This week’s edition of Taxtember highlights how the One Big Beautiful Bill Act (OBBBA) impacts charitable giving and what these changes mean for you. To make things clearer, let’s walk through the rules with Louie & Lisa Loper, a couple with $250,000 of adjusted gross income (AGI), who enjoy supporting their community and give to various charities each year.
New Deduction for Standard Deduction Users
In the past, if you took the standard deduction you got zero tax benefit for charitable giving. OBBBA changes that permanently.
Beginning in 2026, taxpayers who don’t itemize can still deduct charitable gifts up to:
- $1,000 for individuals
- $2,000 for married couples filing jointly
This is not applicable if you are able to itemize deductions but it is a meaningful shift for taxpayers who take the standard deduction. Before, if you took the standard deduction, your charitable gifts reduced your taxable income by exactly $0. Now, you can deduct up to $2,000 of those gifts each year.
Example: Louie & Lisa normally take the standard deduction and donate $2,000 each year to UNK. In the past, they would have received no tax break. Now, they’ll get to deduct the entire $2,000—even while claiming the standard deduction.
Note: While many sources call this an above-the-line deduction, that is not the case. This deduction does not reduce your adjusted gross income (AGI) like other above-the-line deductions, but it will reduce your taxable income. Contributions to donor-advised funds (DAFs), supporting organizations, or private foundations do not qualify.
New Threshold for Itemized Deduction
For those who itemize deductions, OBBBA adds a new wrinkle: beginning in 2026, charitable contributions will be subject to a 0.5% of AGI floor. To summarize what that means, the first slice of your donations—equal to 0.5% of your AGI—won’t count toward a deduction. Only contributions above that amount will be deductible.
Example: Louie & Lisa have $250,000 of AGI and donate $15,000 to charities in 2026. But now they are itemizing their deductions instead of taking the standard deduction like in the past example.
0.5% AGI Floor = $250,000 x 0.005 = $1,250 Floor
Deductible amount = $15,000 (total donations) – $1,250 (0.5% AGI Floor) = $13,750 deduction within your itemized deductions.
They still get a strong deduction, but it’s a little smaller than before.
Cash Donation AGI Limit Made Permanent
Itemizers have been able to deduct cash donations up to 60% of AGI since the 2017 TCJA. The OBBBA has made that provision permanent.
New Limitations for High-Income Households
While not exclusive to charitable contributions, OBBBA introduces a cap on itemized deductions for our high-income earners in the top 37% bracket starting in 2026. Effectively, this is limiting the benefit of itemized deductions to a maximum of 35 cents on the dollar.
Example: Let’s say Louie & Lisa’s 2026 income is actually higher than $250,000 that we have been using and they’re actually in the top tax bracket of 37%. A $100,000 gift that once reduced their taxes by $37,000 will now only reduce them by $35,000. They’re still helping their favorite causes, but the tax savings are smaller—so it may make sense to accelerate some giving into 2025 or explore other strategies.
Planning Implications for YOU
We know your charitable giving is guided by your values and impact first, not taxes. But smart planning can stretch your generosity further. Some strategies to consider:
- Accelerate donations into 2025 if you’re a high-income earner facing the new cap.
- “Bunch” giving into certain years (possibly via a donor-advised fund) to get above the itemized threshold.
- Leverage non-cash donations – it is still important that nothing has changed regarding the gifting of highly appreciated assets (e.g. stocks, ETFs, mutual funds) to avoid capital gains tax.
- Example: Louie & Lisa bought $10,000 of Apple stock years ago that is now worth $50,000. If they sold it and donated the cash, they’d owe tax on $40,000 of gains. By donating the shares directly to the charity or through the use of a Donor Advised Fund (DAF) for sending to charities over time, they avoid the capital gains tax and still deduct the value (subject to AGI limits).
- Leverage the new $2,000 deduction in 2026 if you take the standard deduction—a lot of people will be able to benefit from this one.
Final Thoughts
Tax laws may change, but the heart of giving does not. We’re here to help you navigate the new rules while keeping your generosity impactful and tax-efficient. If you’d like to review your charitable strategy for 2025 and beyond, please reach out.
Wishing you meaningful (and strategic) giving ahead,
Oldfather Financial Services