On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill Act (OBBBA) into law. This legislation updates several provisions from the Tax Cuts and Jobs Act (TCJA), many of which were set to expire at the end of 2025. One of the most significant areas affected is charitable contribution deductions—specifically, how much of your charitable giving you can deduct on your tax return.
Below is a clear breakdown of the new rules and how they may affect your giving strategy in 2025, 2026, and beyond.
Updated AGI-Based Limits for Charitable Deductions
Your charitable deduction limit depends on both your adjusted gross income (AGI) and the type of property you donate. Under the new rules, the AGI limitations are as follows:
Contribution Type | Public Charities | Non-Public Charities (e.g. private foundations) |
Cash | 60% | 30% |
Capital gain property (using cost basis) | 50% | 20% |
Capital gain property (using fair market value) | 30% | 20% |
If your giving exceeds these limits in a single year, you can carry forward the unused deduction for up to five years.
60% Cash Limit Now Permanent Before OBBBA, the 60% cash limit to public charities was scheduled to drop back to 50% on December 31, 2025. Under the new law, the 60% limit is now permanent, giving donors more long-term flexibility.
AGI Carryover Rules If donations exceed the AGI limit in a year, both:
- the unused charitable deduction, and
- the unused portion of the 0.5% floor
can be carried forward for up to five years.
New 0.5% AGI “Floor” on Charitable Deductions (Starting 2026)
Beginning in 2026, you can only begin deducting charitable contributions after exceeding 0.5% of your AGI. This threshold is often referred to as a “floor.”
.5% Floor Example:
In 2026 you make a cash donation of $10,000 to your favorite public charity, and your AGI is $200,000. You can only deduct $9,000 of that donation as a deduction. Here’s the math $200,000 AGI x .5% ‘floor’ = $1,000. $10,000 less $1,000 ‘floor’ = $9,000 net deductible donation in 2026.
Required Ordering Rule
The IRS must apply the 0.5% floor in a specific order. The reduction will first apply to:
- Appreciated property donations to non-public charities (private foundations)
- Appreciated property to public charities valued at fair market value
- Cash donations to non-public charities
- Conservation contributions (example donating land to a nature conservatory)
- Appreciated property to public charities, valued at cost basis
- Cash contributions to public charities
This ordering system matters because certain categories have lower AGI limits and may trigger carryover.
Strategic Tip: Consider Larger Donations in 2025
Because the floor begins in 2026, donors may want to accelerate significant gifts into 2025 to avoid losing deductibility on the first 0.5% of AGI each year.
Example: How the ordering rule in the 0.5% Floor Works:
In 2026 Fred earns $200,000 and donates the following in 2026:
- $45,000 cash to public charities
- $50,000 appreciated stock to a private foundation and he uses the fair market value to value the donation
His 0.5% AGI floor: 0.5% × $200,000 = $1,000 (non-deductible portion)
The floor reduces the appreciated stock gift first, lowering it from $50,000 → $49,000.
The stock gift to the non-public charity is then limited to 20% of AGI: 20% × $200,000 = $40,000 allowed this year. For 2026 Fred deducts:
- $40,000 of stock donations to private foundation (20% AGI limit)
- $45,000 of cash to public charities (fully deductible under the 60% rule)
Fred he carries forward to 2027:
- $9,000 of stock donations ($49,000 after .5% floor less $40,000 deducted)
- The unused $1,000 floor
Total carryforward to next year: $10,000
Above-the-Line Charitable Deduction (Starting 2026)
Beginning in 2026, taxpayers who do not itemize can still receive a modest charitable deduction:
- $1,000 for single filers
- $2,000 for joint filers
This deduction applies only to cash gifts to public charities—not to:
- Donor-advised funds (DAFs) – charitable giving account you contribute cash or other assets, receive an immediate tax deduction, and then recommend grants to your favorite charities over time
- Private non-operating foundations – charities that don’t run their own programs but mainly give out grants
This new deduction may benefit taxpayers who typically take the standard deduction. New strategy for those who gift over $1,000 Single or $2,000 married filing joint, but are not able to itemize annually – you may want to consider bunching several years donations in one year to push your deductions up over the standard deduction for one year. In non-bunched years limit donations to the above the line amount.
2026 High-Income Itemized Deduction Benefit Cap: Maximum 35% Tax Rate
Under prior rules, itemized deductions reduced taxable income at a taxpayer’s actual highest marginal tax rate (up to 37%). Starting in 2026, the tax benefit of all itemized deductions, including charity, is capped at a 35% rate, even for those in the 37% tax brackets. Check the 2026 tax rates below to see if these limitations will apply to you.
2026 Filing Status | 37% Tax Bracket Applies To Taxable Income Over |
Single | $640,000 |
Married Filing Jointly | $768,000 |
In simple terms: if you’re a high-income earner, you won’t get as big of a tax break for all your itemized deductions as you did before — your savings will be capped at what someone in the 35% tax bracket would get.
New Federal Scholarship Tax Credit (Starting 2027)
Beginning in 2027, taxpayers may qualify for a non-refundable federal tax credit of up to $1,700 for donations to approved scholarship-granting organizations (SGOs) that support K–12 students from low-income families.
Instead of just getting a taking an itemized tax deduction for these donations, this credit directly lowers the amount of taxes you owe.
Key rules:
- Only cash donations qualify.
- If you receive a state tax credit for the same gift, the federal credit is reduced.
- You must choose between a deduction or the credit—you cannot claim both.
- Unused credit can be carried forward up to 5 years.
- Donations must go to public charities, not private foundations.
This credit may provide a more valuable benefit than a deduction—especially for taxpayers in lower tax brackets.
Final Takeaways
The OBBBA introduces the most extensive charitable giving changes in years. Key planning points include:
- The 60% cash deduction limit is now permanent.
- A new 0.5% floor begins in 2026—consider accelerating giving into 2025.
- Non-itemizers gain a new above-the-line deduction in 2026.
- High-income donors will see a reduced tax benefit due to the 35% cap.
- A valuable new K–12 scholarship credit begins in 2027.
These changes create both challenges and new planning opportunities. Donors may want to review their giving strategies before the end of 2025 to take full advantage of the current rules. Contact your Insight team if you have questions or would like us to run tax projections to identify the most strategic moves for your charitable donations.