What OBBB Means for Charitable Contributions

New Rules for Charitable Deductions Starting in 2026

For years, charitable giving rules have shifted with each round of tax legislation, leaving individuals and corporations uncertain about what’s next. The One Big Beautiful Bill (OBBB) Act is the latest in this evolution, introducing new opportunities and limitations that will take effect in 2026.

Some provisions remain unchanged. The cash contribution limit, previously raised from 50 percent to 60 percent of adjusted gross income (AGI) under the Tax Cuts and Jobs Act, is now permanent. That offers continuity for taxpayers who give at higher levels.

Other provisions are new, and many of them will expand the pool of taxpayers who benefit from giving. Starting in 2026, even those who claim the standard deduction will have access to a charitable contribution deduction—up to $1,000 for single filers and $2,000 for joint filers. At the same time, the legislation narrows the benefit for higher earners and sets new thresholds that shape how deductions may be claimed.

Charitable Contribution Changes for Individuals

The OBBB Act widens the circle of taxpayers who can benefit from giving. The provision is especially notable for the many households that do not itemize deductions. For the first time, standard deduction filers will be able to claim a charitable giving benefit, though the deduction is capped at $1,000 for individuals and $2,000 for joint filers. For households that do not itemize, this is welcome news, as it extends the tax benefit of giving to a much broader group.

At the same time, the new law reshapes how deductions work for higher earners. Currently, taxpayers in the 37 percent bracket receive a 37 percent benefit for their charitable contributions. Starting in 2026, that benefit is capped at 35 percent. While this reduces the value of deductions slightly, it also encourages thoughtful planning. For those considering large gifts, 2025 presents an opportunity to secure the full 37 percent benefit before the change takes effect.

The Act also introduces a new floor beginning in 2026. The first 0.5 percent of adjusted gross income (AGI) given to charity will not be deductible. For example, a joint filer with $500,000 in AGI will not receive a deduction on the first $2,500 donated. This change means smaller, annual donations may no longer yield the same tax advantage. Yet there are strategies to manage this. Donors may choose to bunch contributions by combining several years’ worth of gifts into one year, ensuring the total exceeds the floor. Another option is to contribute to a donor-advised fund, allowing taxpayers to claim the full deduction in a single year while distributing the funds to charities over time. In addition, individuals age 70½ or older may make Qualified Charitable Distributions (QCDs) directly from IRAs. Because these gifts are made with pre-tax dollars, they provide a tax benefit without being subject to the 0.5 percent floor. These approaches help maintain the benefit of charitable giving under the new rules.

Charitable Contribution Changes for Corporations

Corporations also face new rules under the OBBB Act, and these changes reward careful planning. Beginning in 2026, contributions are deductible only if they exceed one percent of taxable income. At the same time, a ceiling has been set: deductions are capped at 10 percent of taxable income, with any excess carrying forward to future years.

This structure creates both a challenge and an opportunity. Companies that experience a loss will not be able to deduct their charitable contributions in that year. Yet for profitable businesses, the 10 percent ceiling provides clarity. Contributions above that limit are not lost but instead may be applied in later years. This allows corporations to think about giving on a multi-year horizon rather than being constrained by annual results.

In practice, planning will matter more. Projections of taxable income can help organizations strategically determine the timing and size of gifts so that they remain within the new one percent floor and 10 percent ceiling. For some organizations, this may mean shifting when contributions are made or coordinating gifts with expected profitability. With the right approach, corporations can continue to support charitable causes while ensuring they capture the full value of their deductions.

Additional Incentives for Supporting Education

The OBBB Act also introduces new incentives for targeted giving beginning in 2027. Taxpayers who contribute cash to qualified charitable organizations that provide K–12 scholarships may qualify for a nonrefundable tax credit of up to $1,700. This credit directly offsets taxpayers’ federal tax liability rather than reducing their taxable income, effectively amplifying the benefit of supporting education.

For individuals who prioritize educational causes, this provision makes charitable giving even more advantageous. It encourages contributions to organizations that directly support students, while still allowing donors to claim the standard or itemized deduction. The increased benefit of the credit offers a meaningful incentive for those looking to maximize the impact of their charitable dollars under the new law.

What to Do Before Year End

For individuals and corporations, 2025 offers a window to maximize the benefits of charitable giving before the OBBB Act changes take effect. High-income taxpayers, particularly those in the 37 percent bracket, may consider making contributions before December 31, 2025 to secure the full 37 percent marginal tax benefit rather than the reduced 35 percent rate in 2026.

Large gifts in 2025 also avoid the new 0.5 percent AGI floor that begins next year. For example, a joint filer with $500,000 in AGI would lose the deduction on the first $2,500 of contributions in 2026, but giving before year-end ensures no portion of the gift is excluded.

Corporations have similar considerations. Contributions must be coordinated with projected taxable income to remain above the one percent floor and within the 10 percent maximum deduction. Organizations may need to run projections comparing book income and taxable income to ensure gifts capture the full deduction.

AAFCPAs’ tax and wealth advisors offer strategic approaches to help both individuals and corporations optimize giving. Bunching contributions over multiple years into a single year allows taxpayers to exceed the floor without giving every year. Donor-advised funds provide additional flexibility, enabling contributions to be made in 2025 while distributing funds to charities over several years.

By planning now, donors can secure the maximum benefit of their contributions, maintain giving goals, and position themselves for smoother charitable planning under the new rules.

How We Help

AAFCPAs helps high-net-worth individuals and families as well as businesses navigate the complexities of charitable giving under evolving tax laws by providing guidance to structure contributions efficiently, time them strategically, and align them with broader personal financial plans and business goals.

For individuals and families, we offer comprehensive planning to maximize the benefit of charitable deductions while preserving wealth, including guidance on standard versus itemized deductions, timing gifts to achieve the highest marginal tax benefit, and using tools such as donor-advised funds or bunching strategies to overcome deduction floors, as well as advice on whether contributions of cash, stock, or other assets may provide the greatest tax efficiency.

Financial planning & investment advisory services are offered through AAF Wealth Management, a registered investment advisor. Tax services are provided by AAFCPAs. AAF Wealth Management and AAFCPAs are affiliated entities.