Maximizing Impact & Income: How OBBBA Reshapes Charitable Giving

The One Big Beautiful Bill Act (“OBBBA”), signed into law on July 4, 2025, represents one of the most comprehensive overhauls to the tax code in years. Its provisions touch many areas of individual and business planning, but for many taxpayers – especially those who give to charity – the biggest changes are in how deductions are calculated and applied.

Charitable giving has long been one of the most flexible tax planning tools available, offering a way to both advance philanthropic goals and reduce overall tax liability. OBBBA changes the rules of the game by introducing new thresholds and caps that alter how much of those donations can be deducted.

In this blog, we’ll review the most important charitable giving updates in OBBBA, explain what they may mean for you, and outline strategies to preserve as much of the tax benefit as possible in light of these sweeping changes.

Itemizing Under OBBBA: What’s Changing for Charitable Donors

Two major updates in OBBBA reshape how itemized charitable deductions work:

1. 0.5% Adjusted Gross Income (AGI) Floor

   Beginning in 2026, itemized charitable contributions will only be deductible to the extent that they exceed 0.5% of AGI. This creates a new hurdle before any donations count toward reducing your taxable income.For example, if your AGI is $500,000, the first $2,500 of charitable contributions will not provide any itemized deduction benefit. Only the amount above that threshold is deductible on Schedule A (Itemized Deductions).

2. 35% Deduction Cap for 37% Bracket Taxpayers

   High-income taxpayers in the 37% marginal bracket also face a new limitation: their charitable contributions are capped at a maximum deduction value equal to 35% of the donation, rather than their full 37% marginal rate.This means, for example, that a $100,000 charitable gift previously providing a $37,000 tax savings will now yield only $35,000 in savings – a meaningful reduction in the value of giving for high earners.

Together, these provisions change the landscape for itemized deductions: charitable gifts on Schedule A will receive less of a deduction (0.5% AGI floor), and charitable gifts for top earners will not generate the same level of tax savings as before (35% cap for those in the 37% marginal federal tax bracket).

Standard Deduction Filers Get a Boost

While OBBBA tightens the rules for itemizers, it also introduces a new below-the-line charitable deduction for those who take a standard deduction.

Starting in 2026, individuals can deduct up to $1,000 (or $2,000 for married couples filing jointly) in cash contributions to qualified charities without having to itemize deductions. This deduction isn’t subject to the 0.5% floor, which means that even smaller donors can benefit.

While modest compared to the itemized deduction structure, this provision broadens access to tax benefits for a larger group of donors, ensuring that even standard deduction filers get some recognition for their charitable giving.

Smart Giving in a New Era: Strategies to Maximize Your Tax Benefits

The new charitable deduction rules mean timing and strategy will be critical. Here are a few ways to maximize the value of your contributions:

1. Consider accelerating charitable gifts into 2025.
   

   Because the new floor and deduction cap take effect in 2026, charitable gifts made in 2025 may be more valuable from a
   tax planning perspective. For high-income taxpayers, especially those in the 37% bracket, accelerating charitable giving into 2025 could preserve a greater tax benefit.

2. Bunch contributions into a Donor-Advised Fund (DAF).
   

   By “bunching” several years’ worth of contributions into 2025 – and directing them into a DAF – you can avoid the new 0.5% AGI floor and secure the deduction at current, higher benefit levels. This strategy locks in tax savings now while allowing you to distribute funds to charities over time.

3. Gift from your IRA via Qualified Charitable Distributions (QCDs).

   For individuals over age 70½, QCDs from IRAs will become even more valuable under the new rules. QCDs are not subject to the 0.5% AGI floor nor the 35% deduction cap for top-bracket taxpayers, making them one of the most tax-efficient ways to support charities while also satisfying required minimum distributions (RMDs).

4. Update your 2025 tax projection.

   OBBBA adds new layers of complexity to charitable giving, making it crucial to plan ahead. Running a 2025 tax projection can help determine how these changes impact your deductions and guide decisions about whether to accelerate donations or adjust your strategy.At Tull Financial Group, we can model how the OBBBA provisions affect your charitable giving and overall tax situation. Understanding the impact now allows you to take proactive steps and preserve as much value as possible before the new rules take effect.

Final Thoughts: Navigating the New Charitable Landscape

OBBBA fundamentally reshapes charitable giving deductions. For many donors, especially high-income taxpayers, the combination of a new 0.5% AGI floor and a capped deduction benefit at 35% means charitable giving may offer slightly less tax advantages than it once did. Accelerating contributions into 2025, using donor-advised funds, and leveraging Qualified Charitable Distributions can help you maintain the value of your giving.

Curious whether these changes affect your charitable giving strategy? Reach out to Tull Financial Group today at (757) 436-1122 to discuss your specific situation. We can help you understand how the OBBBA changes impact you and build a charitable giving plan that supports your goals while optimizing your tax benefits.