The One Big Beautiful Bill Act has the potential to materially impact charitable giving patterns in the United States. Some changes—like making the 60% AGI limit on cash contributions to public charities permanent, new deductions for non-itemizers, and a new federal tax credit for contributions to certain scholarship granting organizations—offer clear advantages. But the bill also introduces restrictions that will diminish the tax benefits of charitable giving. Fortunately, the more restrictive provisions won’t go into effect until 2026, giving donors a chance to strategically use current tax benefits while they last.
A Timely Opportunity
Starting in 2026, the new bill sets a “floor” on charitable income tax deductions, allowing itemizers to only claim a charitable income tax deduction on contributions that exceed 0.5% of their adjusted gross income (AGI). At the same time, an overall cap on itemized deductions will effectively reduce the maximum tax benefit for top earners to 35 cents per dollar donated.1
How will this play out in practice? Consider Patricia, who at the peak of her career earns $2.0 million per year while directing $100,000 of her annual income to charity. Currently, the full $100,000 gift is deductible against her 37% federal income tax rate, for a tax benefit of $37,000 (Display 1). Under the new law, Patricia’s tax benefit will drop—she’ll only be able to deduct $90,000, with a reduced tax offset rate of 35%. As a result, her tax savings from a $100,000 donation will decline from $37,000 in 2025 to just $31,500 in 2026. For some donors, that means the legislation creates a strong incentive to accelerate gifts to their favorite charities into this year.
The Benefits of Bunching
What if Patricia intends to give at this same rate for at least ten more years? If she contributes $100,000 annually while she’s still working, her total cumulative tax benefit would amount to $348,500 (Display 2).
Alternatively, Patricia might “frontload” by gifting $1.0 million in 2025. She would take advantage of current tax rules and receive an upfront tax benefit of $370,000—gaining an extra $21,500 compared to staging her gifts.
Traditionally, taxpayers have maximized the tax benefits of charitable giving by concentrating charitable activity in the highest income tax years, along with bunching their deductions for higher itemized benefits. But starting in 2026, this approach may need a rethink. High tax years will come hand in hand with a higher deduction floor. What’s more, while the bill allows carrying forward disallowed deductions, this only applies when contributions exceed the 0.5% floor. If donations fall below this threshold, unused deductions are lost. Bunching contributions to surpass the floor will help to offset this particular challenge.
What if Patricia prefers to stagger her support over the ten-year time horizon? She can contribute to a vehicle like a donor-advised fund (DAF) this year, locking in the higher tax benefit now while continuing to make grants over time. Plus, the assets in the DAF can be invested for tax-exempt growth throughout the decade.
A Higher SALT Cap Opens up Opportunities
The opportunity in 2025 isn’t just for top earners. The bill temporarily raises the state and local tax (SALT) deductions cap from $10,000 to $40,000, with an income phaseout starting at $500,000 for joint filers. This cap and threshold will increase by 1.0% per year through 2029, then revert to $10,000.
This means more taxpayers in high-tax states will itemize deductions, instead of relying on the standard deduction. Importantly, this provision is effective for the 2025 tax year, when enhanced charitable tax benefits are available. Philanthropic taxpayers switching to itemization due to the SALT cap increase should also consider whether frontloading charitable gifts is feasible to maximize their savings.
New Opportunity for Non-itemizers in 2026
Starting in 2026, donors taking the standard deduction can take advantage of a new above-the-line charitable deduction. The OBBBA lets non-itemizers deduct up to $1,000 for single filers and $2,000 for joint filers on cash donations to public charities. This doesn’t apply to gifts to donor-advised funds or private non-operating foundations, but it creates a fresh tax incentive for millions to support charities they’re passionate about.
Doing Good with Your IRA
Next year, donating from an IRA will become even more appealing for some taxpayers over age 70.5. IRA Qualified Charitable Distributions (QCDs) of up to $108,000 per year (adjusted for inflation) can be made directly from IRAs to public charities. Instead of a charitable deduction, a QCD is excluded from income, bypassing the 0.5% AGI floor on charitable deductions and the 35% effective cap on itemized deductions. IRA QCDs, which surged in popularity after the passage of the 2017 Tax Cuts and Jobs Act,2 remain beneficial for those using the standard deduction and will become relatively more attractive for many itemizers.
In addition, those planning to leave income tax–deferred assets to charity at death should name the charity directly on a Designation of Beneficiary form, sidestepping potential deduction caps from naming their estate with a subsequent bequest.
New 1% Floor on Corporate Giving
In 2026, corporations will only be able to deduct contributions that exceed 1% of their taxable income, up to a ceiling of 10%. Charitable contributions below the 1% threshold can’t be carried forward—only those above the 10% ceiling can be. With corporate giving currently making up 7% of total charitable donations,3 this change may reduce future contributions. Put simply, for corporations, 2025 is the time to give.
Strategize Now, Benefit Later
While the chance to give in 2025 is timely and attractive, aggregating future charitable gifts into a single tax year will remain attractive for years to come. Doing so will help donors avoid ongoing exposure to the deductible gift floor.
Given the nuances surrounding these new provisions, taxpayers should work closely with their trusted advisors to determine the best path forward for their situation. When it comes to the tax benefits of charitable giving, a bit of thoughtful planning today will amplify philanthropic impact in the years to come.
- Christopher Clarkson
- National Director, Planning | Foundation & Institutional Advisory
- Shea McCabe, CFP®
- Associate Director—Wealth Strategies
1 The tax bill introduces a new limitation that reduces itemized deductions by 2/37 of the lesser of (i) the taxpayer’s total itemized deductions, or (ii) the amount by which their taxable income plus total itemized deductions exceeds the 37% bracket threshold (before applying the limitation, and after the application of any other limitation on the allowance of any itemized deduction).
2 National Philanthropic Trust: https://www.nptrust.org/philanthropic-resources/philanthropist/ira-charitable-rollovers-helping-clients-put-a-distribution-to-good-use-with-a-designated-fund/
3 Giving USA 2024 Infographic. Giving USA FoundationTM, The Giving Institute, and the Indiana University Lilly Family School of Philanthropy.