The latest tax changes in the One Big Beautiful Bill Act (OBBBA), passed in July 2025, contain a fair amount of good news for those interested in saving on taxes. But, as with almost anything related to the federal government, there’s a little less-good news in the mix, also. Let’s take a look at some new opportunities that will allow those who are philanthropically minded to provide more impactful gifts to the causes they care most about, along with some limitations that tax-efficient givers need to take into consideration.
New, Above-the-Line Charitable Deduction
Perhaps the most widely applicable change brought about by OBBBA makes it possible for taxpayers to make charitable donations of as much as $2,000 (for married filers; $1,000 for single filers) to qualified charities. Significantly, this provision applies to those who do not itemize. Many will remember that with the major increase in the standard deduction created by the Tax Cuts and Jobs Act (TCJA) of 2017, itemized deductions lost their advantage for many taxpayers. Now, this provision of OBBBA permits even non-itemizers to deduct gifts to qualified charities. A similar provision enacted by the pandemic-era CARES Act permitted a similar above-the-line deduction of $300, and some 90 million taxpayers claimed the deduction. So, this new rule has the potential to expand charitable giving to a broader slice of the taxpaying public.
OBBBA and Deductibility of Charitable Gifts
But the effects of the new law also come with some limitations for higher-income taxpayers. OBBBA caps the deductibility of itemized charitable gifts at 35% of the value of the gift for those in the top tax bracket (37%). This is a reduction from the 37% cap that was in force prior to the passage of OBBBA. In other words, in the 2026 tax year, a donor in the top tax bracket can deduct only $350 on a $1,000 gift.
Additionally, OBBBA imposes a minimum threshold on the amount qualifying for deductibility. In the 2026 tax year, individuals’ charitable gifts must exceed 0.5% of their adjusted gross income (AGI) to be deductible. So, a couple earning $300,000 could only deduct gifts in excess of $1,500. And for corporations, the threshold is higher: 1% of taxable income.
DAFS Are Still a Great Tool for Charitable Giving
We’ve written before about the benefits of donor-advised funds (DAFs) for those interested in maximizing their charitable impact. All these benefits still apply with OBBBA. Because donors can “bunch” multiple years’ worth of gifts to a DAF and then, over time, direct the disposition of the gift, a DAF can allow donors to accelerate gifts into years when deductibility rules are more favorable and also to combine multiple years of giving to ensure exceeding the AGI threshold for deductibility. Because DAFs give donors more flexibility with both the timing and the amount of gifts, they can be very useful for maximizing the tax-efficiency of philanthropic efforts. Additionally, DAFs can receive a variety of asset types, which can prove especially beneficial for those who may wish to avoid capital gains liability by donating appreciated assets such as listed securities, real estate, collectible, or even business interests.
Use QCDs to Your Advantage
Especially for retired persons in higher tax brackets, qualified charitable distributions (QCDs) can be a great way to reduce taxable income and benefit a favorite charity at the same time. A donor who is receiving required minimum distributions (RMDs) from a traditional IRA or a traditional rollover IRA and who does not need the income to maintain their retirement lifestyle has the option, instead of receiving the RMD as income, to make a QCD directly from the IRA account to a qualified charitable organization. Note that according to QCD rules, while QCDs cannot be given directly from a 401(k) or 403(b) account, funds can be rolled over to an IRA account and may then be distributed via a QCD. Funds thus distributed are not attributed as taxable income to the giver. In 2026, an individual may give up to $111,000 ($222,000 for married couples if both individuals own an IRA) in the form of QCDs.
Charitable Giving and Your Family Philanthropy
High-net-worth families who are establishing a family giving legacy of philanthropy are well advised to work their estate planning professionals to design trusts and other legal entities that can both facilitate and systematize the philanthropic efforts of the multigenerational organization. Properly designed and organized trusts and private foundations can help philanthropically minded families maximize their impact for generations and, at the same time, provide benefits of tax efficiency and professional management.
Mathis Wealth Management, as a fiduciary financial advisor and wealth manager, is dedicated to helping clients support their most valued causes while obtaining appropriate tax advantages. If you have questions about your charitable giving program or its tax implications, we would appreciate the opportunity to help. Please contact us.
