The One Big Beautiful Bill Act: Impact on Charitable Giving
May 11, 2026
By Gina Khawam, CPA
The One Big Beautiful Bill Act (OBBBA), P.L. 119-21, enacted on July 4, 2025, includes several provisions that may significantly affect charitable giving strategies for both individual and business taxpayers in the current and future tax years. The changes discussed in this article take effect beginning with the 2026 tax year, making it crucial for
nonprofit organizations and their donors to understand the implications now and plan proactively.
Individual Provisions
The OBBBA introduced a few notable provisions that affect individual taxpayers differently, depending on whether they itemize deductions or claim the standard deduction on their personal income tax return.
Charitable Deductions for Non-Itemizers
During the COVID-19 pandemic, a temporary tax provision allowed non-itemizers a small deduction for cash donations to charities in tax years 2020 and 2021 — $600 for married taxpayers filing jointly and $300 for other filers in 2021.
Beginning in 2026, taxpayers who take the standard deduction rather than itemizing deductions will be able to deduct charitable contributions up to $2,000 for married taxpayers filing jointly and $1,000 for other filers. This applies to contributions made to
qualified charities, but not to donor advised funds (DAFs), Section 509(a) (3) supporting organizations, or non-operating private foundations.
Note: Taxpayers who take advantage of Arizona credit contributions may not deduct amounts that are claimed as state credits for federal purposes.
Floor on Charitable Deductions for Itemizers
Taxpayers who itemize are now subject to a 0.5% floor on itemized charitable deductions beginning in 2026. This means a deduction will be allowed only to the extent aggregate contributions exceed 0.5% of the taxpayer’s Adjusted Gross Income (AGI), computed without regard to any Net Operating Loss (NOL) carryback.
For example, if an itemizing taxpayer’s AGI is $100,000, the first $500 of charitable contributions for the year are not deductible.
Reduced Itemized Deduction for High Taxpayers
Beginning in 2026, all itemized deductions, including charitable contributions, are limited to a tax benefit of 35%. This means that taxpayers in the highest marginal tax bracket of 37% are further limited on their total itemized deduction. This limitation is applied after the 0.5% floor on itemized charitable deductions.
For taxpayers in the 37% tax bracket, itemized deductions, including charitable contributions, are reduced by 2/37 of the lesser of:
- The total amount of itemized deductions, or
- The amount by which the taxpayer’s taxable income before itemized deductions exceeds the dollar amount at which the 37% bracket begins.
In 2026, the 37% bracket applies to taxable income above $768,700 for married taxpayers filing jointly and $640,600 for single and head of household filers. Depending on the taxpayer’s income, the application of this provision could result in a significant loss of tax savings for high-income earners.
Business Provisions
Similar to individual taxpayers, corporations now face a new minimum threshold for deducting charitable contributions, beginning in 2026.
Floor on Charitable Deductions for Corporations
Corporations are now subject to a 1% floor on charitable contribution deductions. This means that a deduction is allowed only to the extent that the aggregate contributions
exceed 1% of the corporation’s taxable income for the taxable year.
For example, if a corporation’s taxable income is $100,000, the first $1,000 of charitable contributions for the year are not deductible.
Interaction with the Corporate 10% Ceiling
A corporation’s charitable contribution deduction is generally limited to 10% of taxable income, calculated before certain deductions. Therefore, starting with tax years beginning in 2026, corporations can only deduct contributions that exceed 1% and are within 10% of taxable income. The new floor effectively limits a corporation’s charitable
deductions to 9% of its taxable income.
Under the OBBBA, charitable contributions disallowed by the 1% floor can be carried forward, but only in a year in which the 10% limitation is exceeded. In other words, if the
corporation’s charitable deductions are less than 10% of its taxable income, the first 1% subject to the floor cannot be carried forward.
If, however, the charitable deductions exceed 10% of the corporation’s taxable income, the excess over 10% plus the disallowed 1% can be carried forward. The disallowed 1% may be carried forward for up to five years.
Nonprofit Organizations – How to Prepare
In light of the 2026 tax law changes, donors may revisit their charitable giving strategies to ensure they are maximizing available tax benefits while continuing to make a meaningful impact in their communities.
As giving patterns adjust, nonprofit organizations should carefully evaluate the potential effects of the OBBBA provisions when budgeting for the current and future fiscal years. Proactive planning, thoughtful donor communication and diversified fundraising strategies will be essential to maintaining revenue stability in a shifting tax landscape.
What to Expect
Nonprofits may see an increase in small-dollar giving, particularly from non-itemizing individual taxpayers who can now deduct up to $2,000 of charitable contributions in addition to the standard deduction.
However, high-income taxpayers, both individual and corporate, may have accelerated contributions in 2025 to yield greater tax savings, and therefore may reduce efforts in 2026.
Ernst & Young LLP (EY) predicts, based on a Quantitative Economic and Statistics study, that the new 1% floor on corporate charitable deductions could reduce corporate giving by $4.2 billion to $4.8 billion annually.
Corporate taxpayers may consider “bunching” charitable contributions, strategically consolidating donations into certain years to exceed the 1% limitation and maximize tax benefits. This approach may involve reducing or pausing contributions in some years in order to make larger, more impactful gifts in other years when they are more tax-effective.
Take Action Now
Those responsible for fundraising should take a proactive and strategic approach by:
- Educating smaller-scale individual donors — emphasizing that their contributions may still provide a tax benefit even if they do not itemize deductions
- Cultivating multi-year partnerships with corporate donors to provide greater stability amid legislative shifts
- Reinforcing mission impact over tax benefits in high-dollar fundraising efforts, ensuring philanthropic motivations remain durable regardless of changes to donor deductibility
Final Thoughts
Nonprofit organizations must regularly evaluate how tax law changes affecting individual and corporate donors could impact their funding, budgets and reporting requirements. New provisions from the OBBBA, applicable to 2026, may have significant implications for nonprofits that are not proactive in their donor discussions.
By strategically aligning donor messaging with legislative developments, nonprofits can reduce fundraising volatility and strengthen long-term donor relationships.