The “One Big Beautiful Bill” (OBBB), signed into law on July 4, 2025, represents the most sweeping tax reform since the Tax Cuts and Jobs Act (TCJA). While the legislation spans hundreds of pages, individual taxpayers need to be aware of key changes regarding charitable deductions that will impact them.

Background Discussion

Historically, only taxpayers who itemized their deductions could benefit from claiming charitable donations. This was true for donations of both cash and property. There was also no lower limit on the amount of charitable donations that could be claimed (so long as the taxpayer met the threshold for itemizing).

For tax years beginning in 2020 and 2021, a temporary provision allowed non-itemizing taxpayers to deduct charitable donations of cash (not property) up to $300 ($600 for married taxpayers filing jointly). This was a temporary provision intended to encourage charitable donations during the Covid years and was not extended beyond 2021.

As a general matter, prior to the TCJA, deductions for most types of charitable donations made by individuals were capped at 50% of the taxpayer’s contribution case (which is generally the taxpayer’s adjusted gross income, or AGI). The TCJA temporarily increased this cap to 60% of the taxpayer’s contribution base, for tax years beginning after 2017 and before 2026.

Summary of OBBB Changes

Under the OBBB, the deduction for non-itemizers is permanently restored for tax years beginning after 2025. The amount of the above-the-line deduction is also increased to $1,000 ($2,000 for married taxpayers filing jointly). The above-the-line deduction is available for cash contributions only (not donations of property, securities, etc.). The above-the-line deduction is not available to taxpayers who itemize. The OBBB also permanently extended the 60% of AGI cap for charitable contributions made by individuals.

The OBBB also introduced a new type of restriction on charitable contributions – taxpayers must now meet a minimum “floor” amount of 0.5% of their contribution base for the year to deduct any charitable contributions. Charitable contributions that are disallowed by this “floor” amount can be carried forward.

Taxpayers and tax preparers should be aware of the following items:

• Track all charitable donations, cash or non-cash, and be sure to keep receipts for every donation.

• Even taxpayers who normally do not itemize deductions may be able to take advantage of the $1K/$2K above-the-line charitable deduction.

• As a best practice, all taxpayers should track all their charitable contributions, whether they believe they will be able to claim them or not.

Contact your YHB advisor today to discuss how these changes can impact you.