One Big Beautiful Bill (OBBB): Impact on charitable giving

Key tax considerations for 2026 and beyond

On July 4, 2025, the One Big Beautiful Bill (OBBB) Act was signed into law. The legislation preserves several key elements of the 2017 Tax Cuts and Jobs Act (TCJA) while introducing new provisions that may shape charitable giving in meaningful ways. This article provides an overview of the new rules, updates to the TCJA, and other developments that may be relevant for donors as they plan their philanthropic strategies. Key parts of the legislation took effect in 2025, with more changes following in 2026 and beyond. Now is the time to assess how these shifts may impact your charitable planning strategies.

New tax provisions introduced by the OBBB

The OBBB introduced three tax provisions that could significantly influence decisions on charitable giving strategies, offering both expanded opportunities and important considerations for donors.

1. Above-the-line charitable deductions for non-itemizers
   Beginning in the 2026 tax year, a reinstated deduction allows non-itemizers to deduct cash donations to certain charities—up to $1,000 for single filers or $2,000 for married couples filing jointly. This provision is not indexed for future inflation, and donations to donor-advised fund sponsors and some private foundations are ineligible for the deduction.
   Implication: Since the TCJA increased the standard deduction, only about 10% of households itemize their deductions,¹ making the remaining 90% of households ineligible for charitable giving tax deductions. With the introduction of this provision, all households are now eligible to receive a tax deduction for qualified charitable contributions, potentially increasing participation in giving. A similar provision in 2020 and 2021 allowed a $300 deduction for charitable giving under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Approximately 90 million taxpayers claimed it in 2020–2021.
   
2. New floor on deductions for itemizers and corporations
   Effective in the 2026 tax year, itemizers who make charitable contributions may only claim a tax deduction to the extent that their qualified contributions exceed 0.5% of their adjusted gross income (AGI). For example, a couple with an AGI of $300,000 can only deduct charitable donations in excess of $1,500. Similarly, corporations are only entitled to deduct charitable contributions to qualified charities that exceed 1% of their taxable income.
   Implication: High-income individuals who itemize deductions should carefully consider the timing and amounts of their giving, and the strategies to maximize their deduction. For example, a bunching strategy or an approach of making larger gifts with less frequency can be more effective under the new rules. Corporations may want to take steps to proactively manage (and potentially increase) their giving to ensure they exceed the 1% threshold. Additionally, companies may benefit from consulting a tax advisor, especially if they operate on a fiscal year rather than a calendar year, to understand how the new rules apply.
3. New limits to deductions for itemizers in the top tax bracket
   In addition to the floor, the new legislation caps the tax benefit of itemized charitable deductions at 35% for those in the 37% marginal tax bracket. In other words, these high-income filers donating $1,000 would see the value of their deduction limited to $350 when previously it was $370. This change is effective for the 2026 tax year.

Extensions of the 2017 Tax Cuts and Jobs Act

Several provisions from the TCJA were made permanent or extended under the OBBB, thus continuing to influence charitable giving strategies and tax planning.

• Income tax brackets: Under the new law, the current income tax brackets have been made permanent. Effective as of the 2025 tax year, the income tax brackets are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
• New standard deduction amounts: Beginning with the 2025 tax year, the standard deduction, which was raised by the TCJA, increased further by $1,000 for single filers and $2,000 for married couples filing jointly. The standard deduction has increased again for the tax year 2026, to $16,100 for single filers and $32,200 for joint filers, with future amounts indexed for inflation.
• Adjusted gross income limits: The new law permanently extended the ability to deduct up to 60% of AGI for cash contributions to 501(c)(3) public charities.
• Estate and gift tax exemption: The federal estate and gift tax exemption has been increased to $15 million for the 2026 tax year, with future adjustments for inflation. This means that for the vast majority of estates, charitable bequests will offer limited tax benefits, whereas lifetime charitable contributions remain a tax-effective approach.

Other key tax changes

Several other updates are worth noting for their potential impact on charitable giving strategies and decision-making.

• An increased state and local tax (SALT) deduction
  Under the OBBB, the SALT deduction for itemizers has been increased from the $10,000 set by the TCJA to $40,400 in 2026. The increased SALT deduction begins to phase out for taxpayers with incomes over $505,000 in 2026. The cap and income threshold will increase annually by 1% through 2029 and then revert to $10,000 in 2030.
  Implication: Donors should note if their itemization status changed in 2025 as a result of the increased SALT deduction and determine if they expect to itemize again in 2026. If so, this could allow them to deduct more of their 2026 charitable donations, and they should plan accordingly.
• A tax deduction for donations to scholarship organizations
  Under the OBBB, a new tax credit goes into effect in 2027 allowing filers to claim up to $1,700 per taxpayer for cash donations to qualified K-12 scholarship-granting organizations. This credit is available to all individual taxpayers, regardless of whether they itemize.
  Implication: Donors who support these organizations should note that not all scholarship-granting organizations will qualify, and make sure to keep track of their paperwork, regardless of whether they plan to deduct other charitable giving.
• Higher tax rates on university endowments
  The OBBB introduced a new tiered endowment tax on university endowment investment earnings, with rates ranging from 1.4% to 8%. The highest rate applies to institutions with above $2 million in endowment assets per student. Private colleges with fewer than 3,000 tuition-paying students are exempt from the tax. While only 56 colleges and universities were subject to the higher tax rate at the time that the law was passed, this number is expected to increase over time.
  Implication: The change may make unrestricted current support—such as to an annual fund—more helpful to some institutions. Donors who support colleges and universities may want to check with their chosen institution to understand how their donation can provide the greatest value.

Key takeaways and considerations

In light of recent tax law changes, donors should take a fresh look at their charitable giving strategies to ensure they are maximizing both their impact and tax efficiency. Donors and their advisors should consider:

• Timing of contributions –Using a bunching strategy may yield greater tax savings. A donor-advised fund may be worth considering for this purpose.
• Thinking beyond cash – Itemizers will continue to be able to potentially minimize capital gains taxes on donations of non-cash appreciated assets while also being eligible for an income tax deduction, making these the most tax-smart assets to give for many.
• Maxing out a deduction with a combined gift – Itemizers may want to consider donating both non-cash and cash assets to take advantage of the higher AGI limits for cash donations and maximize their giving.
• Working with a trusted professional – Donors should engage with a financial advisor or tax professional to tailor a plan that aligns with their values and goals.

1 Tax Policy Center, “What are itemized deductions and who claims them?” 2024.