Update your Strategy for Impact … and reach out to us any time if you have questions!
Recent changes in federal tax law under the One Big Beautiful Bill Act (OBBBA) bring challenges, opportunities, and a sense of urgency as you consider plans for charitable giving in 2025 and beyond. The community foundation is here to help you update your strategy for impact. We’re sharing answers to three frequently asked questions about how the new laws will impact giving, what you can do about it, and how the community foundation can help.
“What’s happening with the standard deduction, and how big of a deal is it?”
The Tax Cuts and Jobs Act of 2017, the number of taxpayers who itemized deductions dropped significantly. This eliminated tax deductibility as a motivator for charitable giving for many Americans, which in turn, caused charitable giving to drop. Now, under the OBBBA, the standard deduction is going up again. However, OBBBA increases the state and local tax (SALT) deduction allowances from $10,000 to $40,000 with 1% increases through 2029 which will result in an overall increase in the number of itemizers.
“How can I make the most of the new deduction if I’m a non-itemizer?”
The OBBBA introduced a new deduction for charitable contributions starting in 2026: $1,000 for individual filers and $2,000 for married couples filing jointly. This provision, similar to the temporary pandemic-era incentive, allows non-itemizers to receive a modest tax benefit for their charitable gifts. Note that this new deduction is for cash gifts only (and it also does not apply to gifts to donor-advised funds).
“I itemize my deductions, at least in some years. What is ‘bundling’ and does it make sense for me?”
The answer may be yes! (We always recommend seeking tax advice from a qualified tax advisor to address your personal situation.) Coupled with an increasing standard deduction, two OBBBA provisions that take effect in 2026 may provide incentives for you to “front-load” or “bundle” charitable contributions, not only to exceed the high standard deduction to allow you to itemize, but also to avoid two limitations to charitable deductions effective starting with the 2026 tax year. First, beginning in 2026, the deductibility of charitable contributions will be capped at 35% of adjusted gross income (AGI), even for itemizers in the 37% tax bracket. Second, also beginning in 2026, a 0.5% floor will apply to itemized charitable deductions, meaning that only contributions exceeding 0.5% of AGI will be deductible.
For example, if you typically donate $12,000 each year to charity, but your other deductions do not push you over the standard deduction, you t could give $36,000 (three years’ worth of gifts) to a donor-advised fund at the community foundation in 2025. The idea is that you can combine this gift with other deductions to substantially exceed the standard deduction, allowing you to itemize and claim a much greater deduction for that year. Over the following two years, you can take the standard deduction and lean on the donor-advised fund to distribute funds to favorite charities.
These two upcoming changes reduce the value of charitable deductions for high-income taxpayers and may create a strong incentive for making larger gifts in 2025.
We know this can be a lot to digest. As always, the community foundation is honored to be your trusted partner and sounding board. We invite you to reach out to explore how our team can help navigate tax law changes and maximize opportunities in 2025 and beyond.
