Tools & Resources: Advisors

The OBBBA and Charitable Giving

The One Big Beautiful Bill Act (OBBBA), passed in 2025, brought a mix of stability and change. Many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) survived, creating welcome predictability in the estate planning arena. But the charitable giving changes under the OBBBA alter the playing field and require donors to adjust their strategies. You have the opportunity to help clients effectively navigate the new rules to achieve their philanthropic goals.

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New Rules for Charitable Deductions

• A new charitable deduction for nonitemizers. Beginning in 2026, nonitemizers can deduct up to $1,000 ($2,000 for joint filers) for cash contributions to qualified public charities (excluding donor-advised funds, supporting organizations, and private foundations). Since approximately 90% of taxpayers don’t itemize, this is a nice reward for those who make small but meaningful gifts. The deduction reduces taxable income, offering a meaningful benefit in addition to the standard deduction.
• A new floor for charitable deductions. Beginning in 2026, itemizers can only deduct contributions that exceed 0.5% of adjusted gross income (AGI). For example, someone with AGI of $200,000 needs to give more than $1,000 before being able to claim any deduction. Carryover of excess amounts will be allowed only if the 0.5% threshold is met.
• Deduction limit for charitable gifts of cash. The temporary 60%-of-AGI limit for cash gifts to qualified charities is now permanent.
• Itemized deduction limit for top earners. Starting in 2026, those in the top 37% tax bracket (less than 1% of all taxpayers) will have the tax benefit of their deductions capped at 35%—including deductions for charitable gifts.
• A new senior deduction. For 2025–2028, taxpayers age 65 or older can take an additional $6,000 above-the-line deduction. While this isn’t technically a change to charitable deductions, for many seniors, it may free up additional funds to meet charitable goals. The deduction phases out when the individual reaches specified income limits. In the case of joint filers, only one spouse needs to be 65 or older to claim the deduction. If both spouses are 65 or older, their deductions are reduced simultaneously by the phaseout. 

 

Strategies for Tax-Efficient Giving

With the high standard deduction, fewer people will itemize to take charitable deductions. It’s more important than ever to explore strategic giving methods that will maximize impact and align with a donor’s financial and philanthropic objectives. Consider the following simple approaches to help maximize tax-efficient giving opportunities without the complexity associated with trusts or other more sophisticated charitable giving strategies.

1. Gift bunching. The OBBBA permanently extends the higher standard deduction—in 2026, it’s $16,100 (single filers or married filing separately), $24,150 (head of household), and $32,200 (joint filers). Many taxpayers have already shifted from itemizing to taking the standard deduction, and some have begun “bunching” two or more years’ worth of charitable contributions into one tax year to make itemizing worthwhile. For instance, a donor who typically gives $12,000 annually could contribute $36,000 in 2026, claim the itemized deduction, then take the standard deduction in the following two years before making another gift. This strategy may be doubly useful if it also allows the donor to surpass the new 0.5%-of-AGI floor.
2. Donor-advised funds (DAFs). DAFs remain a versatile option for taxpayers who want to make a large charitable contribution during a high-income year, qualify for an immediate income tax deduction, and then recommend grants to charities over time. This can be particularly useful for donors who are bunching gifts or planning multiyear gifts.
3. Qualified charitable distributions (QCDs). IRA owners age 70½ and older can continue to use QCDs to donate directly from their IRAs. These gifts are not deductible, so they are not impacted by the new giving floor or limitations on deductions. Instead, they are tax-free distributions that count toward the donor’s required minimum distribution (RMD) if one is due. For example, a 75-year-old could make a QCD from an IRA, pay no tax on the distribution, satisfy their RMD, and preserve eligibility for the new senior deduction.
4. Opportunities for nonitemizers. If bunching gifts is not feasible or desirable, donors can give cash to take advantage of the new deduction for nonitemizers.
5. Strategic noncash donations. Now that the new limitations on deductions are in place, gift options that offer substantial tax advantages become more powerful. Gifts of appreciated stock or real estate let the donor bypass the capital gains tax, potentially making up for the additional limitations on the charitable deduction.
6. Legacy gifts. While bequests and charitable beneficiary designations don’t offer any income tax advantages, they also aren’t impacted by the new deduction limitations. Some donors may find these to be easy, powerful, and lasting alternatives to annual gifts.

 

Winning Strategies Under the OBBBA

Donors and financial professionals must adapt to the new landscape created by the OBBBA. The new legislation introduces both opportunities and complexities. And luckily, the motivation for giving—for helping others and making the world a better place—remains the same.