On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBB) into law. OBBB is a sweeping package reforming taxes, spending, and social policy. While the bill has drawn scrutiny for its broad impacts, its charitable provisions deserve careful consideration for their potential to reshape American giving. Here’s an in-depth look.
1. Above-the-Line Charitable Deduction for Nonitemizers
OBBB makes permanent a benefit once temporary under COVID-era tax law: for taxpayers who take the standard deduction, it allows up to $1,000 (single filers) or $2,000 (joint filers) in cash gifts to qualified charities to be deducted “above the line”, meaning the benefit applies even without itemizing. Previously, only itemizers could deduct charity; with over 90% of filers
2. Limits on Itemizer Benefits
For those who itemize, OBBB imposes a 0.5% AGI floor – you only begin deducting after your gifts exceed 0.5% of your AGI. Moreover, the maximum benefit is capped at 35% of the deduction, even if your top marginal rate is 37%. Notably, cash gifts to public charities can still make up to 60% of AGI, which is an increase from pre-TCJA rules.
3. Corporate Giving Floor
Starting in 2026, corporations must give at least 1% of taxable income in charitable donations to claim any deduction, with a continued cap at 10%, and the ability to carry forward excess contributions for up to five years. This aims to ensure baseline corporate philanthropy, while curbing potentially abusive write-offs.
What It All Means for Donors & Nonprofits
- Non-itemizers: For the first time, cash donations of up to $1,000 – $2,000 can directly reduce taxable income, boosting motivation to give.
- Itemizers: High-income donors must consider the 21-cent reduction on every dollar above 35%, plus the 0.5% floor – a strong incentive to bunch gifts into 2025 while full deduction rates still apply.
- Corporations: Must commit a baseline 1% to charity; nonprofits may need to engage more actively with corporate philanthropy.
Strategies for Savvy Giving
- Move big gifts into 2025. If planning a major donation, do it before 2026 to maximize the 37% deduction amount.
- Track gifts under $2K. Non-itemizers should be aware – such gifts now matter for tax filing and encouraging giving.
- Weigh credits vs deductions. For those supporting SGOs, the education credit may be more valuable than standard deductions.
- Engage corporately. Nonprofits should highlight the 1% floor to corporate partners and develop deeper relations beyond-cap tax incentives.
OBBB’s charitable reforms demonstrate a dual approach: broadening access to everyday giving while tightening rules for high-end donors. Nonprofits will need to adapt – optimizing small-dollar outreach, planned giving timing, and scholarship-related campaigns to thrive under the new rules.
