Charitable giving is often about more than generosity; it’s also a key part of a thoughtful tax and legacy strategy. The One Big Beautiful Bill Act (OBBBA) introduces new opportunities and limits for charitable contributions.

Understanding these changes and exactly when they take effect lets you plan and act to maximize your benefits.

 

New Opportunities to Lower Your Tax Bill

Nonrefundable Tax Credit — Up to $1,700

This credit is available to U.S. citizens and residents who make cash contributions to qualified Scholarship Granting Organizations (SGOs) that provide need-based scholarships for eligible K-12 students who can enroll in a public school. States decide whether to participate and which SGOs qualify. State credits reduce the federal credit.

 

Beginning January 1, 2026: Additional Limitations

0.5% Floor for Charitable Contributions

There are limits based on contribution type (e.g., 60% for cash to public charities, 30% for capital gain property). These calculate your “allowable contributions.” Starting in 2026, only allowable contributions exceeding 0.5% of your AGI are deductible.

Example: AGI: $500,000, Cash charitable contributions: $50,000

500,000 × 60% = 300,000 limit for cash contributions

Since 50,000 is less than 300,000, the entire $50,000 is allowable

500,000 × 0.5% = $2,500 0.5% floor

50,000 − $2,500 = $47,500 deductible charitable contributions

Capping Itemized Deductions

For top earners, this rule limits the practical benefit of itemized deductions, including charitable gifts. If you’re in the highest federal tax bracket (37%), the tax benefit you receive can’t exceed what you’d get at a 35% rate.

Charitable Deduction Without Itemizing for 2026

If you take the standard deduction, you may receive a tax deduction of $1,000 ($2,000 for joint filers) for cash contributions to public charities. While modest, this deduction offers strategic value—especially for retirees on fixed incomes who give regularly.  Contributions to Donor-Advised Funds and [some] Private Foundations would not qualify for this deduction.

 

Lock In Today’s Charitable Tax Breaks Before They Shrink

If you’ve been considering a significant gift to your favorite causes, 2025 is the year to act! A well-timed plan NOW can lock in today’s more generous rules and preserve tax benefits long after the calendar changes.

Carry-Forward Rules

If your charitable contributions exceed the annual limits in 2025, you can carry the excess forward for up to five years—without being subject to the new 0.5% floor starting in 2026.

Bunch Contributions in 2025

Accelerate planned donations into 2025 to secure the full deduction. If you expect a high-income event this year (such as a business sale or large bonus), this can be especially tax-efficient.

Leverage Donor-Advised Funds (DAFs) in 2025 (add link to TG Blog post)

Front-load multiple years of giving into a DAF to get the full deduction now while maintaining flexibility to distribute gifts over time.

Donate Appreciated Assets

This time-tested strategy becomes even more valuable under the new rules. Donating appreciated securities avoids capital gains tax and lowers your AGI, which helps with the 0.5% floor limitation on deductions.

Watch for AGI “Cliffs” in 2026–2028

If your income is near the top tax bracket threshold (37%), consider reducing your AGI to preserve deductions. Options could include:

• Qualified Charitable Distributions (QCDs) (add link to TG Blog post)
• Employer retirement contributions
• Installment sales
• Charitable remainder trusts (add link to TG Blog post)

 

We can help you craft a plan

Tax laws can be complex, but we’re here to help you build a plan tailored to your unique situation and charitable goals. Smart decisions made today can protect your legacy for years to come.

The OBBBA doesn’t remove the benefits of charitable giving—it calls for more precise planning. Now’s the time to revisit your strategy.