The One Big Beautiful Bill Act (OBBBA), passed in July 2025, made several significant changes to charitable giving rules. Well, the giving doesn’t actually change, but the tax deductions available for charitable giving change. This has changed our giving plan for the next few years, and if giving is important to you (and I hope it is), it will probably change your plan too. Let’s take a look at the new rules so you can decide.
Note that all of these rules change in 2026. The 2025 tax year operates under the old rules.
Non-itemable charitable deduction
Some people call this an over-the-limit deduction, but technically it is not. However, it is not an itemized deduction that appears on Schedule A. Basically, you can deduct a $1,000 ($2,000 married) gift to charity and still take the standard deduction of $15,750 single/$31,500 MFJ. (2025 – visit our annual number page To get the most recent data)Note that this deduction is only for donations of cash (not appreciated shares) made directly to charity, not through a Donor Advised Fund (DAF),
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New 0.5% AGI limit
For item makers like us, there’s a new frontier to learn. It is set at 0.5% of adjusted gross income (AGI). If your AGI is $300,000, the first 0.5% * $300,000 = $1,500 that you donate to charity, at least after that initial $1,000-$2,000, is not deductible. That doesn’t sound too bad, but what if you make $3 million? Now, the first $15,000 is not deductible. That’s real money.
top bracket donor range
This is an even bigger issue for people with higher incomes and larger donations. If you’re in the top tax bracket (37% federal) in 2025, you can deduct 37% of your charitable contributions. However, in 2026, people in the subject bracket (still 37% federal) can deduct only 35% of their charitable contributions. So, if you earn $800,000 and donate $100,000 of that to charity, you don’t get the $37,000 deduction. You get a deduction of $35,000. Doesn’t seem like you’re crazy, right? Just makes our tax code a little more progressive, at least for those who donate, especially when combined with that $1,000/$2,000 deduction that would typically help lower earners.
But what if you wanted to give away one million dollars? Now your deduction is $20,000 smaller. That’s real money.
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What can you do about these changes?
Admittedly, the changes are relatively modest, but donors with higher incomes should consider accelerating their donations to at least future years through 2025 if possible. DAFs make this easy because you can separate the deductions from the actual donation. You can put three or four years’ worth of charitable donations into a DAF this year and get a slightly better deduction than what would be available if you spread those donations over the next few years.
However, this will dramatically reduce your 2025 tax bill and significantly increase that bill in 2026-2028, so plan for this by setting aside more to pay quarterly estimated payments or increasing your withholding rate if employed.
What are we doing about these changes?
As always, we are trying to kill two or three or maybe four birds with one stone. Katie and I are high income earners, and we donate a lot of money primarily because we think it’s important to support charities. However, we try to get as much tax benefit as possible from that donation.
Long-term readers know that we keep tax-loss harvesting (TLH) in our taxable account and then withdraw the capital gains through charitable donations. We offer appreciated shares through DAF rather than cash. Our chosen charities not only don’t get the cash they need, but they don’t even know who we are unless we tell them. This keeps our mailbox “charity porn free” and simplifies our record-keeping.
However, we do have some legacy investments in our taxable account: VIOV and VSS. For these asset classes, we will now own AVUV/DFSV and AVDV/DISV. well guess what? We can get multiple benefits at the same time by accelerating our donations.
- The VIOV and VSS come from our estate tax reducing trust (Spousal Lifetime Access Trust or SLAT) into the individual account (paying off the promissory note given to us by the SLAT).
- VIOV and VSS will go to DAF in 2025 (equivalent dollars to 3-4 years of donations for us)
- We use the cash to buy AVUV and AVDV (which we could then TLH to DFSV/DISV)
- We take that cut in 2025 when it’s worth it to us at 37% (instead of 35%) and there’s no 0.5% floor, and then
- As is our usual practice, we will distribute cash from the DAF to charity over the next few years.
That’s a lot of dead birds from just one stone. Financial literacy has its benefits. You can’t win the game unless you know the rules.
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How much can you deduct in a year?
If you want to speed up your donation, there are a few things to consider. The key thing is that you can only deduct 60% of your AGI if you give cash, 30% if you give something other than cash (like these appreciated shares). Those deductions can be carried forward for up to five years, but the new rules are likely to apply to deductions made after 2025. Therefore, we will not accelerate the delivery for more than the next few years. Plus, who knows what the rules will be four years from now with a new administration and two new Congresses? They could be even better than this year.
There has been a slight change in the charitable donation deduction rules this year. This may require you to make significant changes to your donation plan. However, don’t wait until the end of the year to do it. This may take days or even weeks and delays are common. We started this process in October, to ensure that we can complete it by the end of the year.
If you need help with tax preparation or you’re looking for tips on the best tax strategies, hire a WCI-certified professional to help you figure it out.
What do you think? Will you accelerate your donations due to these rule changes? why or why not?
