The end of the calendar year often coincides with a surge in charitable giving. This year, donors face a transformed landscape around charitable giving shaped by the One Big Beautiful Bill Act (OBBB, H.R. 1), signed into law on July 4, 2025.¹

This legislation preserves several key elements of the 2017 Tax Cuts and Jobs Act (TCJA) while introducing new provisions that will influence individual and institutional charitable giving. With several changes taking effect for the 2025 and 2026 tax years, it is essential for individuals and corporations to understand the new rules and adapt their giving plans to accommodate both charitable impact and tax efficiency.

New tax provisions introduced by the OBBB

The OBBB brings three major changes to the tax treatment of charitable contributions, each with important implications for donors.

Universal charitable deduction

Starting in the 2026 tax year, the OBBB reinstates an above-the-line deduction for charitable cash contributions made by non-itemizers. Single filers can deduct up to $1,000, while married couples filing jointly can deduct up to $2,000. This deduction is not indexed for inflation, and contributions to donor-advised funds (DAFs) or private non-operating foundations are excluded.

Since the TCJA increased the standard deduction, only about 10% of households have itemized deductions, making the majority of taxpayers ineligible for the charitable deduction. The new rule opens the door for all households to receive a tax deduction for qualified charitable contributions, potentially increasing participation in giving.

The reinstatement of an above-the-line deduction for charitable contributions is likely to have a positive impact on charitable giving in the U.S. by increasing participation among non-itemizers, potentially raising total contributions and shifting demographic patterns in giving. While the exact impact will depend on various factors, including economic conditions and taxpayer awareness of the new deduction, the overall trend suggests a favorable outcome for charitable organizations and the communities they serve.

Limitation for wealthy donors

The OBBB also introduces a cap on the tax benefits of itemized charitable deductions for those in the highest tax bracket. Beginning in 2026, itemizers in the 37% marginal tax bracket will see their deduction capped at 35%. For example, a high-income filer donating $1,000 would receive a $350 deduction instead of the current $370. This change creates a strong incentive for donors in higher tax brackets to consider accelerating their giving to 2025, when they can still benefit from the higher deduction rate.

Introduction of new charitable deduction floor for itemizers and corporation donation limit

A third major change is the introduction of a “floor” for charitable deductions. Starting in 2026, all itemizers can only claim a tax deduction for charitable contributions that exceed 0.5% of their adjusted gross income (AGI). For example, a couple with an AGI of $800,000 could only deduct charitable donations in excess of $4,000. Corporations face a similar rule: Only contributions exceeding 1% of the corporation’s taxable income will be deductible. This shift requires high-income individuals and corporations to carefully consider the timing and amounts of their giving, as well as to develop strategies to maximize their deductions.

Opportunities for donors to take advantage of tax benefits

Given these changes, donors should consider several strategies to take advantage of their philanthropic impact and tax benefits.

Accelerate giving into 2025

High earners may benefit from front-loading their charitable giving in 2025, before the tighter itemized deduction caps take effect in 2026. By making significant gifts this year, donors can take advantage of the current, more favorable deduction rules.

Bunch contributions to clear the 0.5% AGI floor

The new floor on deductions means that itemizers will need to exceed 0.5% of AGI in charitable contributions to claim a deduction. Bunching, or consolidating multiple years’ worth of planned donations into a single tax year, has been an effective strategy since the TCJA increased the standard deduction. By bunching gifts in 2025, donors may be able to receive greater tax benefits before the new rules take effect.

Utilize noncash and illiquid assets

Donors should also remember the advantages of giving noncash and illiquid assets, such as long-term appreciated securities or real estate. These gifts can help donors avoid capital gains tax while supporting charitable causes, providing a double benefit.

Coordinate charitable giving and estate planning

The OBBB raises the estate and gift tax exemption to $15 million per individual ($30 million per couple), meaning fewer estates will face the federal estate tax. This creates a prime opportunity for donors (with their advisors) to align charitable giving with their estate planning. By making lifetime gifts now to DAFs or other charitable vehicles, clients can reduce their taxable estate, gain immediate tax benefits and preserve flexibility in their philanthropy.

Bundle gifts for corporate giving

Corporate clients now face a 1% taxable income floor for charitable deductions, with a new five-year carry-forward provision for unused deductions. This may drive increased adoption of bunching strategies, where corporations consolidate multiple years’ worth of planned donations into a single tax year to surpass the 1% threshold and maximize deductibility. Pairing philanthropic planning with broader business strategies – such as aligning giving with years of higher taxable income or planning around significant liquidity events – can help corporations maintain tax efficiency while meeting philanthropic goals.

The bottom line

Year-end philanthropy is not just about writing a check – it’s about making thoughtful, strategic decisions that can benefit both donors and the organizations they support.

The OBBB marks a significant shift in the tax landscape for charitable giving. By understanding the new rules and adopting strategic approaches, donors can continue to make a meaningful impact while taking advantage of their tax benefits.

As 2025 comes to a close, now is the time to review your philanthropic plans and take action to ensure your giving is both effective and efficient under the new law. Speaking with a financial advisor and your legal and tax professionals can be helpful to strategize and set yourself up next year and beyond.