How the OBBB Impacts 2026 Charitable Giving

Summary: The OBBB introduces significant changes to charitable deduction rules starting in 2026, including new floors, permanent ceilings, and expanded planning opportunities for both individuals and corporations. Learn more about these changes and how donors can navigate them with strategic tax planning.

The One Big Beautiful Bill (OBBB), signed into law July 4, 2025, made several notable changes to the tax deductions available for charitable giving. Beginning in 2026, donors will face both new opportunities and new limitations. While the net impact will vary from one taxpayer to the next, proactive planning can maximize the value of charitable deductions. Understanding these shifts now can help individuals and businesses make the most of their generosity in the years ahead.

So what’s changing in 2026?

• New charitable deduction for individuals claiming the standard deduction: A charitable deduction of up to $1,000 for cash gifts to qualifying public charities ($2,000 for joint filers) will be available to individuals that take the standard deduction. Gifts to donor‑advised funds, supporting organizations, or most private nonoperating foundations aren’t eligible. This charitable deduction is in addition to the standard deduction and provides a tax benefit to donors who do not claim itemized deductions.
• New 0.5% floor on the itemized charitable deductions of individuals: The charitable deduction available to individuals that claim itemized deductions will be reduced by 0.5% of the contribution base. The contribution base is generally equal to adjusted gross income (AGI) subject to certain modifications. For example, the itemized deduction for charitable contributions of an individual with $1,000,000 of AGI will be reduced by $5,000 starting in 2026.

• 60% ceiling on the itemized charitable deductions of individuals made permanent: The itemized charitable deduction available for cash contributions to public charities is capped at 60% of AGI. The 60% ceiling was scheduled to expire after 2025 causing this limitation to revert to the 50% ceiling limitation. OBBB makes the 60% ceiling limitation permanent.

A variety of ceiling limitations are imposed when non-cash contributions are made, or when contributions are made to organizations other than public charities. In addition to the 60% ceiling imposed on cash contributions to public charities, there can be a 50%, 30%, or 20% ceiling limitation imposed on other charitable contributions. Amounts disallowed by ceiling limitations carry forward for five years. Amounts disallowed by the new floor (discussed above) may also carry forward for up to five years but only in years in which the ceiling limitation is exceeded.

• New overall limitation on the itemized deductions of individuals in the highest tax bracket: The total itemized deduction available to individuals in the highest tax bracket will be reduced by 2/37ths of the lesser of (a) the total itemized deductions or (b) the amount of taxable income in the highest tax bracket. This provision effectively limits the tax value of itemized deductions to no more than a 35% tax benefit, a potential 2% rate haircut in the tax value of itemized deductions, including the charitable deduction, for individuals in the 37% tax bracket.

• New 1% floor on the charitable deductions of corporations: The charitable deduction available to C corporations will be reduced by 1% of taxable income. The familiar 10% ceiling limitation still applies, and the five‑year carryforward remains in place when corporations are subject to the ceiling limitation.

Tax Planning Considerations for Charitable Giving

For many donors, the changes above won’t dramatically change the economics of charitable giving. However, the new limitations, effective beginning in 2026, can have a meaningful impact on high income donors making large charitable contributions. Thus, discussions with your tax advisor and careful planning are prudent. For example, a few key planning considerations for individual donors include:

• Bunching multi-year charitable contributions: Consider combining several years of donations into one tax year. Individuals can utilize donor-advised funds to bunch contributions and recommend grants to public charities over time. It may be beneficial to bunch contributions into 2025 because it’s the last year before the new 0.5% floor and new overall limitation take effect. However, bunching can provide value in years beyond 2025 to allow individuals to maximize itemized deductions in one year and utilize the standard deduction in subsequent years. It is important to consider ceiling limitations and carryforward rules when bunching a large amount into a single year.
• For those ages 70+, consider a qualified charitable distribution (QCD): A QCD is a direct transfer from an IRA to a public charity. QCDs are excluded from gross income and they satisfy RMD requirements. The maximum QCD for 2025 is $108,000 per person (indexed annually). QCDs can’t go to DAFs, supporting organizations, or most private nonoperating foundations. It is important to confirm the charitable recipient is eligible for QCD treatment and to work with your IRA custodian to execute a direct transfer.
• Donate appreciated assets instead of cash: Giving appreciated assets that would generate long term capital gain income if sold avoids capital gains tax and provides a charitable deduction equal to the fair market value of the asset. This works particularly well with the donation of publicly traded stock because qualified appraisals are not required to determine the value of publicly traded stock. The charitable deduction is generally limited to cost basis when the property would generate ordinary income if sold. Furthermore, noncash contributions of appreciated capital gain assets are subject to the lower ceiling limitations of 30% or 20%, depending on the type of donee organization.

The Bottom Line

The tax impact of OBBB’s changes to charitable deductions is a mix of give‑and‑take with varying degrees of impact. Every situation is different.

For assistance modeling the impact of the 2026 rules; evaluating bunching or QCD strategies; and helping you decide what, if anything, makes sense at year-end and beyond, reach out to your KSM advisor or fill out the form below.