What the New Bill Could Mean for Donors in 2025 and 2026

The One Big Beautiful Bill Act (OBBBA) introduces a few key updates to federal tax law that could reshape how taxpayers approach charitable giving. Starting now and moving into 2026, taxpayers may need to rethink their giving strategies to maximize the tax benefits of their donations. In this article, we will explore:

• How the OBBBA changed charitable giving incentives
• How these changes may affect donors
• Practical solutions for building better giving strategies in the new tax landscape

How did the OBBBA change charitable giving incentives?

The One Big Beautiful Bill Act, which was signed by President Trump on July 4, 2025, introduced a few provisions that change how (or how much) taxpayers are incentivized to make charitable donations. Here are those key changes:

• Created an above-the-line deduction for non-itemizers: Beginning in 2026, taxpayers who don’t itemize their deduction can deduct up to $1,000 of charitable donations (or $2,000 for married filers). This deduction is indefinite, so it gives some incentive to donate to charity, but keep a few things in mind: (1) this number is not indexed for inflation in future years, and (2) it only applies to cash contributions (not stocks, charitable travel expenses, or in-kind donations like art, jewelry, or cars).
• Increased the standard deduction: In President Trump’s first term, he signed the Tax Cuts and Jobs Act of 2017, which nearly doubled the standard deduction. Since then, only around 10% of taxpayers have been able to itemize, compared to 31% in 2017.[1] The expanded deduction was set to expire at the end of 2025, but the OBBBA made it permanent. While a larger deduction reduces taxable income for many filers, it also means that fewer people itemize. When fewer people itemize, fewer see a direct tax benefit from making charitable contributions.
• Increased the SALT deduction cap: Beginning in the 2025 tax year, the OBBBA temporarily raises the SALT deduction cap from $10,000 to a maximum of $40,000. With this higher limit, more taxpayers will be able to itemize their deductions, which could make charitable giving more attractive. This boost to the SALT deduction cap is adjusted for inflation and is available through the year 2029.
• 5% floor for itemizers: Effective in 2026, taxpayers who itemize can only claim a tax deduction to the extent their contributions exceed 0.5% of their AGI. For example, if a taxpayer’s AGI was $100,000, their first $500 of donations would be disregarded. This means that if they donated $2,000, they could only deduct $1,500.
• Capped charitable contribution deductions for high earners: Taxpayers in the highest tax bracket can only receive a tax benefit from charitable contribution deductions of 35% or less. Typically, their maximum benefit would be the same as their marginal tax bracket: 37%.

How might taxpayers change their giving strategies in response to the OBBBA?

Each taxpayer’s optimal giving strategy will be different. Your goals, your financial situation, and your tax position all play a part. So, instead of talking about what you should do, let’s discuss your options. What are some small changes you can make that could — depending on your situation — increase your charitable contribution deduction?

Solution 1: Change the timing of your contributions

Some of the OBBBA’s changes — like the 0.5% floor — aren’t effective until next year. You may get more of a bang for your contribution buck if you push some of your 2026 donations into 2025.

Solution 2: Bunch your donations

Bunching your charitable donations from two or more tax years into one could help you surpass the standard deduction and therefore see a tax benefit from your donations. Here’s a great primer on bunching strategies if you want to learn more.

Solution 3: Consider a donor-advised fund

Donor-advised funds (DAFs) are investment accounts that let you donate to charity, receive an immediate tax deduction, and direct those assets to charities sometime in the future. Because you receive a current-year tax deduction for whatever you put into the fund, DAFs are often used in a bunching strategy.

Solution 4: Change the types of donations you make

Not all donations produce the same deduction. For example, if you don’t itemize in 2026, your in-kind donations won’t reap any tax benefits, but cash contributions might if you use the $1,000/$2,000 above-the-line deduction. Here are a few other rules of thumb:

• You can deduct up to 60% of your AGI for cash donations, but only up to 30% of your AGI for gifts of non-cash assets like appreciated stock.
• If you donate inventory from your business, the deductible amount is only its cost basis, not its fair market value.
• Gifts to private foundations are limited to 30% of your AGI, while gifts to public charities (like universities) are capped at 60%.

Solution 5: Go over your strategy with an expert

Our team is more than happy to help you hone your giving strategy. A year-end conversation is especially valuable since it gives you time adjust before January 1. Contact us to schedule a consultation.

[1] https://www.irs.gov/statistics/soi-tax-stats-individual-statistical-tables-by-size-of-adjusted-gross-income
Table 1.6 and Table 2.1