Effective January 2026, the One Big Beautiful Bill Act (OBBBA) introduces major changes to how charitable donations are treated for tax purposes. If you work with nonprofit organizations, individual donors or financial advisors, understanding these updates is essential for guiding effective charitable giving strategies and providing accurate advice to your clients.
Key Changes for Individual Donors
1. New minimum giving threshold for itemized deductions
Starting in 2026, individuals who itemize deductions will only be able to deduct charitable contributions exceeding 0.5% of their adjusted gross income (AGI). For example, a household with an AGI of $300,000 must donate more than $1,500 to begin claiming deductions. If the household made a $10,000 charitable gift in 2026, only $8,500 of the gift is deductible.
2. Reduced tax benefit for high-income donors
Donors in the top 37% bracket will have their itemized charitable deductions capped at 35%, reducing the tax benefit of large gifts. This sets a ceiling on the total an individual in the top tax bracket may receive and reduces their charitable deduction by $0.02 for every dollar at this marginal rate. For example, a donor in this tax bracket giving $100,000 may only receive a tax benefit of $35,000, not $37,000.
3. Above-the-line deduction for standard filers
For those who take the standard deduction, a new above-the-line deduction allows:
- Up to $1,000 for single filers
- Up to $2,000 for joint filers
This applies only to cash donations to public charities. It excludes donor-advised funds and in-kind contributions.
4. Estate and gift tax exemption increase
Starting in 2026, the federal estate and gift tax exemption will increase to $15 million per person, adjusted for inflation. This shifts the focus to income tax planning for charitable benefits.
Strategic Planning Opportunities
2025 is a critical year for donors to review and optimize their giving strategies, as these changes will take effect in 2026.
- Accelerate large gifts to take advantage of current deduction rules, particularly for high-income individuals.
- Use a charitable bunching (
bundling ) strategy (combining multiple years of donations) to exceed the new deduction threshold. - Focus on income tax planning as fewer estates will be subject to federal estate taxes.
Let’s Plan Together
The charitable giving landscape is shifting, but with thoughtful planning, your clients’ generosity can continue to make a meaningful impact.
Next steps:
- Connect with
Thrivent Charitable to discuss how these changes may affect your clients’ giving strategies. - Review your clients' giving plans before the end of 2025 to maximize your clients’ charitable goals.
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Donors must itemize deductions to receive a charitable income tax deduction. Charitable giving can result in tax, legal and financial consequences. Thrivent Charitable™ does not provide legal, accounting or tax advice. Consult your attorney or tax professional.
To ensure compliance with IRS requirements, be aware that any U.S. federal tax advice that may be contained in this article is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing and recommending another party to any transaction or matter addressed herein.