The One Big Beautiful Bill Act (OBBBA) brings sweeping tax changes starting in 2026. Alongside retirement and income provisions, the bill reshapes charitable giving rules. Some households will gain new tax benefits, while higher-income donors may face new limits.
Here’s a clear breakdown of what’s changing and what it means for families, businesses, and anyone looking to give back.
1. New Deduction for Non-Itemizers
Most households take the standard deduction rather than itemizing. Until now, that meant no tax break for charitable giving. OBBBA changes this by adding a new “below-the-line” deduction for cash donations.
Limits: Up to $1,000 for single filers and $2,000 for married couples filing jointly.
Qualifying gifts: Only cash contributions to qualified public charities. Gifts of stock, property, or donations to donor-advised funds and private foundations do not qualify.
Inflation adjustment: The amounts are not indexed, meaning the deduction stays fixed over time.
Tax effect: Because this deduction is taken “below the line,” it reduces taxable income, not adjusted gross income (AGI). That means it won’t lower income for things like IRMAA surcharges on Medicare or AGI-based credits.
Why it matters:
After the 2017 Tax Cuts and Jobs Act nearly doubled the standard deduction, millions stopped itemizing. Charitable giving fell sharply—dropping by an estimated $66 billion between 2017 and 2019. This new deduction could encourage smaller donors, especially younger families and middle-income households, to continue giving. While the benefit won’t move the needle for high earners, it provides a meaningful incentive for many who give modest amounts.
2. Cap on Tax Benefits for High Earners
Starting in 2026, taxpayers in the top bracket will see the value of their deductions reduced. While they can still claim charitable contributions in full on Schedule A, the tax benefit is capped at 35%—even if their marginal rate is higher.
Example:
Current law: A $1,000 donation saves $370 for someone in the 37% bracket.
Under OBBBA: The same $1,000 donation saves $350.
This rule applies across all itemized deductions—not just charitable ones.
Why it matters:
For wealthy households, the after-tax cost of giving will rise. Someone used to saving 37 cents on the dollar for charitable gifts will now save only 35 cents. While it may not stop large donors from giving, it changes the math. Advisors may recommend accelerating large gifts into 2025 to lock in the higher deduction before the cap begins.
3. New Income Floor for Deductions
Another big change: starting in 2026, itemizers can only deduct charitable contributions that exceed 0.5% of AGI (1% for corporations).
Example:
A couple with $300,000 AGI must first donate $1,500 before any of their gifts qualify for a tax deduction. Smaller contributions below that threshold won’t reduce taxes.
Why it matters:
This change shifts strategy for higher-income households. Instead of giving smaller amounts every year, it may be smarter to “bunch” gifts into fewer, larger contributions. For instance, a family could give two or three years’ worth of donations in a single tax year to maximize the deduction, then pause before giving again.
But the bunching strategy now comes with a wrinkle: the 35% cap. Families considering very large gifts may want to complete them in 2025 before both the cap and the new floor take effect.
Planning Window Before 2026
OBBBA’s charitable provisions take effect January 1, 2026. That gives families and advisors just a few months in 2025 to make adjustments. Here are some key planning moves:
Accelerate gifts in 2025: High-income taxpayers in the 37% bracket can maximize their deductions before the cap lowers them to 35%.
Review bunching strategies: Households who regularly give smaller amounts may benefit from combining donations into larger lump sums.
Consider donor-advised funds (DAFs): Setting up or contributing to a DAF before 2026 allows families to bunch several years of gifts, capture the deduction under current law, and still distribute grants to charities over time.
Run the numbers: Advisors should revisit charitable giving plans, especially for households with significant philanthropic goals, to model the best timing and vehicles under the new rules.
The Bottom Line
For everyday families, OBBBA opens the door to small but meaningful charitable deductions, even for those who don’t itemize. For high-income households, however, the new limits make the timing and structure of gifts more important than ever.
With the rules set to begin in 2026, the year 2025 is a critical planning year. Families who want to maximize both their charitable impact and their tax benefits should take action before the new caps and floors take effect.
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