With the passage of the One Big Beautiful Bill Act (OBBBA), charitable planning is entering a new era. Beginning in 2026, significant changes to charitable deductions will reshape how and when it makes the most sense to give. Thoughtful planning now can help ensure your generosity continues to make a meaningful impact while also maximizing your tax benefits.
Let’s take a closer look.
Understanding the New AGI Floor
Starting in 2026, a 0.5% floor on adjusted gross income (AGI) will be imposed on itemized charitable contribution deductions. This means only donations exceeding that threshold will be deductible.
For example, if your AGI is $100,000, 0.5% equals $500. The first $500 of your charitable contribution would not qualify for a deduction, but anything above that amount would. So, if you donated $600 to charity, only $100 would be deductible.
Why “Bunching” May Be Your Best Strategy
This new limitation on itemized charitable contributions, combined with other provisions, such as the limitation on state and local tax deductions, makes “bunching” charitable contributions an effective strategy.
Bunching charitable contributions means making several years’ worth of charitable gifts in a single year and then pausing contributions for the next few years. This approach helps overcome both the 0.5% AGI floor and the increased standard deduction hurdle of $15,750 (single) or $31,500 (married filing jointly).
How Donor-Advised Funds Can Help
Even if a large, bunched charitable contribution makes sense, you might have some questions: What if you’ve made annual charitable pledges? What if you haven’t decided how to divvy up your gift among charities? Or what if you prefer to give several smaller donations throughout the year?
A donor-advised fund (DAF) can help balance flexibility with tax-efficiency. By contributing to a DAF, you can take the full deduction in the year you contribute, while distributing grants to charities over time, whether that’s this year, next year, or several years down the road. Funds in a DAF can be invested and grow tax-free, though once contributed, they can only be used for charitable purposes.
High-Income Earners: Act Before 2026
Beginning in 2026, the OBBBA will also impose a new limitation on itemized deductions for taxpayers in the top 37% tax bracket—those with taxable income over $626,350 (single) or $751,600 (married filing jointly).
This limitation decreases itemized deductions by 2/37 of the lesser of:
- Total itemized deductions, or
- The amount by which taxable income plus total itemized deductions exceed the 37% threshold.
In practice, this means the tax benefit of deductions drops from 37% to 35% for those in the top bracket. If you’re consistently in this income range, accelerating your charitable giving with a bunched gift in 2025 could help you capture the full deduction before the limitation takes effect.
A New Deduction for Non-Itemizers
Not all the changes are restrictive. In 2026, the OBBBA introduces a new below-the-line deduction for charitable contributions, available to taxpayers who do not itemize.
This deduction is capped at $1,000 (single) or $2,000 (married filing jointly) and applies only to cash contributions made directly to public charities. Donations to DAFs, supporting organizations, or private foundations won’t qualify.
If you typically take the standard deduction, this new rule means your smaller charitable contributions could finally offer a tax-benefit, so hold onto those donation receipts and share them with your tax preparer when filing.
Plan Now for Maximum Impact
With these sweeping changes on the horizon, 2025 presents a valuable opportunity to rethink your charitable giving strategy. Consider how your timing, giving method, and total contribution amount fit into your broader tax and financial picture.
Charitable giving sits at the intersection of your values, your tax plan, and your financial plan, and thoughtful planning helps ensure they work in harmony. Before the new rules take effect, speak with both your tax advisor and your financial advisor to map out the best approach for 2025 and beyond.
Disclosure
The information presented in this blog is for educational purposes only and should not be considered specific investment, tax, or legal advice. While the information is believed to be accurate as of the date of posting, no guarantee is made as to its completeness or accuracy. WealthCrossing is a registered investment advisor; we do not provide tax or legal services. Please consult with a qualified tax professional or attorney regarding your individual situation before making financial decisions.
