Breaking the Code: Charitable Deductions & OBBBA
By: Tony Khalife, CPA | Partner
Rules Are Set to Change in 2026 for Charitable Deductions with the passage of the One Big Beautiful Bill Act (OBBBA). As we head into year-end, now is the time to review your charitable giving strategy.
Here are 3 key planning opportunities to consider:
Accelerate Charitable Giving into 2025
Use Donor Advised Funds (DAFs)
Consider Qualified Charitable Distributions (QCDs) from IRAs
Accelerate Charitable Giving into 2025
Starting in 2026, charitable deductions will be subject to a new 0.5% income floor and a maximum tax benefit of 35% (down from 37% for top taxpayers). This means high-income donors may see a reduced tax benefit for their gifts. Many clients are choosing to “bunch” or group several years’ worth of donations into 2025 to maximize their deductions under the current, more favorable rules.
Example: A taxpayer with $1,000,000 AGI and $100,000 in charitable contributions in 2025 would receive a $100,000 deduction at the 37% rate ($37,000 tax benefit). In 2026, the same taxpayer would face a $5,000 floor (0.5% of $1,000,000), reducing the deductible amount to $95,000, and the deduction would be limited to a 35% tax benefit ($33,250), resulting in a roughly 10% reduction in tax savings or increase in $3,750 in taxes for the same donation.
Use Donor Advised Funds (DAFs)
A Donor Advised Fund (DAF) can be an effective way to maximize the impact of your charitable giving. By contributing appreciated long-term publicly traded securities, you can receive an immediate tax deduction based on the fair market value while avoiding capital gains tax on the appreciation. Private stock may also be contributed, as long as the DAF sponsor accepts the asset and a qualified appraisal is obtained. A DAF provides flexibility by allowing you to capture the tax benefits now and recommend grants to your preferred charities on your own schedule in the years ahead.
Consider Qualified Charitable Distributions (QCDs) from IRAs
If you are age 70½ or older, you can make direct gifts from your IRA to charity. These QCDs count toward your required minimum distributions and are not subject to the new OBBBA limitations. This can be a tax-efficient way to give in 2026 and beyond, especially if you do not itemize deductions.
If you would like to discuss your charitable giving strategy, please reach out to your tax engagement team.
To ensure compliance with the requirements imposed on us by IRS Circular 230, we inform you that any tax advice contained in this communication (including any attachments) is not intended to and cannot be used for the purpose of: (i) avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any tax-related matter(s) addressed herein.