The One Big Beautiful Bill Act (OBBBA) introduces a new landscape for charitable giving, creating both expanded opportunities and subtle new limits. For clients who itemize deductions, make annual donations, or engage in planned giving, now is the time to revisit strategy.
While charitable intent remains timeless, the tax treatment of charitable gifts under OBBBA is anything but.
What’s Changed and What Hasn’t
The law now distinguishes more sharply between non-itemizers and itemizers, while introducing new floors and caps that could shift the effectiveness of certain giving strategies.
Key changes include:
- Non-itemizers can now deduct up to $1,000 in charitable contributions per year (or $2,000 for married couples filing jointly) without itemizing.
- Itemizers must now meet a new 0.5% of AGI “floor” before charitable deductions begin to count.
- Existing limits on deductibility, such as the 60% of AGI ceiling for cash gifts to public charities, remain in place.
These provisions are in effect starting with the 2025 tax year.
What the New “Floor” Means for Itemizers
For taxpayers who itemize, the most significant change is the introduction of a 0.5% AGI floor. This means that charitable deductions are only recognized to the extent they exceed 0.5% of adjusted gross income.
For example, a taxpayer with $400,000 of AGI must contribute more than $2,000 before their charitable gifts begin to generate a deduction (the deduction must be at least 0.5% or more of the taxpayer’s AGI).
This provision is likely to affect:
- Moderate annual donors, whose charitable gifts fall below the threshold
- Retirees with low AGI but high charitable intent, such as those giving appreciated securities or using Qualified Charitable Distributions (QCDs)
- Families who traditionally “spread” gifts over the year, rather than bunching them into a single gift.
Planning Opportunities
While the new rules introduce some limits, they also encourage more intentional giving. Taxpayers may want to consider the following strategies:
- Gift bunching: Consolidating multiple years of charitable giving into a single tax year can help exceed the new 0.5% floor and maximize deduction value.
- Donor-Advised Funds (DAFs): These remain a flexible tool to front-load charitable gifts in high-income years, while distributing them over time.
- Qualified Charitable Distributions (QCDs): For taxpayers over 70½, QCDs continue to offer a powerful way to give directly from IRAs, reducing AGI and avoiding the new floor entirely.
- Strategic non-cash donations: Gifting appreciated stock or real estate can still unlock significant tax benefits, especially when used to offset concentrated income or capital gains.
A Note for Non-Itemizers
The reintroduction of a charitable deduction for non-itemizers—up to $1,000 per taxpayer—may seem modest, but it reflects a policy shift toward rewarding a broader base of givers. It also creates opportunities for employers, churches, and community organizations to encourage consistent giving among donors who otherwise don’t receive a tax benefit.
This provision may pair well with workplace giving campaigns or employer matching programs, particularly for younger employees or those with simpler tax filings.
Aligning Charitable Goals with Tax Strategy
The bottom line: OBBBA rewards intentional giving, not incidental giving. The new rules may diminish the benefit of small, scattered donations, but they provide continued support for strategic and sustained philanthropy.
At Carlile Patchen & Murphy, we work closely with clients to align their philanthropic goals with sound tax planning. Whether you’re giving annually, funding a family foundation, or planning a legacy gift, our estate, tax, and business attorneys can help you optimize your approach under the new law.
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