The passage of the One Big Beautiful Bill Act (OBBBA) brings several key updates that may impact your charitable giving strategy and overall tax planning. While many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) were set to expire in 2025, the OBBBA locks in some of the most taxpayer-friendly benefits and introduces new rules that could influence when and how you give.
1. Standard Deduction: Permanently Higher, Slightly Adjusted
The OBBBA makes permanent the higher standard deduction first introduced by the TCJA, with continued inflation indexing. Starting in 2025, the standard deduction increases slightly from $15,000 to $15,750 for single filers and from $30,000 to $31,500 for joint filers. For many taxpayers, this higher standard deduction means fewer will itemize deductions each year—especially if itemizable deductions like mortgage interest, medical expenses, and charitable giving don’t exceed those thresholds.
2. Charitable Bunching
With the standard deduction being so high, it often doesn’t make sense to itemize unless deductions are grouped together. That’s where charitable bunching comes in. Let’s say a donor typically gives $10,000 to charity each year. Assuming no other itemized expenses, the donor takes the standard deduction of $15,750 for 2025. Instead, the donor could bunch contributions and maximize the ability to take itemized deductions. Let’s say the donor gives $40,000 (four years’ worth of giving) in a single tax year and then itemizes deductions. This would result in an extra $24,250 in deductions for 2025. In the following three years, the individual doesn’t make a charitable contribution and takes the standard deduction. But what about consistent support for the charity? The donor could contribute the bunched amount to a Donor Advised Fund (and get the deduction), while the DAF distributes the funds as if the donor never stopped his usual pattern of giving. The charity receives the same support, and the donor maximizes his/her tax benefit.
3. Cash Donation Limits: 60% AGI Cap Made Permanent
The OBBBA makes permanent the rule limiting cash contributions to public charities to 60% of your adjusted gross income (AGI). This preserves a significant giving threshold for those inclined to donate large amounts.
4. New Rules for Charitable Deductions in 2026
- 0.5% AGI Floor for Itemized Charitable Deductions
Taxpayers who itemize will now face a 0.5% AGI floor before charitable contributions can be deducted. This means a donor with $200,000 of AGI will lose $1,000 of charitable deductions right off the top. Contributions exceeding this floor are still subject to the usual AGI limits (60% for cash, 30% for appreciated assets). Planning Tip: If you itemize and plan to give, consider accelerating contributions into 2025 to avoid the 0.5% floor and maximize deductions under current rules.
- Deduction for Non-Itemizers
Even if you take the standard deduction, starting in 2026 you’ll be able to deduct up to $1,000 for single filers or $2,000 for married couples. However, this benefit excludes contributions to Donor Advised Funds and non-operating private foundations.
- Cap on Itemized Deductions for High Earners
Beginning in 2026, taxpayers in the top tax bracket (currently 37%) will see their itemized deductions capped at 35% of their value. This reduces the overall tax benefit of itemizing for these individuals. Again, this makes 2025 a strategic year for making large charitable gifts or other deductible expenses.
5. Gift and Estate Tax Exemption: Permanently Higher
The OBBBA locks in the higher gift and estate tax exemption amounts that were scheduled to sunset after 2025: $15 million per individual or $30 million per couple. These amounts are adjusted for inflation each year. This is an important planning window for clients considering wealth transfers or legacy gifts.
The changes brought by the OBBBA offer new planning opportunities—but also introduce added complexity. Timing matters, especially when it comes to charitable giving. Clients who take a proactive approach in 2025 may benefit from more favorable tax treatment than those who wait until 2026 and beyond.
