As you plan your year-end giving, the newly enacted “One Big Beautiful Bill Act” introduces important changes worth noting.
We’ve all been watching policy changes and looking closely at the implications of the “One Big Beautiful Bill Act” that was just passed and signed into law. There are some nuances worth noting as you look at your charitable giving before year-end.
1. New limits to deduction for itemizers in the top tax bracket:
The new legislation caps the tax benefits of itemized charitable deductions at 35%, even for those in the 37% marginal tax bracket. In other words, these high-income filers donating $1,000 would receive a $350 deduction instead of the current $370. This change goes into effect in the 2026 tax year.
Implication: Donors in higher tax brackets who are considering a significant philanthropic gift may consider accelerating their gift in 2025 to maximize the deduction under the current marginal rate before the new cap goes into effect.
2. New floor on deductions for itemizers and corporations:
Effective in the 2026 tax year, itemizers who make charitable contributions will only be able to 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 could only deduct charitable donations in excess of $1,500. Similarly, corporations will only be 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 to maximize that 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.
Please note: This information is provided for general guidance only and should not be considered tax advice. We recommend consulting your tax advisor to understand how these changes may affect your specific situation.
