Trump's one big beautiful bill reshapes charitable giving for donors and advisors

Trump's one big beautiful bill reshapes charitable giving for donors and advisors
An expansion to a 2017 TCJA provision, a permanent increase to the standard deduction, and additional incentives for non-itemizers add new twists to the donate-or-wait decision.
JUL 25, 2025

Financial advisors and their clients have several months to prepare for significant changes to the tax treatment of charitable contributions, as new provisions from the One Big Beautiful Bill Act are set to take effect in 2026.

The legislation, which alters and builds on certain elements from the 2017 Tax Cuts and Jobs Act, introduces new opportunities and limitations for donors, while adding complexity to the landscape of charitable giving.

The 2017 tax law nearly doubled the standard deduction and capped state and local tax deductions, prompting a sharp decline in itemized charitable deductions. According to the Giving USA Foundation and Indiana University, itemized charitable deductions fell by about $66 billion, or 26%, between 2017 and 2019, as reported by the Wall Street Journal. The new law aims to address this by offering a broader tax break for donors who do not itemize, allowing annual deductions of up to $2,000 for married couples filing jointly and $1,000 for single filers.

This expanded deduction, reminiscent of temporary pandemic-era provisions, could make charitable tax breaks more accessible to an estimated 100 million Americans who would otherwise not qualify. However, the deduction is limited to cash gifts made directly to qualified charities, excluding donations of property, stock, or contributions to donor-advised funds and supporting organizations. Additionally, the deduction reduces taxable income but not adjusted gross income, which may affect eligibility for other tax benefits tied to AGI.

For those who continue to itemize, the law introduces new restrictions. For most Schedule A filers, itemized charitable deductions will be reduced by an amount equal to one-half of 1% of adjusted gross income each year. For example, a couple with $225,000 in AGI would be unable to deduct $1,125 of their charitable donations annually. This threshold has a greater impact on the tax benefit of smaller gifts – potentially making more than half of a $2,000 donation ineligible for a deduction—while the effect is proportionally smaller for larger contributions. The full donation can still be made to the charity, but a reduced portion qualifies for a tax break.

High-income taxpayers face an additional limitation: the tax benefit from itemized deductions will be calculated as if their top marginal tax rate is 35%, rather than the actual top rate of 37%. This change, combined with the 0.5% disallowance, is expected to prompt some affluent donors to accelerate their giving strategies. “I expect to see accelerated charitable donations this year from the smartest people in the highest bracket, because of the double tax whammy,” said Richard Pon, a CPA in San Francisco, to the Wall Street Journal.

A recent study by Fidelity Charitable found that 85% of high-net-worth clients are highly engaged in philanthropy, with 72% reporting charitable donations of at least $10,000 annually, yet advisors often underestimate their clients’ charitable activity. Still, nearly half of RIAs said that discussing charitable planning has helped them build stronger relationships with clients, and 60% reported that it has attracted new business.

The chunkily named One Big Beautiful Bill Act also makes permanent the increased standard deduction, setting it at $15,750 for single filers and $31,500 for married couples in 2025, with further increases scheduled for 2026. The expanded “bonus” deduction for taxpayers age 65 and older will remain in place through 2028, according to the San Diego Foundation.

Industry observers note that these changes could further reduce the number of taxpayers who itemize, a philanthropy-chilling trend that began after the 2017 tax overhaul. By raising the standard deduction, the law makes it less likely that many filers will have enough deductions to justify itemizing, so more will opt for the standard deduction instead. As a result, fewer taxpayers will be able to claim itemized charitable deductions.

However, the new law’s introduction of a charitable deduction for non-itemizers – $2,000 for married couples and $1,000 for singles – creates a new incentive for those who take the standard deduction to make charitable gifts, since they can now receive a tax benefit for qualifying donations even if they do not itemize.

Older philanthropic-minded taxpayers, particularly those who are at least 70 and a half years old, might also ponder using qualified charitable donations from their traditional IRAs. As the Wall Street Journal notes, those contributions aren't subject to the new limits, and they often turn out to be the most tax-advantaged way to make an impact.

Lawrence Katzenstein, a lawyer at Thompson Coburn in St. Louis, emphasized the importance of timing in the Wall Street Journal. “People need to decide whether to accelerate contributions into this year, make them on a normal schedule or defer them into next year,” he said.

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