What OBBB May Mean for Charitable Giving

The One Big Beautiful Bill Act (OBBB) significantly reshapes the tax rules governing charitable giving, with changes in effect as of 2026. While the legislation expanded incentives for smaller donors, it reduced the tax efficiency of charitable giving for higher-income households, making thoughtful planning more important than ever.

Let’s first review how higher-income families can adapt their philanthropic approach under these changes.

A New “Floor” on Charitable Deductions for Itemizers

Under current law, itemizers can only deduct charitable contributions that exceed 0.5% of adjusted gross income (AGI). For example, a household with$750,000 in AGI must give more than $3,750 before receiving any deduction.

For high-income households, this means:

o A larger portion of annual giving may not be deductible

o Smaller or incremental gifts may provide little to no tax benefit

As a result, the timing and structure of charitable gifts now play a larger role in tax outcomes.

Reduced Tax Benefit at Higher Income Levels

For those in the top tax bracket, the value of itemized deductions—including charitable

gifts—is now capped at 35%, even if their marginal rate is higher. For example, a $100,000 gift may reduce taxes by $35,000 instead of $37,000.

Planning Becomes More Important Than Ever

Although incentives have narrowed, the new rules reward donors who take a deliberate, coordinated approach to giving. Several strategies standout:

Bunching Contributions

Combining multiple years’ worth of charitable gifts into a single tax year, donors can exceed the 0.5% AGI threshold, improve usable itemized deductions, and maintain consistent support for charities through grantmaking. Donor-advised funds (DAFs) are commonly used to implement this strategy. Your advisor can explain how this tool may work for you!

Donating Appreciated Assets

For investors with long-held, appreciated securities, charitable contributions funded with non-cash assets remain one of the most tax-efficient tools available. Benefits include:

o Avoidance of capital gains tax

o A fair-market-value charitable deduction (subject to AGI limits)

o Larger effective gifts without utilizing current cash

As cash gifts become less immediately tax-efficient, asset-based giving takes on greater importance.1

Qualified Charitable Distributions (QCDs)

For individuals age 70 and older, Qualified Charitable Distributions from IRAs offer key advantages:

o Donations are excluded from taxable income

o Required minimum distributions (RMDs) can be satisfied directly

o The strategy bypasses itemized deduction limitations altogether

In many cases, QCDs now represent the most tax-efficient form of charitable giving for retirees with significant IRA balances. Please note that even if your RMD age is 73, you can still make QCD’s at age 70 1/2 (up to$100,000). Your advisor can help you determine which strategy – and when – maybe optimal for you.2

Now let’s review the expanded incentives for smaller donors:

While the OBBB reduced the tax efficiency of giving for higher-income households, it significantly expands access to tax benefits for smaller donors, particularly those who do not itemize deductions.

A New Charitable Deduction for Non-Itemizers

Beginning in tax year 2026, taxpayers who take the standard deduction can now also deduct charitable contributions, something not previously allowed. Filers may deduct up to $1,000 (single) or $2,000 (married filing jointly) for cash gifts to qualifying public charities.

By separating charitable deductions from itemizing, the legislation allows modest giving to generate tax benefits, encouraging broader participation among younger and middle-income households. The new rules provide a clear, dollar-based deduction without the need to coordinate with other deductions.

This contrasts with high-income donors, who must navigate AGI thresholds and deduction caps. As a result, more households can benefit from giving, even at lower levels.

Overall, OBBB expands incentives for smaller donors while reducing them for higher-income households— helping make charitable planning simpler for smaller donors and more strategic for wealthier ones.

Final Thoughts

Charitable giving under OBBB remains a meaningful planning opportunity—but now requires greater precision. For higher-income households, tax benefits are no longer automatic. The structure, timing, and asset selection matter more than ever!

By working with your advisor, you can align charitable strategies with your broader tax, investment, and estate planning to help preserve both philanthropic impact and after-tax efficiency. For those committed to giving at higher levels, revisiting and refining charitable plans is no longer optional, it’s essential.

1How OBBBA alters charitable deduction strategies for 2025 and 2026

2Seniors can reduce their tax burden by donating to charity through their IRA | Internal Revenue Service