The impact of the One Big Beautiful Bill Act on charitable giving
From September 2025 Insights on Charitable Giving newsletter
On July 4, 2025, the One Big Beautiful Bill Act became law. As the name implies, the act contains a plethora of provisions, including several impacting charitable giving.
New federal income tax laws to have on your radar related to philanthropy include:
$1,000 “above-the-line” charitable deduction for non-itemizers
Taxpayers who do not itemize deductions can deduct up to $1,000 per person ($2,000 for married couples) for cash contributions to qualifying public charities.
0.5% floor for charitable deductions for individuals who itemize
For itemizers, charitable deductions are now only available to the extent a donor donates more than 0.5% of their adjusted gross income.
1% floor for charitable deductions for corporations
For corporations, the floor to claim a charitable deduction is 1% of the corporation's adjusted gross income.
60% adjusted gross income limit for cash contributions continues
For cash contributions to public charities, donors may continue to take deductions up to 60% of their adjusted gross income. This provision is no longer subject to a sunset.
Tax benefit of deductions capped at 35% for individuals in the top tax bracket
In a new version of the “Pease limitation,” taxpayers in the top 37% federal income tax bracket will have their itemized deductions decreased by 2/37ths for each dollar above that limit. This caps the tax benefit of charitable and other deductions at 35%.
How these new laws will impact individual taxpayers will largely hinge on whether they itemize deductions. To itemize, a taxpayer’s potential itemized deductions should exceed the standard deduction.
Under the new law, the standard deduction remains high. For 2025, it increases $750 per person to $15,750 for individuals and $31,500 for married couples.
But the new law raises the limit on state and local tax (SALT) deductions to $40,000 per household in 2025, subject to a reduction equal to 30% of modified adjusted gross income over $500,000. (The reduction cannot decrease the deduction below $10,000.)
For individuals who live in high-tax states, the raised SALT limit may allow them to itemize and receive a larger tax benefit for their charitable gifts. For individuals who don’t itemize, the new $1,000 “above-the-line” deduction may now provide them with a tax benefit for their charitable gifts that they didn’t previously receive.
Separate from charitable income tax deductions, two other new laws to be aware of include:
Starting in 2027, a new tax credit will be available for gifts of up to $1,700 a year to qualifying organizations providing scholarships for students of private K-12 schools.
Starting in 2026, several changes will apply to the tax on the net investment income of universities with larger endowments, including Stanford. These include a new rate schedule with 1.4% (the original rate), 4%, and 8% brackets depending on the size of the institution's endowment divided by its number of full-time students.
This information is intended to be general in nature and is for educational purposes only. It is not intended as legal, tax, financial or estate planning advice. The accuracy of the information may change and cannot be guaranteed. Please consult with your advisors to consider how the new tax law may apply for you.
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