Gift of Giving: Charitable Contributions and Your Finances

The landscape of charitable giving is shifting dramatically with the enactment of the One Big Beautiful Bill Act. Donors must understand how these changes affect both generosity and tax strategy.

From new deductions for non-itemizers to benefit caps for top earners, these reforms demand careful planning and reflection. Whether you’re an occasional donor or a high-net-worth philanthropist, this guide offers clarity and practical steps to maximize impact.

Major Legislative Overhaul in 2025

In July 2025, Congress passed the One Big Beautiful Bill Act, marking the most significant update to charitable giving rules in years. The act creates phased changes effective in 2025 and beyond, reshaping both incentives and limitations.

These reforms touch individual filers, corporations, and estates, setting new floors, caps, and universal deductions that will guide donor behavior for the coming decade.

New Universal Charitable Deduction for Non-Itemizers

Beginning in the 2026 tax year, non-itemizers can claim an above-the-line deduction of:

• $1,000 for single filers
• $2,000 for married couples filing jointly

This permanent but non-inflation-indexed deduction extends tax relief to roughly 90% of households that take the standard deduction.

Note that contributions to donor-advised funds, supporting organizations, and private non-operating foundations are ineligible for this universal deduction, so direct gifts to public charities are your best choice.

Key Changes for Itemizers in 2026

Itemizers face three major shifts under the new law. Starting with the 2026 tax year, only contributions above a minimum floor qualify for deduction, and benefit rates are capped.

• 0.5% charitable deduction floor—only donations exceeding 0.5% of AGI are deductible.
• 35% tax benefit cap for top earners—even taxpayers in the 37% bracket can claim only a 35% deduction rate.
• 1% corporate deduction floor—corporations must surpass 1% of taxable income before deducting gifts, capped at 10% of income.

These measures aim to balance revenue goals with sustained philanthropic support. High-income donors should particularly note the combined impact of floors and caps on large contributions.

Why 2025 Is a Critical Planning Year

Since the deduction floor applies only after 2025, accelerating gifts into the current year can yield substantially greater tax savings.

Consider a high-earner with $10 million AGI who donates $100,000 annually. In 2025, the full amount is deductible, but in 2026, half may be lost to the floor. By bunching donations, the same individual can optimize benefit.

This example underscores why strategic bunching of gifts can deliver tens of thousands in extra savings before the new rules take effect.

Estate, SALT, and QCD Planning Considerations

The act also increases the federal estate and gift tax exemption to $15 million for 2026, making lifetime charitable transfers a primary deduction tool for most estates.

State and local tax deductions rise to $40,000 for itemizers in 2025, phasing up until 2029. Higher SALT caps may influence whether you choose to itemize or claim the standard deduction plus the universal charitable benefit.

Qualified Charitable Distributions (QCDs) remain a powerful vehicle for IRA holders, with a 2025 limit of $108,000 per individual. Though not deductible, QCDs satisfy required minimum distributions without adding taxable income.

Strategic Recommendations for Donors

• Accelerate giving into 2025 if you itemize large contributions to bypass the 0.5% floor.
• Track cash donations carefully in 2026 to claim the new universal deduction if you take the standard deduction.
• Evaluate donor-advised funds for immediate deductions, then distribute to charities over time for flexibility.
• Mix cash and non-cash gifts to balance carryforward opportunities and maximize benefit caps.
• Consult a tax advisor to model your AGI fluctuations and tailor the timing of gifts for optimal advantage.

Conclusion: Embracing Philanthropy with Confidence

The One Big Beautiful Bill Act transforms the charitable giving landscape, offering new opportunities and challenges. By understanding timelines, ceilings, and floors, donors can refine their approach and ensure that generosity aligns with financial prudence.

Whether you’re a non-itemizer seeking a fresh deduction or a high-net-worth individual planning a major gift, the key lies in thoughtful timing, diversified strategies, and staying informed about evolving rules. Embrace these changes as a chance to deepen your impact and give with both heart and strategy.