The recently passed One Big Beautiful Bill Act (OBBBA) includes several sweeping reforms that affect how individuals and families approach philanthropy. While the name might sound lighthearted, the legislation brings profound changes. If you donate to charity, here’s how OBBBA may impact your strategy.

New Charitable Tax Deduction for Non-itemizers

Starting in the 2026 tax year, there is a new charitable deduction for taxpayers who do not itemize. The deduction is “above-the-line” for up to $1,000 for single filers and $2,000 for joint filers. The deduction is limited to gifts of cash and excludes gifts to donor-advised funds (such as Fidelity Charitable accounts). This new deduction should incentivize donors who do not itemize to support charities.

Limits for Charitable Deductions for high-income taxpayers

Starting in 2026, taxpayers in the highest 37% tax bracket (over $626,350 individual or $751,600 married filing joint) will have their itemized deductions capped at 35%. This change can reduce the tax benefit of large charitable gifts for high-income individuals. As an example, a $100,000 donation for someone in the 37% bracket will save $35,000 in taxes vs. $37,000 without the cap. Accelerating charitable contributions in 2025 before this change takes effect could make sense for certain taxpayers.

New Floor for Charitable Deductions

Another change for high-income taxpayers is a new floor on charitable donations based on a percentage of adjusted gross income (AGI). Starting in 2026, only the portion of charitable contributions that exceeds 0.5% of AGI is deductible. As an example, a taxpayer with $300,000 in AGI, the first $1,500 of charitable contributions will yield no deduction. Similar to the limit above, a strategy of accelerating charitable contributions in 2025 could make sense to avoid this floor in 2026.

These changes to charitable contributions underscore the importance of thoughtful planning. Strategies can be implemented, such as bunching donations using a donor-advised fund, to ensure you are maximizing the tax benefits of your charitable gifts. These strategies can be crucial for taxpayers in the highest tax bracket, as it may be necessary to take action before 2026 to ensure you’re making the most of the tax savings from large charitable gifts.

We’re more than happy to coordinate with your tax adviser to help you navigate these issues and ensure your giving remains as impactful as ever. Over the next several months, we will continue to highlight the changes in the tax landscape due to OBBBA in blogs and client meetings. Let us know if you have any questions on how this bill impacts your situation.

Mary McCraw, CFP®

Vice President

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