Mixed News for Charitable Giving: The Impact of The One Big Beautiful Bill Act

Here’s the thing about tax planning – just when you think you understand the rules, Washington changes them. But this time, the change is actually good news for many people – but not all.

The One Big Beautiful Bill Act, signed into law on July 4, 2025, brought back something we haven’t seen since the early pandemic years: a charitable deduction for people who claim the standard deduction on their tax returns.

What Changed?

Starting this year, if you claim the standard deduction, you may also be able to deduct up to $2,000 if you’re married filing jointly. This is only available to people who take the standard deduction – if you itemize, you can’t use this new deduction.

Think about what this means. For years, we’ve had clients who give generously to charity but couldn’t get any tax benefit because their total itemized deductions didn’t exceed the standard deduction. Now they can get a tax benefit even if they don’t itemize, while supporting causes they care about.

But There’s a Catch for High Earners

If you itemize your deductions, there are two new rules that complicate charitable giving: starting in 2026, you can only deduct charitable contributions that exceed 0.5% of your adjusted gross income. So if your Adjusted Gross Income, or AGI, is $300,000, you can’t deduct the first $1,500 of your charitable giving.

And for those in the 37% tax bracket, the value of your charitable deduction gets capped at 35% instead of the full 37%.

While not a huge impact for most people, this is a good reason to think strategically about how and when you make charitable gifts. For example, you may want to make a bigger contribution in a year where your income is higher than normal to a Donor Advised Fund (DAF). Doing so could allow you to claim a bigger deduction against your taxable income, while giving you the flexibility to make gifts from the DAF to your desired charities on your own schedule. This is sometimes called “bunching” your giving. If you don’t have a DAF and would like to discuss how they work, get in touch.

AGI Limits Still Matter for Itemizers

If you itemize and make it over the new 0.5% AGI floor, you still need to keep in mind the overall AGI limits for charitable giving. Cash donations to public charities may generally be deducted up to 60% of your AGI.

For appreciated assets like stock, the limits are tighter. Donations of appreciated property to public charities (including donor-advised funds) are generally limited to 30% of AGI. The good news? If you exceed these limits in any year, you may be able to carry forward the excess charitable deductions for up to five years.

The Bottom Line

For middle-income families who take the standard deduction, this is welcome news. You can now get a tax benefit for charitable giving without having to itemize. But make sure to hang on to those receipts!

For high-income families who itemize, the new rules are more complicated. You might want to consider bunching strategies – making larger charitable gifts less frequently (or at least in higher income years) to get over that 0.5% of AGI hurdle.

To discuss how these changes might impact your financial situation, request a complimentary consultation.

This information is based on current law as of July 2025. Tax laws can change, and individual situations vary. Please consult with your tax advisor for guidance specific to your circumstances.