Overview
The One Big Beautiful Bill Act (OBBA), signed into law this month, introduces significant
changes to the U.S. tax code. While some of these new provisions might seem to reduce the incentive for charitable giving, strategic donors can actually benefit more than ever - if they plan carefully.
This memo highlights the changes that directly impact charitable giving and Donor-Advised Fund strategy, along with guidance on how donors can adapt to take full
advantage of the new rules.
Key Provisions Impacting Charitable Giving:
1) Higher Standard Deduction
New baseline deductions:
$15,750 (Single)
$31,500 (Married Joint)
Fewer taxpayers will itemize deductions most years, reducing the automatic tax benefit of routine annual charitable giving.
What this means: Giving smaller amounts sporadically is now less tax-efficient. It’s important to “bunch” gifts strategically in certain years to exceed the itemization threshold.
2) Above-the-Line Deduction for Non-Itemizers (with Limits)
Non-itemizers can deduct:
Up to $1,000 (single) or $2,000 (joint)
Only for cash gifts to 501(c)(3) public charities
DAFs, private foundations, and supporting organizations are excluded.
What this means: This offers modest relief to small donors, but does nothing for contributions to Donor-Advised Funds. High-capacity donors will still need to itemize to benefit from Donor-Advised Fund contributions.
3) 0.5% AGI Floor on Charitable Deductions
Itemized charitable deductions are only allowed above a new 0.5% AGI floor.
Example: A taxpayer with $400,000 AGI can only deduct the portion of giving that exceeds $2,000.
What this means: Smaller annual gifts lose much of their tax benefit. Donors should consider bundling gifts into fewer, larger years to clear the floor and maximize deductibility.
4) Cap on Deduction Value for Top Bracket Donors
For taxpayers in the top 37% bracket, the value of charitable deductions is capped at 35%.
This effectively reduces the marginal tax benefit of giving for high-income earners.
What this means: While Donor-Advised Funds still provide flexibility in timing deductions, wealthy donors should act strategically and make contributions during high-income years, being mindful of the cap.
5) 60% AGI Limit on Cash Contributions Made Permanent
Taxpayers can continue to deduct cash gifts to public charities (including Donor-Advised Funds) up to 60% of AGI.
This provision is now permanent.
What this means: Donors who itemize can still gain substantial tax benefits from Donor-Advised Fund contributions, especially in years with unusually high income.
Takeaway: Strategic Planning Is Essential
The OBBBA doesn’t eliminate charitable giving incentives - it just raises the bar for accessing them. To make the most of the new rules:
Donors Should:
Use charitable “bunching” to clear the standard deduction and AGI floor.
Contribute to Donor-Advised Funds during high-income years to lock in the highest deduction value.
Combine Donor-Advised Fund giving with direct gifts to public charities for more diversified tax benefits.
Review giving strategies annually with a trusted advisor.
Donors Should Avoid:
Expecting full deductibility for small annual gifts (unless using the limited above-the-line deduction).
Waiting until December to plan - an effective tax strategy requires early action.
The Bottom Line
The OBBBA adds complexity, but it also creates new opportunities for thoughtful, well-planned philanthropy. Used wisely, Donor-Advised Funds remain among the most flexible and powerful tools for tax-efficient giving.
If you’d like help modeling these scenarios or would like to adapt this memo for clients or board members, please feel free to reach out.
