Key OBBBA Charitable Giving Changes Beginning in 2026
Overview of Key OBBBA Changes Affecting Charitable Giving
Charitable planning changes significantly beginning in 2026 under the One Big Beautiful Bill Act. The law introduces a new non itemizer charitable deduction, adds an AGI based floor for itemized charitable contributions, and reduces the marginal value of deductions for high income taxpayers. These changes alter the strategy for donors who want to maximize the tax benefit of their giving. The final year of the current rules is 2025, which creates meaningful planning opportunities for taxpayers who intend to make multi year gifts or who face new limitations beginning in 2026.
Key Tax Impacts
- The new non itemizer charitable deduction begins in 2026 and allows $1,000 for single taxpayers and $2,000 for married filing jointly when giving cash to §170(c) charities.
- Itemizers face a new 0.5% AGI floor beginning 2026, which disallows deductions until charitable gifts exceed the floor.
- The 60% AGI limit for cash contributions to public charities becomes permanent.
- C corporations face a new 1% taxable income floor on charitable deductions in addition to the existing 10% limit.
- High income taxpayers in the 37% bracket receive a reduced benefit on itemized deductions due to the OBBBA limitation that caps the value at roughly 35%.
Schedule a Consultation to evaluate timing strategies for 2025 and 2026 charitable planning.
New Non Itemizer Charitable Deduction Beginning 2026
OBBBA §70424 establishes a permanent above the line deduction for taxpayers who do not itemize. The deduction is $1,000 for single, head of household, and married filing separately taxpayers and $2,000 for married filing jointly taxpayers. It applies only to cash contributions made to §170(c) charitable organizations. There is no AGI phase out, and it is available in addition to the standard deduction. (IRC §170; OBBBA §70424)
New 0.5% AGI Floor for Itemized Charitable Deductions Beginning 2026
OBBBA §70425(a) imposes a requirement that itemizing taxpayers may deduct charitable contributions only to the extent that total gifts exceed 0.5% of AGI. Gifts below the floor receive no deduction. Disallowed amounts do not carry forward unless the disallowance is caused by percentage limitation rules under §170(b). (IRC §170(b); OBBBA §70425(a))
60% AGI Limit for Cash Gifts Made Permanent
The 60% AGI limit for cash contributions to public charities, which would have expired with the TCJA sunset, is made permanent by OBBBA §70425(b). (IRC §170(b)(1)(G); OBBBA §70425(b))
New 1% Corporate Taxable Income Floor
C corporations now face a 1% taxable income floor under OBBBA §70426. A corporation may deduct only the portion of gifts that exceed 1% of taxable income, and the pre existing 10% limit still applies. Amounts disallowed by the floor do not carry forward unless permitted under §170(b)(2). (IRC §170(b)(2); OBBBA §70426)
New High Income Itemized Deduction Limitation
OBBBA §70111 reduces the value of itemized deductions for taxpayers in the 37% bracket so that the benefit does not exceed an approximate 35% marginal rate. This limitation applies on top of the 0.5% floor. (IRC §63; OBBBA §70111)
Taxpayer Profiles and Recommended Timing Strategies
Taxpayers Who Will Not Itemize in 2025 or 2026
These taxpayers receive no benefit for charitable contributions in 2025 but will qualify for the non itemizer deduction beginning 2026. The recommended strategy is to defer routine cash gifts to 2026 and later. For appreciated property, consider selling the property and contributing cash since the deduction applies only to cash. (IRC §170; OBBBA §70424)
Itemizers Whose Annual Giving Is Below 0.5% of AGI
Beginning in 2026, these taxpayers may receive no deduction unless they exceed the floor. A bunching strategy is recommended by combining gifts across years so that 2025 becomes a high giving year followed by alternating high giving years in 2027 and 2029. (IRC §170; OBBBA §70425(a))
High Income Itemizers in the 37% Bracket
These taxpayers face the 0.5% floor and the reduced deduction benefit. A large 2025 contribution, such as to a donor advised fund, can secure a deduction at a higher marginal rate and may provide a benefit for taxpayers who are near §199A income thresholds. (IRC §170; IRC §199A; OBBBA §70111; Reg. §1.199A-1 et seq.)
Taxpayers Whose Itemized Deductions Barely Exceed the Standard Deduction
Beginning in 2026, many taxpayers in this profile will receive greater benefit from claiming the standard deduction along with the new non itemizer charitable deduction. Accelerating gifts into 2025 generally is not recommended unless bunching is part of a larger plan. (IRC §63; OBBBA §70424)
Self Employed Taxpayers and Business Owners
Payments with a business purpose may qualify as §162 ordinary and necessary business expenses and avoid the new charitable limitations. This treatment may increase the effective benefit beginning in 2026. (IRC §162; IRC §170; Reg. §1.162-20)
Integrating 2025 and 2026 Timing
Who should give more in 2025:
- High income itemizers in the 37% bracket.
- Itemizers whose gifts fall below the 0.5% threshold.
- Taxpayers planning multi year gifts or donor advised fund contributions.
- Taxpayers who can improve §199A eligibility by lowering AGI.
Who should defer giving to 2026:
- Non itemizers.
- Taxpayers close to the standard deduction who may benefit more beginning 2026.
- Donors making modest recurring gifts.
Substantiation and Compliance
- Cash gifts require a bank record or receipt. (IRC §170(f)(17); Reg. §1.170A-15(a)(1))
- Gifts of $250 or more require a contemporaneous written acknowledgment. (IRC §170(f)(8))
- Non cash gifts follow existing appraisal and Form 8283 requirements. (IRC §170(f)(11))
Future Treasury guidance is expected to clarify interactions among the 0.5% floor, the 60% limit, and carryforward rules.
Conclusion
OBBBA creates meaningful changes for donors beginning in 2026. The introduction of a non itemizer deduction, new AGI floors, and reduced marginal value for high income taxpayers shifts the landscape for charitable planning. Taxpayers who want to maximize the impact of their gifts should evaluate whether 2025 presents a final opportunity to deduct contributions without the new restrictions.
