If charitable giving is part of your legacy or tax strategy, recent changes in the One Big Beautiful Bill Act (OBBBA) could reshape how your gifts are treated — potentially making 2025 a pivotal year for action.
The OBBBA introduces several new rules that could impact how donors receive tax benefits for charitable gifts. For some, the new laws could be favorable; for others, they could result in a partial or total loss of deductions.
While these rules don’t take effect until the 2026 tax year, some taxpayers will want to act before the end of 2025 to make the most of their generosity.
What Changes Should I Know if I Take the Standard Deduction?
Under current rules (still in place for 2025), taxpayers who use the standard deduction cannot reduce their taxable income by amounts given to charity. This will change starting in 2026.
Beginning in 2026, taxpayers who do not itemize can deduct up to $1,000 for an individual or $2,000 for a married couple in cash contributions. This deduction does not apply to gifts made to donor-advised funds (DAFs).
If you do not expect to itemize deductions this year, it may make sense to wait until 2026— when those contributions could result in a tax deduction you wouldn’t otherwise receive in 2025.
What Changes Should I Know if I Itemize Deductions?
For those who itemize, upcoming changes could be more impactful. Starting in 2026, charitable contributions will be subject to a 0.5% adjusted gross income (AGI) floor before deductions can begin. This means that if your AGI in 2026 is $500,000, you would need to donate $2,500 before you could deduct the first $1. In this example, if your actual donation was $3,000 you would receive a deduction of only $500 because that is the amount above the $2,500 floor.
Someone who makes a large gift relative to their AGI will only lose a small portion of their deduction, but someone making a more modest gift relative to AGI could lose most or all of their charitable deduction.
These examples show how the rule will impact different donors beginning in 2026:
- A household with AGI of $360,000 donates $38,000 to charity. The floor is $1,800. Their deduction is $36,200. They still got to deduct 95% of their gift.
- A household with AGI of $1,095,000 donates $6,000 to charity. The floor is $5,475. Their deduction is $525. They lost over 90% of their deduction.
For those who itemize, it may be beneficial to make anticipated charitable gifts in 2025 before the 0.5% AGI floor takes effect in 2026. Donors may consider “front-loading” multiple years of gifts in 2025 using a Donor Advised Fund (DAF). DAFs allow you to take an immediate tax deduction while distributing gifts to charities over time.
What If I’m Not Sure How Philanthropy Fits into My Plans?
The new rules under the OBBBA don’t change the why of giving—but they do change how to give effectively. Whether your motivation is legacy, impact, or tax efficiency, this is a good time to revisit how philanthropy fits into your broader wealth plan.
Consider these key factors:
- Legacy and Impact – Do you want your giving to reflect family values, support specific organizations, or create an eduring legacy for future generations?
- Timing – With new rules taking effect in 2026, accelerating gifts into 2025 may enhance deductions, especially if you itemize.
- Tools and Flexibility – Vehicles like Donor Advised Funds allow you to make a tax-efficient contribution in one year while deciding on the timing and recipients later.
- Integration with Your Plan – Charitable giving intersects with retirement, estate, and tax strategies. Coordinating these elements helps ensure your generosity aligns with your long-term goals.
Make Charitable Giving Work for You
Every client’s situation is unique. The right approach depends on your resources, goals, and the role you want charitable giving to play in your overall financial picture. A thoughtful conversation with your financial advisor can help determine whether accelerating gifts, establishing a DAF, or simply waiting until 2026 will put you in the best position to maximize both the impact of your giving and the efficiency of your tax plan.
