Understanding the OBBBA Impact on Charitable Giving
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, makes permanent certain tax provisions originally scheduled to expire, alongside key changes and new provisions that could impact your client’s charitable giving.
Here is a summary of OBBBA’s key components, including both “Positive” and “Challenging” provisions that will impact philanthropy.
Consider these when helping clients plan their tax-aware charitable strategies.
“Positive” provisions
Standard Deduction Clients (Non-Itemizing) – Above the Line Deductions:
Starting in 2026, for clients who do not itemize, an above-the-line deduction allows them to deduct up to $1,000 ($2,000 for married couples filing jointly) for charitable cash contributions. However, cash gifts to Private Foundations, DAFs, and Supporting Organizations are not eligible.
State and Local Tax (SALT):
SALT deductions increased from $10,000 to $40,000 . More of your clients may find it advantageous to itemize charitable deductions.
Temporary Increase in State and Local Tax deduction (SALT):
Under OBBBA, the SALT deduction cap increases to $40,000 ($20,000 for married filing separately) starting in 2025, with a 1% annual increase through 2029. In 2030, it reverts to $10,000 ($5,000 for married filing separately). From 2025–2029, the cap is phased down for taxpayers with modified AGI over $500,000—reduced by 30% of the excess, but not below $10,000.
Scholarship Grant Organizations (SGO) Benefits:
Starting in 2027, a $1,700 per taxpayer credit is available for clients who make gifts to Scholarship Grant Organizations (SGO). SGOs make scholarship grants to private and religious K–12 schools. This benefit is available net of any state credit, regardless of whether your client itemizes.
AGI Limit for Charitable Cash Contribution Deductions Made Permanent:
The existing ability to deduct up to 60% of AGI cash contributions to 501(c)(3) charities is permanently extended – ideal for smaller cash gifts. There is no change in the 30% AGI for non-cash gifts –such as asset-based donations.
Higher Gift and Estate Tax Exemptions Made Permanent:
Effective January 1, 2026, the unified estate and gift tax exemption is permanently increased to $15 million per person ($30 million for married couples), with annual inflation-indexed increases after 2026. Most estates (more than 99%) will not be subject to federal estate taxes. This may encourage clients to transfer family and philanthropic wealth while living, making lifetime charitable giving the primary way to receive a charitable deduction for most taxpayers. The Generation Skipping Tax (GST) exemption remains equal to the basic exclusion amount and will be indexed for inflation.
“Challenging” Provisions
New Limits for Itemizers in the Top Marginal Tax Bracket:
Starting in 2026, the OBBBA caps benefits for itemizers at 35%, even for those in the 37% tax bracket. Clients in higher tax brackets may want to accelerate major charitable gifts into 2025 to maximize deductions before the cap begins in 2026.
New Deduction Floor Itemizers:
Starting in 2026, itemizers can only deduct charitable contributions exceeding .5% of their AGI. Clients planning major gifts may consider giving in 2025 to avoid this new limitation.
New Standard Deduction Amounts:
Starting in 2025, OBBBA raises the standard deduction to $15,750 (single) and $31,500 (joint), which—like past increases—may discourage smaller, “checkbook philanthropy” cash gifts to charity.
Insights
According to Giving USA, in 2024, Americans gave $592 billion to charity. This is $130 billion more than the United States imported from China, according to Trading Economics 2025 Data.
As a trusted advisor, you are in an advantageous position to help clients reevaluate charitable strategies considering OBBBA’s potential impact on future high-net-worth giving. Now is the time to consider:
- Tax-smart giving in 2025 rather than 2026.
- Use of long-term appreciated assets that offer both an income tax deduction and avoidance of capital gains tax.
- Using iGiftFund
Donor advised funds (DAFs)
Simple to implement, powerful in impact. To understand how DAFs work, explore the basics:
Donor Restricted Funds (DRFs)
As a national community foundation, iGiftFund offers a variety of fund solutions beyond DAFs, including Designated Funds, Endowments, Field of Interest Funds, Scholarships, as well as QCD solutions that can satisfy RMDs.
With iGiftFund, the donor’s financial advisor continues to manage DAF and Donor Restricted Fund charitable assets in open architecture, with any custodian, at all account sizes. No pools or products!
iGiftFund is the ideal partner to create, protect, and pass on your clients’ philanthropic legacies over generations to come.
iGiftFund – the ideal partner for donors and financial advisors.
Tax-smart, simple, and personalized – all with lower fees!
Contact iGiftFund – Our experienced professionals are here to assist and provide insights on seamlessly integrating DAFs into your practice.
This information contained in this article is intended solely for educational purposes.
The content is not intended, and shall not be construed as professional advice (or a substitution for) including but not limited to legal, financial, tax or any other professional interpretation.