News

Written By: Paul Staisiunas, JD, LLM 

When the One Big Beautiful Bill Act was signed into law on July 4, 2025, it carried significant changes across the tax code. Many of those changes directly affect charitable giving and the incentives that large donors have relied on are shifting.  

Key changes: 

1. For those who itemize, only the portion of charitable contributions exceeding 0.5% of adjusted gross income (AGI) will be deductible. 

1. For high-income donors (taxpayers in the 37% tax bracket), the maximum tax benefit (i.e., “deduction rate”) for charitable giving is capped at 35% of the donation. 

1. The existing limit that cash charitable contributions may not exceed 60% of AGI (for those itemizing) was made permanent under the new law.  

1. Corporations can only deduct charitable gifts that exceed 1% of taxable income, with excess contributions subject to a carry-forward for up to five years.  

What do these changes mean for your Charitable Giving Strategy? 

While philanthropy remains a powerful tool for impact, the new rules reshape how —and how much —your giving will impact your tax savings. For high-net-worth individuals and corporations alike, these changes introduce new thresholds and caps, making strategic planning more important than ever.  

We’ve broken down the four key provisions that could significantly influence how you structure your charitable giving going forward. 

1. A 0.5% “floor” on charitable deductions for itemizers

Starting in January 2026, taxpayers who itemize may only deduct charitable contributions to the extent they exceed 0.5% of their adjusted gross income (AGI). This makes smaller annual gifts less tax-favored. 

• Example: If your AGI is $4 million, only charitable gifts above $20,000 will generate a federal deduction. 

2. 35% Cap for donors in the top income tax bracket

Previously, donors in the highest marginal tax bracket could deduct charitable contributions at 37% (subject to any other applicable limitations). For tax years beginning after December 31, 2025, the new law limits the maximum deduction benefit to 35% (i.e., donations are effectively treated as if in a 35% bracket) for taxpayers in the 37% tax bracket. If you’ve been considering making a significant charitable gift, 2025 is the year to do it. Reach out to your FLSV advisor for guidance on the best strategy for this.  

• Example: If you are a donor in the 37% bracket and donate $10,000, you will only receive a $3,500 deduction instead of a $3,700 deduction. 

3. The TCJA temporary provision was made permanent

The provision that was set to expire under the Tax Cuts and Jobs Act, which allowed taxpayers to deduct cash gifts to qualified charitable organizations up to 60% of their AGI, was made permanent. 

4. A 1% floor for corporate charitable deduction 

For corporations (for tax years beginning after December 31, 2025), only corporate charitable gifts exceeding that 1% taxable income threshold qualify for a deduction. The 10% cap remains in place for corporations. Charitable contributions below the 1% threshold may be carried forward for up to five years but only in years in which the total charitable contributions exceed the 10% cap.  In those years, contributions below the 1% threshold and above the 10% cap would be carried forward. 

• This means it is essential for corporations to strategically plan their charitable giving alongside their broader tax strategy to ensure maximum benefits. 

Are there any other changes you should be aware of? 

Beyond the four headline provisions, the new law introduced several other adjustments that may influence giving strategies: 

• Limits on deduction ceilings and carryforwards: Some charitable gifts that were previously fully deductible in the year made may now fall under carryforward rules, reducing flexibility for donors with significant contributions. 

• Above-the-line deduction for non-itemizers: Taxpayers who take the standard deduction can now claim up to $1,000 (or $2,000 for joint filers) in charitable deductions. However, this excludes gifts to donor-advised funds and non-operating foundations. 

• Ongoing complexity and potential donor impact: With multiple thresholds, caps, and floors, charitable tax planning grows more complicated. It’s crucial to work with your advisor to adjust your charitable giving strategy to maximize its impact. 

Why These Changes Matter for Your Estate Plan 

With the new tax provisions in place, now is an ideal time to revisit your estate plan to ensure your charitable goals still align with your broader wealth strategy. The new limits on deductions and contribution thresholds may affect how and when your giving delivers the greatest impact — both for the causes you care about and for your overall tax efficiency. 

By reviewing your estate plan, you can explore strategies such as donor-advised funds, charitable trusts, or planned gifts that continue to support your philanthropic objectives while optimizing tax outcomes. Your FLSV advisor can help you evaluate these options and adjust your plan so it remains both effective and aligned with the latest tax landscape. 

Moving Forward with Purpose 

Now is an ideal time to review your charitable giving and estate plans. Reviewing how your current strategy fits within the updated deduction limits can help you stay both tax-smart and true to your philanthropic goals. Even minor adjustments, such as rethinking the timing of gifts, utilizing appreciated assets, or exploring options like donor-advised funds or charitable trusts, can help you make a greater impact while maintaining flexibility. 

At FLSV, our team is here to help you navigate these changes and identify opportunities that support your values, your legacy, and your overall financial plan. A thoughtful review before year-end can ensure your giving remains both meaningful and strategically aligned with today’s evolving tax landscape.