Several provisions of the One Big Beautiful Bill Act (OBBBA, which was signed into law on July 3, 2025) take effect this 2025 tax year. Other future changes could influence your charitable giving strategies for this year, 2026, and future years. This is an essential time to evaluate these provisions and consider how they may influence your end-of-year charitable gift planning to increase your impact on your favorite charities and maximize tax savings.
The OBBBA affects individual income taxpayers in several ways (for more helpful information and resources please go to this linked Cheat Sheet). Here is a short list of what’s changed and how it might impact you for your consideration.
- The standard deductions from the Tax Cuts and Jobs Act (TCJA) doubled the standard deduction amounts from the earlier levels, but that was temporary. For 2025, the increase standard deduction for individuals and married couples filing separately is $15,000, $30,000 for married couples filing jointly, and $22,500 for heads of household. These increased standard deductions are made permanent by OBBA.
- Individuals who are age 65 and older are eligible to claim a new, temporary deduction of $6,000 beginning in 2025 with expiration in 2028. This new deduction is in addition to the current standard deduction for seniors under existing law. This senior deduction is available to taxpayers who claim the standard deduction and those who itemize.
- Individuals who are at least 70 ½ years old may donate up to $108,000 per individual from your IRA. Married couples can each give up to $108,000, totaling $216,000. Qualified charitable donations count towards your required minimum distribution (RMD) if you are RMD age. They are also excluded from taxable income on federal income tax returns, reducing your adjusted gross income (AGI), thus reducing your taxes.
- Under OBBBA the child tax credit will increase to $2,200 per child, adjusted for inflation. The credit is still income-dependent and subject to phase-out.
- OBBA allows tax-free distributions from section 529 plans to be used for additional expenses in connection with enrollment at an elementary or secondary school (including private schools and religious schools).
- For 2025, the federal estate tax exclusion amount for decedents is $13,990,000 per person or $27,980,000 per married couple. The exemption will be $15,00,000 in 2026 and adjusted for inflation in future years
- Currently if you itemize your deductions, you can deduct state and local income taxes or sales taxes (SALT) and you can deduct state and local property taxes up to $10,000. OBBBA raises SALT deductions to $40,000 with a 1% increase each year until 2029.
- Beginning in the 2026 tax year non-itemizers are allowed to deduct cash donations to charity up to $1,000 for single filers or $2,000 for married couples filing jointly. Some types of donations are ineligible for the deduction, including to donor-advised funds or private non-operating foundations.
- In 2026 OBBBA caps the tax benefits of itemized charitable deductions at 35%, even for those in the 37% marginal tax bracket. For example, high-income filers donating $1,000 would receive a $350 deduction instead of the current $370.
- Also effective in the 2026 tax year, itemizers who make charitable contributions will only be able to claim a tax deduction to the extent that their qualified contributions exceed 0.5% of the AGI. For example, a couple with an AGI of $300,000 could only deduct charitable donations in excess of $1,500.
- High-income individuals who itemize deductions should carefully consider the timing and amounts of their giving and the strategies to maximize their deduction. Bunching is a strategy or an approach of making larger gifts less frequently that can be more effective under the new rules.
- Corporations will only be entitled to deduct charitable contributions to qualified charities that exceed 1% of their taxable income. Corporations may want to take steps to proactively manage (and potentially increase their giving to ensure they exceed the 1% threshold.
Considering the 2025 tax law changes, donors should take a fresh look at their charitable giving strategies to ensure they are maximizing both impact and tax efficiency. Donors and their advisors should consider the timing of contributions – perhaps accelerating contributions in 2025 and/or using a bunching strategy. This year it is crucial to work with a trusted tax professional or financial advisor to tailor a plan that meets your goals and aligns with your values.
This content is informational and educational in nature. It does not offer professional tax, legal or accounting advice. For specific advice on your taxes, finances or estate, please consult a qualified professional advisor.
