The One Big Beautiful Bill Act (OBBBA) fundamentally rewrites the charitable giving playbook for American donors. While expanding tax benefits for millions of non-itemizing taxpayers, the legislation simultaneously introduces new limitations that could significantly reduce deductions for high-income donors.
Read below for a detailed breakdown of OBBBA’s new charitable provisions, strategic comparisons of giving vehicles under the updated rules, and planning recommendations to maximize both tax benefits and philanthropic impact.
The OBBBA introduces three new tax provisions that will influence decisions on charitable giving strategies. Let’s dive into the three key changes.
1. Below-the-line charitable deductions for non-itemizers
Starting in 2026, taxpayers who take the standard deduction will be able to deduct up to $1,000 (single filers) or $2,000 (married filing jointly) in cash gifts to qualified charities. This deduction isn’t adjusted for inflation, and certain contributions, like those made to donor-advised funds or private non-operating foundations, do not qualify.
The new below-the-line deduction is reminiscent (but not as significant) of temporary Covid-era provisions and aims to broaden access to charitable tax breaks. According to research from the Giving USA Foundation and Indiana University, itemized charitable deductions dropped by $66 billion (26%) from 2017–2019 following the Tax Cuts and Jobs Act (TCJA).
The OBBBA provision could make deductions accessible to an estimated 100 million non-itemizing taxpayers but only for direct cash gifts to qualified charities. Stock donations, property gifts, and contributions to donor-advised funds or supporting organizations do not qualify.
Also note the significance of the deduction being “below the line.” In other words, this deduction reduces taxable income, not adjusted gross income (AGI), which means it won’t help lower thresholds for tax benefits like IRMAA, surtaxes, or AGI-based credits.
Why it matters: The TCJA’s expansion of the standard deduction significantly reduced the number of itemizers, thus reducing the incentives to make charitable contributions as they were no longer deductible in many instances. While more taxpayers may itemize under the new rules (with the expanded SALT cap), the vast majority still will not itemize and therefore won’t qualify for traditional charitable deductions. Although the $1,000/$2,000 deduction won’t move the needle for high earners, it may prove meaningful for lower-income or younger taxpayers.
2. New limits to deductions for itemizers in the top tax bracket
Starting in 2026, the OBBBA limits the tax benefit of itemized deductions including charitable deductions for high-income taxpayers. While these taxpayers can still claim the full deduction amount on Schedule A, the value of the deduction is capped at 35%, even if their marginal tax rate is 37%.
For example, under current law, a donor in the 37% bracket who gives $1,000 to charity saves $370 in taxes ($1,000 × 37%). Under OBBBA, the same $1,000 donation is still reported as a deduction, but the actual tax savings is limited to $350 ($1,000 × 35%).
This 35% cap applies across all itemized deductions, not just charitable ones, and effectively reduces the marginal value of those deductions for top-bracket filers.
Why it matters: This effectively reduces the marginal benefit of charitable deductions for top earners. Donors in higher tax brackets who are considering a significant philanthropic gift may want to think about accelerating their gift to 2025 to maximize their deduction under the current marginal rate before the new cap goes into effect.
3. New income floor on deductions for itemizers and corporations
Effective in 2026, itemizers who make charitable contributions will only be able to claim a tax deduction to the extent that their qualified contributions exceed 0.5% of their adjusted gross income (AGI).
For example, a couple with an AGI of $300,000 could only deduct charitable donations in excess of $1,500. Similarly, corporations will only be entitled to deduct charitable contributions to qualified charities that exceed 1% of their taxable income.
Why it matters: High-income individuals who itemize deductions should carefully consider the timing and amounts of their giving, and the strategies to maximize their deductions. For example, a bunching strategy or an approach of making larger gifts with less frequency can be more effective under the new rules. The new legislation encourages giving bigger gifts less frequently rather than consistent small ones. However, the new 35% cap mentioned above must also be taken into account. High-income donors considering large gifts may want to complete them in 2025 before this cap takes effect.
With OBBBA’s charitable provisions taking effect January 1, 2026, advisors have a narrow five-month window to help clients maximize tax benefits under current rules. Before December 31, 2025, advisors should immediately review high-income clients’ giving plans, as any client in the 37% bracket considering major gifts should accelerate them to capture the full marginal benefit before the 35% cap takes effect. Also consider the .5% AGI floor for non-itemizers. This is also the time to conduct bunching analysis for clients and establish donor-advised funds for those planning multi-year giving strategies.
Throughout Q4 2025, advisors should prioritize scheduling charitable giving reviews with high-income clients (and continue to do so each year) while preparing educational materials about the new charitable deductions. The next five months represent a critical planning opportunity.
Proactive action to educate clients and implement strategic giving plans before year-end will deliver significant value while positioning you as an essential partner in navigating the new charitable landscape.
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