Charitable Giving and the OBBBA: What You Need to Know for 2025 and 2026

Charitable giving has always been a meaningful way for individuals to support the causes they care about while also receiving potential tax benefits. However, recent legislation has made changes that may affect how those benefits are calculated. With the passage of The One Big Beautiful Bill Act of 2025 (OBBBA), individuals who give to charity, particularly high-income earners and those who itemize deductions, will want to understand how their giving strategy might need to shift in 2025 and 2026.

The OBBBA, signed into law earlier this year, is primarily known for its focus on federal spending and budgeting reform. However, tucked into the legislation are some key changes related to personal income taxes and charitable deductions. These changes are intended to encourage giving in new ways, depending on how a taxpayer files and how much they contribute.

First, let’s begin with what’s happening in 2025. For individuals who itemize deductions, 2025 is shaping up to be an important year to consider maximizing charitable giving, especially in the form of cash contributions. Under current rules, itemizers can deduct cash contributions to qualified public charities up to 60 percent of their adjusted gross income (AGI). The OBBBA does not change this limit, so individuals who are able to itemize and who have the capacity to make significant gifts will still benefit from this high threshold in 2025.

After 2025, however, new limitations will apply. Individuals in the highest income bracket, currently set at 37 percent, will see their charitable deduction benefits capped at 35 percent. In addition, anyone who itemizes charitable contributions will only be allowed to deduct the portion of their charitable giving that exceeds 0.5% of their adjusted gross income.

What this means in practical terms is that high-income earners who itemize because their deductions exceed the standard deduction may want to consider making larger charitable gifts before the end of 2025. For individuals who are charitably inclined and financially able, this creates a window of opportunity. Not only do these contributions benefit the organizations and causes they care about, but they also help reduce federal income tax liabilities in a tax environment that remains favorable for large cash gifts.

It is important to consult with a tax advisor before making large contributions, as other factors, such as state tax laws and overall income strategy, can affect the ultimate impact of those donations. For example, donating appreciated stock to public charitable organizations or a donor-advised fund may offer additional benefits, such as avoiding capital gains tax, and offering the best after-tax value for many donors.

Looking ahead to 2026, there’s good news for taxpayers who take the standard deduction. The OBBBA introduces a new special charitable deduction, scheduled to take effect on January 1, 2026. This deduction echoes a temporary provision made available during the pandemic through the CARES Act, though the new version is slightly more generous.

In 2026, taxpayers who do not itemize will be able to claim a deduction for charitable contributions made in cash to qualifying organizations. The amount of this deduction is $1,000 for single tax filers and $2,000 for joint tax filers. Even though this is not a large deduction, it represents an important shift in tax policy. For many households who give regularly but do not itemize, this will be the first time in years they can receive any federal tax benefit from charitable giving.

The inclusion of this special deduction is aimed at broadening participation in charitable giving and recognizing the contributions of donors at all income levels. While the benefit may seem modest in dollar terms, it sends a strong signal that every gift counts and that the government sees value in supporting a culture of philanthropy, regardless of a taxpayer’s income or filing status.

With these changes, individuals should consider reviewing their charitable giving plans with an eye on timing. If you itemize, you may want to consider making larger gifts in 2025 to take advantage of the existing rules. If you typically take the standard deduction, you can look ahead to 2026 as a year when giving to charity may finally offer a tax advantage once again.

Tax laws are complex, and individual situations vary widely, so this is a good time to connect with your tax professional and client centric team at Greenleaf Trust to determine which charitable giving strategies are right for you. Planning now can help you maximize both the impact of your charitable contributions, and the tax benefits you receive in return.

Disclosure: This article is intended for informational purposes only and is not a substitute for legal or tax advice. Always consult with a qualified tax professional before making charitable or financial decisions.