Jennifer Raess JD, CFP®, CLU®

Oct 28, 2025

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The OBBBA Clock Is Ticking: Why 2025 Might be the Year to Act for Maximum Charitable Deductions

The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, introduces some significant charitable giving changes starting in 2026. It expands opportunities for everyday donors while tightening limits for high-income taxpayers. With year-end approaching, advisors should review these shifts now to help clients maximize charitable impact and tax benefits before the new rules take effect in 2026. The impact of these changes will vary depending on whether clients itemize their deductions, making it important to tailor charitable strategies accordingly.

New rule for non-itemizing individuals

Starting in 2026, taxpayers who take the standard deduction can claim an “above-the-line” charitable deduction for direct cash gifts to public charities. 

• Deduction limits: Up to $1,000 for single filers and $2,000 for married couples filing jointly.
• Exclusions: Donor-Advised Funds (DAFs) and supporting organizations don’t qualify.
• Impact: Expected to boost charitable giving among standard deduction households. 

Advisors may want to remind clients that this benefit, while modest, creates a renewed incentive for smaller cash gifts to qualified charities starting next year. For clients who itemize, however, the rules are changing in a different way. 

New rules for itemizing individuals

Beginning in 2026, itemizing taxpayers will face two major limitations that reduce the value of charitable deductions. High-income donors, in particular, should consider accelerating major gifts into 2025 to preserve full deductibility.

0.5% AGI floor

Only the portion of charitable contributions that exceeds 0.5% of a donor’s Adjusted Gross Income (AGI) is deductible. For example, a taxpayer with $1 million in AGI won’t be able to deduct the first $5,000. 

Strategic move: Consider “bunching” of gifts into 2025. If clients are still determining which organizations they want to support, a Donor-Advised Fund (DAF) can provide flexibility – allowing them to take the deduction this year and recommend grants later.  

35% deduction cap for top earners

Donors in the top income tax bracket will see their deduction value capped at 35%, down from the current 37%. That means a $10,000 donation in 2026 will result in a $3,500 tax savings, compared to a $3,700 tax savings in 2025. To lock in the higher deduction, advisors should help clients complete major gifts – especially of appreciated assets – before December 31, 2025. 

Key year-end strategies for clients

With these new rules taking effect in 2026, the window for certain tax-efficient giving strategies may be narrowing. Below are key planning considerations advisors may want to review with clients before year-end. 

For high-income earners

High income earners have several tools to maximize charitable impact and tax efficiency:

• Accelerate gifts into 2025: Take advantage of the current rules before the 0.5% AGI floor and deduction cap take effect.
• Use Donor-Advised Funds (DAFs):
  • Bunch contributions to secure a deduction now.
  • Contribute appreciated securities to avoid capital gains
• Leverage Qualified Charitable Distributions (QCDs): For clients age 70½ or older, QCDs from IRAs can satisfy Required Minimum Distributions (RMDs) without increasing AGI. The maximum QCD in 2025 is $108,000, rising to $115,000 in 2026.
• Gift appreciated securities directly: Donating long-term appreciated assets to a public charity directly remains one of the most tax-efficient strategies available. 

For non-itemizers

Starting in 2026, clients taking the standard deduction can claim a modest above- the-line charitable deduction – but only for direct cash gifts to public charities. These clients may want to delay small cash donations until next year to qualify, if appropriate.  

The bottom line

The OBBBA represents one of the most significant shifts in charitable giving tax policy in recent years, and advisors should review clients’ charitable giving plans now to assess how 2025’s more favorable rules may influence planning before changes take effect in 2026.

For high-income clients who itemize, the combination of the new 0.5% AGI floor and the reduced 35% deduction cap could make delaying major gifts less advantageous. Given the strong performance of equity markets in recent years – charitable contributions of appreciated securities may also serve as an effective portfolio management and rebalancing tool while minimizing capital gains taxes.

For clients who typically take the standard deduction, the new above-the-line deduction creates a modest but meaningful opportunity starting in 2026. While these clients may benefit from waiting on smaller cash gifts, advisors should still review their overall financial picture to determine the appropriate approach.

The key message: for clients with significant philanthropic goals, 2025 might be an advantageous year to evaluate giving strategies. Approaches such as accelerated giving, strategic use of DAFs, or leveraging QCDs where appropriate can help align charitable intent with potential tax efficiencies. Starting these conversations early can help clients make informed decisions within the current policy landscape. 

The information provided here does not constitute legal, financial, or tax advice. It is provided for general informational purposes only. This information may not be updated or reflect changes in law. Please consult with an estate attorney, financial advisor, or tax professional who can advise as to your particular situation.