Charitable planning and the One Big Beautiful Bill Act

11/18/2025
Charitable planning and the One Big Beautiful Bill Act

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduces several significant changes to charitable planning starting largely in the 2026 tax year. These changes affect both taxpayers who itemize deductions and those who take the standard deduction.  These changes may impact your 2025 year-end charitable planning, as well as for your 2026 tax planning and beyond.

Key provisions of the OBBBA for charitable giving and planning include:

For Non-Itemizers (Standard Deduction Filers)
New Above-the-Line Deduction: Beginning in 2026, taxpayers who take the standard deduction can claim a new "above-the-line" deduction for cash contributions to qualified public charities (excluding donor-advised funds and private foundations). The limits are:

• $1,000 for single filers.
• $2,000 for married couples filing jointly.

Impact: This change is expected to incentivize a large number of middle-income households, who make up about 90% of taxpayers, to give to charity for tax benefits.

For Itemizers and High-Income Donors
New Deduction Floor: Starting in 2026, itemizers can only deduct charitable contributions that exceed 0.5% of their Adjusted Gross Income (AGI). For example, if a taxpayer has an AGI of $200,000, only the amount of donations over $1,000 is deductible.

Deduction Value Cap for Top Earners: For taxpayers in the top 37% income bracket, the tax benefit of all itemized deductions, including charitable ones, is capped at a value equivalent to a 35% tax rate.

Permanent 60% AGI Limit: The act makes permanent the ability for individuals to deduct cash gifts to public charities up to 60% of their AGI, a provision that was previously temporary.

For Corporations
New Deduction Floor: Corporations can only deduct charitable contributions that exceed 1% of their taxable income. Contributions below this floor are not deductible, but excess contributions above the existing 10% cap can still be carried forward for up to five years.

Strategic Charitable Planning Considerations
"Bunching" Strategy: Donors, especially high-net-worth individuals, may consider "bunching" or consolidating several years' worth of donations into late 2025 to maximize deductions under the more favorable current rules before the new floors and caps take effect in 2026. Donor-advised funds (DAFs) are a common tool for this strategy.

Qualified Charitable Distributions (QCDs): For donors aged 70½ or older, QCDs from an IRA (up to $108,000 in 2025) remain an effective, tax-free way to support charity and satisfy required minimum distributions, as this strategy is unaffected by the new itemization rules.

Donating Appreciated Stock: Gifting appreciated securities can remain highly tax-efficient, allowing donors to deduct the fair market value and avoid capital gains tax.


If you have questions about your specific tax situation for your charitable planning and would like to discuss further, please let us know.  Thank you again for having us be your CPA.

- The Team at Sechrest & Bloom, LLC