By Beth Dopking Neal, CFP®

 

On July 4, 2025, the One Big Beautiful Bill Act was signed into law, bringing sweeping changes to U.S. tax law, many of which affect how individuals and corporations are incentivized to give to charitable causes. These changes have potentially significant implications for donors, nonprofits, and the strategies used in philanthropic planning. Below is a breakdown of key provisions and strategic considerations.

Key Provisions of the OBBBA Affecting Charitable Giving:

1. Universal Charitable Deduction for Non-Itemizers

Beginning in 2026, taxpayers who do not itemize will be able to deduct charitable donations: up to $1,000 for single filers, and $2,000 for married couples filing jointly.

Note: this deduction does not apply to donor-advised funds or private foundations.

2. Itemizer Floor for Individual Deductions

For those who continue to itemize deductions, charitable deductions will only be deductible for the portion exceeding 0.5% of adjusted gross income (AGI) starting in 2026. In other words, smaller donations (below that threshold) won’t yield any tax deduction.

Example: Household AGI in 2026 $250,000, Floor $250,000 x 0.5% = $1,250, Charitable contribution in 2026 $5,000, Deductible amount = $3,750

3. Corporate Floor for Charitable Deductions

Corporations must now donate more than 1% of their taxable income in order for charitable contributions to be deductible. Contributions below that threshold won’t qualify.

Example: Taxable income in 2026 $5,000,000, Floor $5,000,000 x 1% =$50,000, Charitable contribution in 2026 $70,000, Deductible amount = $20,000

4. Cap on Deduction Value for High Brackets

For high-income itemizers, there is now a limitation: the effective deduction for charitable contributions is reduced due to a 35% cap on how much value can be claimed for those in the top tax bracket (37%).

Example: Household AGI $1 million, Charitable contribution in 2026 $400,000, Floor $1,000,000 x .5% = $5,000, Eligible deduction = $400,000 – $5,000 = $395,000, Max deduction limitation 35% x $395,000 = $138,250 max tax benefit (versus $146,150 at 37%)

5. Other Related Changes

• • The top individual tax rate (37%), and some lower brackets, are made permanent.
  • Higher standard deductions remain, which means fewer taxpayers will itemize. 2025 standard deduction amounts: $15,750 single/married filing separately, $31,500 for married filing jointly, additional deduction for age 65+ of $6,000 per each eligible taxpayer ($12,000 for married couples who are both 65+).
  • The State & Local Tax Deduction (SALT) cap has been raised temporarily for some filers, which may indirectly affect whether people itemize (and thus how much charitable giving yields a tax benefit).

Strategies for Donors:

To adapt to the new rules and maximize effectiveness (both philanthropic impact and tax efficiency), here are some strategies individual and corporate donors might consider.

1. Plan ahead / timing of gifts

• • If possible, accelerate giving before 2026 (when many of the new thresholds, floors, and caps come into effect) if you expect to be in a high tax bracket or have large giving goals.
  • “Bunching” – making larger gifts in one year so that you exceed the 0.5% AGI threshold (if itemizing) or so that your charitable deductions are more meaningful.

2. Use appreciated assets

• • Giving stocks, bonds, or other appreciated property can provide additional tax benefits (capital gains avoidance, etc.). Even with limits on the deduction, the non-tax-benefit side (asset transfer) is powerful.

3. Consider donor-advised funds (DAFs) and private foundations

• • While some portions of the new law do not apply to gifts to DAFs (non-itemizer deduction excluded), DAFs may still offer flexibility in timing distributions to charities.
  • For some donors, shifting giving into foundations or trusts could help smooth out giving over years to exceed thresholds more consistently.

• Note: If you plan to open a DAF, please do so no later than 12/8/25 for tax year 2025 donations.

4. Engage in multiyear pledges

• If the timing of your deductions becomes more critical, consider pledging over multiple years or making multi-year commitments. The charity can rely on the commitment, but the donor decides when and how to fund each installment allowing you the flexibility to give in years when it yields more tax benefit.

5. Diversify giving base

• • Smaller nonprofits, local causes, and community foundations may increasingly benefit from non-itemizer deductions and might be more open to donor relationships.
  • For donors whose incentives have weakened, finding ways to engage with causes through volunteering, non-cash giving, etc., may maintain impact even with less tax leverage.

6. Work with tax / financial advisors

• • The new law adds complexity — floors, thresholds, caps. Working with a professional to model different scenarios (income levels, expected tax rate, timing) is more important than ever.

Conclusion:

The One Big Beautiful Bill Act reshapes the tax incentives around charitable giving in ways that both open doors for wider participation (through non-itemizer deductions) and impose new limits (floors, caps, etc.). The net effect likely will be mixed: some increase in small-donor participation, but reduced incentives for certain high donors and corporate giving.

For donors, thoughtful planning becomes even more important: timing, type of gift, and working closely with tax professionals and financial advisors will help maximize both tax benefit and impact.

For more information about Charitable Giving Strategies, contact Beth Dopking Neal at bneal@suncoastequity.com or call 813-963-0502.

This material is provided for informational purposes only and should not be construed as tax or legal advice. Suncoast Equity Management/Suncoast Prosperity Advisors is not engaged in rendering tax, accounting, or legal services. Please consult your professional tax advisor regarding your individual circumstances before making any decisions.