OBBBA Brings New Charitable Deduction Rules for Donors
- HFM CPAs + Business Advisors
- Dec 16, 2025
- 2 min read
The recently passed One Big Beautiful Bill Act (OBBBA) brings significant changes to the rules for charitable deductions, affecting both itemizers and non-itemizers starting in 2026. While the law introduces a new above-the-line deduction for some donors, it also imposes new limits and reductions that could impact the tax benefits of giving.
Key Changes for Charitable Giving:
Above-the-Line Deduction for Non-Itemizers: Beginning in 2026, taxpayers who do not itemize can claim an above-the-line deduction for cash donations—up to $1,000 for single filers and $2,000 for married couples filing jointly. However, this deduction is not available for gifts to donor-advised funds or private foundations, and it is not indexed for inflation.
New Floor for Itemizers: For those who itemize, only charitable contributions that exceed 0.5% of adjusted gross income (AGI) will be deductible. For example, if your AGI is $500,000, the first $2,500 of charitable giving will not be deductible.
Cap on Itemized Deductions: The value of all itemized deductions, including charitable contributions, will be capped at 35% for taxpayers in the highest tax bracket. This means that even high-income donors will not receive the full tax benefit of their charitable gifts.
Reduction on Certain Deductions: The law also introduces a reduction of 5.14% on certain deductions for those in the top tax bracket, further limiting the tax savings from charitable giving.
Planning Considerations:
Timing Matters: Taxpayers may want to consider accelerating charitable contributions into 2025 to take advantage of current rules before the new limitations take effect.
Donor-Advised Funds: Contributing to a donor-advised fund before year-end may allow donors to maximize their deduction under the old rules and distribute gifts to charities over time.
Long-Term Philanthropy: The new rules may require a fresh look at long-term giving strategies, especially for high-income individuals and those who regularly make large charitable gifts.
The OBBBA introduces both new opportunities and new challenges for charitable giving. While some donors will benefit from the above-the-line deduction; others, especially high-income taxpayers and those who itemize, may see reduced tax benefits from their charitable contributions.
Questions?
Contact HFM CPAs for questions on how this may affect your specific situation. Our team stays current with evolving tax and related legislation to help you navigate new opportunities and requirements.
HFM CPAs provides specialized accounting, tax, and assurance services to individuals and businesses across Connecticut and Rhode Island.