How Will the OBBBA Impact Your Charitable Giving Strategy?

Key changes in the OBBBA impacting individual donors

High-net-worth individuals often view philanthropy not just as a personal value but as a powerful component of their long-term tax strategy. The recently passed One Big Beautiful Bill Act (OBBBA), effective July 4, 2025, introduces several key changes to the tax landscape that may affect how you plan and execute charitable contributions.

Whether charitable giving is part of your personal goals or part of annual tax planning, now is the time to take a fresh look at your approach. Following is an overview of key provisions related to charitable donations:

1. Charitable deduction for non-itemizers

Beginning in 2026, even taxpayers who do not itemize can deduct up to $1,000 (single) or $2,000 (joint) in cash charitable contributions. This small but notable shift will benefit those claiming the standard deduction by allowing additional deductions, even for taxpayers also using Qualified Charitable Distribution (QCD) planning (using your IRA if age 70 ½ or older) or bunching your charitable donations to claim itemized in some years and standard deduction in other years.

2. Permanent 60% AGI limit for cash contributions

The ability to deduct up to 60% of adjusted gross income (AGI) for cash gifts to qualified charities is now permanent, providing greater certainty and benefitting donors looking to give generously.

3. New AGI floor for itemized giving

Starting in 2026, charitable donations for itemizers will be subjected to a floor which will disallow a portion of the deduction. The charitable contribution base (or floor) is 0.5% of AGI. 

Example:  AGI is $250,000 so the floor is $1,250. If the taxpayer donates $10,000, only $8,750 will be deductible on Schedule A as a charitable donation. While 0.5% may not seem like a large floor, in a large income year, the disallowed deduction could be especially meaningful.

4. Itemized deduction cap on tax benefit for top earners

Those in the 37% tax bracket will see their itemized deduction benefit capped at 35% starting in 2026. Prior to 2017, high income taxpayers were subjected to a phaseout of a portion of their itemized deductions. This “Pease” limitation was generally 3% of AGI over a certain threshold. The new cap will only apply to taxpayers who have taxable income over approximately $750,000 (married filing joint) or $625,000 (single or head of household) or $375,000 (married filing separate). Again, this limitation is not large on its own, but when combined with the new charitable contribution base disallowance, the tax benefit is significantly reduced.

5. Increased standard deduction

The higher standard deduction has been made permanent and is increased for inflation annually. For 2026, the standard deduction rises to $31,500 for joint filers and $15,750 for single filers. This keeps “bunching” strategies noted above viable for taxpayers alternating between standard and itemized years.

Strategic planning insights for 2025 and beyond

Accelerate charitable giving into 2025

Given the new limitations coming in 2026 (mainly the charitable contribution base and the reduction of overall itemized deduction benefit to a max of 35%), front loading your contributions into 2025 can yield more significant tax advantages. Utilizing a Donor Advised Fund (DAF) allows you to make a large contribution this year (2025) and distribute funds to charities over time.

Planning Insight: With the increased $40,000 SALT cap in place for 2025, it may be easier to surpass the standard deduction threshold, maximizing itemized benefits. Caution, the increased SALT cap is reduced back to $10,000 through a phaseout calculation beginning with modified adjusted gross income (MAGI) of $500,000 (all but married filing separate which is $250,000) for 2025.

Bunch contributions for maximum benefit

Philanthropic minded taxpayers should continue to bunch charitable gifts into a single tax year to surpass the standard deduction threshold especially with the new charitable contribution base (floor) in 2026 and itemized deduction benefit cap. This strategy works well alongside the increased standard deduction in off years.

Donate appreciated securities

For the most efficient gifting strategy, consider contributing long-term appreciated securities. You can deduct the full fair market value while avoiding capital gains tax. These gifts are subject to a 30% AGI limit.  The same 5-year carryover for excess contributions applies to cash or property donations.

Leverage qualified charitable distributions (QCDs)

If you are age 70½ or older, you can direct up to $108,000 in 2025 from your IRA to a qualified charity using a QCD. Though not deductible, a QCD reduces your taxable income (i.e. the QCD is not included in your AGI/ taxable income calculation). This direct reduction to your AGI also helps to reduce other AGI-related thresholds (cap on itemized deductions at 35%, phase out of $40k SALT deduction and Net Investment Income (3.8%) tax to name a few).

Planning Insight: Making QCDs before reaching age 73 (the current RMD age) can help reduce future Required Minimum Distributions (RMD) and related tax burdens.

Bonus planning opportunity: Roth conversions

With new phase outs and floors taking effect for 2026, it makes 2025 an ideal year to consider Roth IRA conversions. Taxpayers can offset the conversion tax with strategic charitable contributions.

Navigating the changes in the OBBBA will require additional planning. For high-net-worth individuals, charitable giving is more than generosity, it is a tool for preserving wealth, reducing tax exposure, and shaping your legacy.

Keiter’s Family, Executive and Entrepreneur Advisory Services team can help you assess your charitable giving strategies to align with these legislative changes. Contact your Keiter Opportunity Advisor | Email | Call 804.747.0000 for more information.