With the One Big Beautiful Bill (OBBB) Act dramatically reducing the amount of federal dollars to many services, nonprofits that will pick up more of the slack are seeking support.
These charitable organizations may get a bit of help from the same legislation that’s put pressure on them.
Beginning with the 2026 tax year, the OBBB will provide generous taxpayers who claim the standard deduction some tax benefit for their gifts to Internal Revenue Service approved tax-exempt organizations.
Single filers can claim on their 2026 tax returns, which will be filed in 2027, up to $1,000 of their eligible gifts.
The non-itemizing charitable deduction will be $2,000 for married filing jointly taxpayers.
What’s old is new again: You might remember this special giving tax break during the COVID-19 pandemic.
The Coronavirus Aid, Relief and Economic Security (CARES) Act signed into law in March 2020 allowed for a tax deduction of up to $300 directly on Form 1040.
Then in late December 2022, the nonitemizing deduction was extended and expanded for 2021 thanks to the federal spending bill.
That end-of-year measure, the Consolidated Appropriations Act (CAA), continued the $300 donation deduction for single filers who didn’t itemize, and also doubled the deductible amount for married jointly filing nonitemizers.
New charitable tax benefits: The OBBB version obviously is much more generous.
It also is permanent, meaning that there is no set date for it to expire.
But the new deduction for donations for nonitemizers does keep one of the older version’s rules.
Gifts to donor-advised funds cannot be claimed here. You still must itemize to get the tax benefit of this type of donation.
Help for charities’ bottom lines: When the Tax Cuts and Jobs Act of 2017 took effect, its doubling of the standard deduction amounts dramatically reduced the number of filers who itemized.
Now around 90 percent of taxpayers take the larger standard deduction.
Since the only way to get a tax benefit for charitable gifts is to itemize, taxpayers’ eschewing of Schedule A has hurt some nonprofits.
“While overall charitable funds have expanded according to the most recent data available, the share of Americans who give to charitable causes has fallen,” reported The Conversation in January.
Donations plummeted from 66.2 percent of all U.S. adults in 2000 to 45.8 percent in 2020, according to the nonprofit news organization’s research.
Will the OBBB’s new, and larger, deduction for non-itemizers spur more of us to give again? Perhaps.
But the bulk of contributions will continue to come from the remaining 10 percent of taxpayers who itemize those gifts (and more) when they file. And they are now going to get less tax benefit for their philanthropy.
Trimming a charitable tax break, too: When tax writers create laws, they typically take from one sector of taxpayers when they give to another. In this case, it’s the itemizing donors on the short end of the tax stick.
The new tax law established a charitable deduction floor of 0.5 percent of adjusted gross income (AGI) in determining how much can be claimed. Contributions below the floor are not deductible.
Or, to put it another way, itemized charitable contributions are reduced by half a percentage point of your AGI to get to the amount of contributions that count on Schedule A.
For example, if your 2026 AGI is $100,000, you may only deduct the portion of your charitable donations that exceeds $500. For those who want to see the math, that’s 100,000 x 0.005 = 500.
This calculation means that your $10,000 donation to charity is worth just $9,500 when you claim it as an itemized deduction on your 2026 tax return.
But there’s a bit of good OBBB news for altruistic itemizers. The limitation on cash contributions to public charities that was set to revert to 50 percent of AGI from the 60 percent limit set by the TCJA is now permanently at the higher percentage amount.
Evaluate your giving plans: With the donation deduction coming in the next tax year, now is the time for you to reassess your giving plans.
If you take the standard deduction, but the new tax break matters to you, consider holding off on your 2025 giving until January.
Yes, your favorite nonprofit will have to wait a bit for the funds. But your gift might be bigger since the tax benefit is a potential $1,000 or $2,000 depending on your filing status.
And if you itemize, you might want to bulk up your 2025 gifts to avoid the limit that will take effect next year.
Of course, taxes are not the only — and in many cases, not the main — consideration of people who give to charities. But if your good deeds also can benefit you at tax filing time, no one would begrudge you taking the tax break.
You also might find these items of interest:
- Don’t overlook alternative ways to give to charity
- 5 ways to determine whether a charity is naughty or nice
- Property donation valuation guidelines for charitable spring cleaners
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