The One Big, Beautiful Bill Act (OBBBA) brought sweeping changes to the federal tax code, many of which we covered in our recent overview for businesses and high-net-worth individuals. One area that deserves a closer look? Charitable giving. New limitations will apply starting in 2026, which makes 2025 a key window for maximizing your donations—for both your favorite causes and your tax return.
What’s Changing?
The OBBBA introduced several changes to how individual taxpayers can deduct charitable contributions, both for itemizers and non-itemizers. Some are taxpayer-friendly, while others introduce new limitations that may catch people off guard if they don’t plan ahead.
1. New Deduction for Non-Itemizers (2025–2028)
Individuals who take the standard deduction can now deduct up to $1,000 ($2,000 for married couples filing jointly) in cash donations made to 501(c)(3) public charities. This temporary benefit applies only for 2025 through 2028 and excludes donor-advised funds and supporting organizations.
2. Good News: 60% AGI Limit Made Permanent
Previously set to sunset in 2026, the rule allowing taxpayers to deduct cash contributions up to 60% of their AGI is now permanent. This change solidifies a generous ceiling for significant donations.
3. New Hurdle: 0.5% AGI Floor for Itemizers (Starting in 2026)
Here’s the big one—and it may catch people off guard. Starting in 2026, taxpayers who itemize can only deduct charitable contributions that exceed 0.5% of their adjusted gross income (AGI). Think of it like a deductible on your tax return: the first 0.5% doesn’t count. For example: If your AGI is $200,000, only the portion of your donations above $1,000 will be deductible. Modest recurring contributions may fall below the threshold for deduction eligibility starting in 2026. Plus, there’s a kicker—this floor also applies to carryovers of donations made in 2025 or later. So, if you want to lock in deductions without being limited by this rule, it’s important to act before the year (2025) ends.
Planning Opportunity: Consider Frontloading Gifts in 2025
With the new 0.5% AGI floor set to take effect in 2026, taxpayers with charitable inclinations may want to accelerate their giving into 2025 to maximize their deductions. For example: Someone who regularly donates to a community foundation or donor-advised fund may choose to contribute multiple years’ worth of gifts in 2025. These types of funds allow donors to make the full contribution now—securing the deduction—while distributing the funds to specific charities in future years. Taxpayers may also want to consider the following strategies:
- Bunching contributions into 2025 while the deduction rules are still more favorable.
- Making qualified charitable distributions (QCDs) from Traditional IRAs if age 70½ or older, which are not subject to the AGI floor and can provide a tax-efficient way to give.
- Coordinating multi-year giving strategies in consultation with a tax advisor, taking into account projected income and tax law changes in 2026 and beyond.
Being proactive now could mean a significantly larger deduction—and greater impact for the causes you care about.
A New Charitable Giving Credit for Scholarships
Coming in 2027, taxpayers will have access to a new nonrefundable federal tax credit for cash donations made to approved scholarship-granting organizations. While it doesn’t replace the traditional charitable deduction, it could offer a valuable new opportunity—especially for those focused on supporting education. Here’s what you should know:
- Credit is capped at $1,700 per year
- It can be carried forward for up to five years
- It can’t be stacked with a state credit for the same donation
- It only applies in states that opt into the program
Since  AGI doesn’t limit this credit, it can be a helpful tool for those seeking to support educational opportunities in a tax-efficient way.
What Should You Do Now?
If charitable giving is part of your financial plan, 2025 offers a unique opportunity to maximize deductions before the 0.5% floor takes effect. Take time now to:
- Review your giving goals
- Talk to your CPA or financial advisor about frontloading options
- Explore donor-advised funds or community foundations
- Check your eligibility for QCDs
FAQs: 2025 Charitable Giving and New Tax Limits
Q: Can I still deduct charitable donations in 2025? A: Yes. In fact, 2025 may be the most strategic year to make a donation. You can still take advantage of current deduction rules before the new 0.5% AGI floor for itemizers goes into effect in 2026. Q: What is the 0.5% AGI floor for charitable deductions? A: Starting in 2026, you can only deduct charitable contributions that exceed 0.5% of your adjusted gross income (AGI). For example, with an AGI of $200,000, the first $1,000 of donations wouldn’t count toward your deduction. Q: How can I maximize my charitable tax deductions in 2025? A: Consider frontloading donations, using donor-advised funds, bunching contributions, or making qualified charitable distributions (QCDs) from your IRA (if you’re age 70½ or older). These strategies can help you lock in larger deductions under current rules. Q: Do the new deduction rules apply to donor-advised funds? A: The new deduction for non-itemizers does not apply to donor-advised funds. However, itemizers can still use donor-advised funds to frontload giving in 2025 and deduct under the current rules. Q: Is there a charitable giving tax credit available? A: Yes—starting in 2027, a nonrefundable federal tax credit will be available for donations to qualified scholarship-granting organizations. The credit is capped at $1,700 and only available in states that opt into the program.
Bottom Line
Don’t let a small change become a big missed opportunity. By acting now, you can lock in full charitable deductions before the new rules take effect—and support the causes that matter most to you in a more tax-efficient way. Need help planning your giving strategy? We’re happy to talk it through. Contact us today!
