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As the year comes to a close, donors and nonprofits alike are preparing for the impact of the One Big Beautiful Bill Act (OBBBA), which went into effect on July 4, 2025. This sweeping legislation changes the way Americans donate and the way charities receive, with most changes taking effect for tax years beginning January 1, 2026. The game is changing.
Remember the short-lived cross-border donation deduction from the pandemic years? It's making a comeback. Beginning in 2026, taxpayers who do not report will again be able to deduct cash donations of up to $1,000 for single filers and $2,000 for married couples making joint donations to qualified public charities. The deduction is in addition to the standard deduction and provides a modest but meaningful incentive for those who donate regularly. It applies only to monetary donations to qualified public charities.
For those who list, the math gets a little more difficult. Starting in 2026, only the portion of charitable donations that exceeds 0.5% of adjusted gross income (AGI) will be deductible. If your AGI is $100,000, the first $500 of your donation does not count. Taxpayers in the highest 37 percent bracket will also find that their savings are capped at 35 percent, meaning each dollar donated will yield no more than 35 cents in federal tax benefits. These changes aim to limit the most generous tax breaks for high earners, but can also have a negative impact on organizations.
Given these new thresholds, timing and strategy are more important than ever. One proven tactic is “bundling,” which involves combining multiple years of charitable donations into a single tax year to overcome the new AGI floor and make itemization worthwhile. Donor-Advised Funds (DAFs) can help by allowing donors to claim a large deduction within a year while gradually giving money to charities. Combining pooling with appreciated stock donations or charitable remainder funds can also reduce capital gains and preserve flexibility for long-term philanthropy.
Of course, charities will also feel the impact. The general deduction could attract more small donors, while reduced incentives for top earners could somewhat dampen the inflow of larger donations. Companies also do not remain unaffected by the OBBBA changes. From 2026, a new 1% floor means that only contributions exceeding 1% of taxable income are deductible, although the familiar 10% cap still applies. For a business with taxable income of $1 million, the first $10,000 in donations provides no tax benefit.
Retirees who use Qualified Charitable Distributions (QCDs) still enjoy one of the most tax-efficient ways to give. Individuals age 70½ or older can transfer funds directly from an IRA to a qualified charity to meet required minimum distributions and keep the amount out of taxable income. The QCD rules are not affected by OBBBA and cleverly circumvent the new AGI lower limits.
The end result? Even as the landscape changes, generosity still pays off. 2025 could be the last chance to give under the old, friendlier deduction rules, so smart donors and nonprofits alike are planning their next steps. The details may be complex, but the message remains timeless; Thoughtful giving never goes out of style.
Jen Lindstrom, CPA, is a partner at Arledge, the largest local accounting firm in the Oklahoma City metropolitan area. Arledge is a recognized leader in the accounting industry, providing practical solutions in tax planning, auditing, consulting, accounting advisory and client accounting.