The “One Big Beautiful Bill Act” (OBBBA), signed into law earlier this year, brings significant changes to how charitable giving will impact your taxes, starting in 2026. Whether you itemize deductions or take the standard deduction, these updates may affect how you plan your donations as we near the end of 2025 and into 2026.
Key Changes to Be Aware Of:
New Above-the-Line Deduction for Those Who Take the Standard Deduction (Starting 2026)
Taxpayers who take the standard deduction will be able to deduct up to $1,000 (single filer) or $2,000 (joint filer) in charitable contributions without itemizing. This is the first time in years that standard deduction filers will see a direct tax benefit for their charitable giving.
New 0.5% AGI Floor for Those Who Itemize
Starting in 2026, itemized charitable deductions will only apply to contributions that exceed 0.5% of your adjusted gross income (AGI). For example, if your AGI is $200,000, only contributions over $1,000 will be deductible. Previously, there was no AGI floor.
Standard Deduction Increase
The standard deduction will increase to $15,750 (single) and $31,500 (joint), with future adjustments indexed to inflation.
Corporate Giving Floor
C corporations must now contribute at least 1% of taxable income to deduct charitable gifts. The existing 10% cap remains in place.
How to Plan Around These Changes:
Maximize Deductions in 2025
If you currently itemize your deductions, 2025 is your last year to deduct charitable contributions without the 0.5% AGI floor. Accelerating your giving, especially large or planned gifts, this year can help you take full advantage of the current tax code.
Consider a Bunching Strategy
With the new AGI floor in 2026, it may be harder to get a deduction each year. “Bunching” multiple years of giving into one year could push you above the threshold, allowing you to itemize and get a better tax benefit in that year.
Evaluate Whether to Itemize or Take the Standard Deduction
Given the higher standard deduction and the new above-the-line charitable deduction, it may be more efficient to take the standard deduction most years and plan your giving accordingly.
Review Corporate Giving Plans
Business owners should revisit their philanthropic strategies to ensure they meet the new 1% floor or restructure their giving if they wish to optimize their tax benefits accordingly.
Donor-Advised Funds (DAFs) Still Have an Important Role
While DAF contributions won’t count toward the new above-the-line deduction, they remain a valuable tool for bunching, timing, and managing your long-term charitable goals.
The landscape of charitable giving has become more complex. There is still time remaining in 2025 for you to plan around these changes while supporting your cause. Please reach out to your Rockbridge Financial Advisor if you would like to discuss further.