Overview of OBBBA Charitable Giving Changes
The One Big Beautiful Bill Act (OBBBA) makes sweeping changes to charitable giving rules starting in 2026. These rules bring both opportunities and challenges for taxpayers, corporations, and nonprofits. Understanding the details is essential for tax planning and charitable contribution strategies.
- Winners: Non-itemizers (new deduction), taxpayers in high-tax states (higher SALT deduction cap).
- Losers: Higher-income taxpayers, itemizers, and corporations facing new floors and reduced benefits.
Key Changes in Charitable Giving Rules
1. New Deduction for Non-Itemizers
- Starting in 2026, non-itemizers can deduct:
- $1,000 (single)
- $2,000 (married filing jointly)
- Applies only to cash contributions. Donor-advised funds and private foundations do not qualify.
- Example: A middle-class household giving $3,300 annually could deduct up to $2,000 if married, reducing taxable income directly.
2. Increased SALT Deduction
- SALT cap rises from $10,000 to $40,000 in 2025 with 1% annual increases ($40,400 for 2026).
- Phased out for AGI above $500,000; eliminated at $600,000.
- Projected increase in itemizers: from 10% to 14% of taxpayers (27 million).
- Example: A New York taxpayer paying $35,000 in property and state taxes can now deduct nearly the full amount, encouraging more charitable giving.
- Read more about SALT Deduction: OBBBA Expands SALT Deductions: What It Means for You – Allied Tax Advisors
3. New Floor for Itemizers
- Starting in 2026, deductions only apply to contributions above 0.5% of AGI.
- Example: If AGI = $200,000 and you donate $10,000 → only $9,000 deductible.
- Carryforward rule: Disallowed amounts may only be carried forward if contributions exceed AGI ceilings; otherwise, they are lost.
- Concern: Could discourage giving by higher-income taxpayers.
4. Deduction Ceilings (Unchanged)
- 60% of AGI – cash donations.
- 30% of AGI – appreciated long-term property.
- 50% of AGI – non-cash property.
- Private foundations: stricter limits of 30%, 20%, 20%.
Example: If AGI = $500,000, maximum deductible cash contributions = $300,000. If $305,000 is donated, $5,000 can carry forward.
5. High-Income Taxpayers
- Deduction benefit capped at 35% for those in the top bracket, down from 37%.
- Example: A $100,000 gift previously reduced taxes by $37,000. Under OBBBA, only $35,000 saved.
- Positive note: Permanent repeal of the Pease limitation, which once cut itemized deductions by up to 80%.
6. Corporate Contributions
- Longstanding rule: Only 10% of taxable income deductible (carryforward allowed 5 years).
- New rule in 2026: Deductions apply only if contributions exceed 1% of taxable income.
- Example: A corporation with $1M taxable income must give more than $10,000 before deductions apply.
- Median corporate giving is under 1% of pre-tax profits (2023 data) — meaning many will lose tax benefits.
Impact on 2025 Giving
- Itemizers and corporations should maximize giving before December 31, 2025, to avoid new 0.5% and 1% floors.
- Non-itemizers may benefit from waiting until 2026 to leverage the new deduction.
- Strategy: Some may “double up” contributions in 2025, then reduce giving in 2026.
Planning Strategies
- Bunching contributions: Make larger, less frequent donations to surpass new deduction floors.
- For taxpayers 70.5+: Use qualified charitable distributions (QCDs) from IRAs — not subject to the 0.5% floor.
- Corporations: Consider restructuring giving (e.g., via compensation to executives who donate personally).
- High earners: Plan for reduced tax savings — charitable impact remains, but financial efficiency declines.
Key Takeaways
- Non-itemizers: modest deduction starting 2026.
- Itemizers: face 0.5% AGI floor on deductions.
- Corporations: must give above 1% of taxable income for deductions.
- 2025 is a crucial year to maximize giving before restrictions take effect.
Work with Allied Tax Advisors
Understanding these changes and applying the right strategies can save you thousands. At Allied Tax, our team of experienced San Diego CPA specializes in tax planning, tax preparation, and business advisory services.
Whether you’re an individual taxpayer or a business owner, we’ll help you navigate the new charitable giving and tax deductions in 2026 and other opportunities in the tax code. Learn more in our detailed OBBBA Tax Changes Guide for 2025.
👉 Contact us today for expert San Diego tax preparation services and start planning smarter for 2025 and beyond.