Breaking Down the One Big Beautiful Bill: Charitable Giving

The Series

The One Big Beautiful Bill (OBBB) is the kind of sweeping tax law that gets a lot of airtime—and even more confusion. Headlines scream big promises, while the fine print tells a different story.

This series is my attempt to clear the air, piece by piece. Instead of soundbites, we’ll look at what actually changed, who it impacts, and how we’re thinking about it in real financial plans.

Today’s Focus: Charitable Giving

For many families, charitable giving is as much about values as it is about taxes. You want to support causes you care about, but you also want to give in a way that makes financial sense. The OBBB reshapes some of those incentives, introducing both opportunities and potential complications.

Here are the three headline changes worth knowing:

1. Above-the-Line Charitable Deduction (2026) – Beginning in 2026, taxpayers can deduct cash contributions to qualified charities even if they don’t itemize—up to $1,000 if single, or $2,000 if married filing jointly. This means everyone, not just itemizers, can see a tax benefit for giving.
2. Charitable Deduction Limits Extended – The OBBB continues the expanded charitable deduction limits first introduced in prior tax law changes. Cash contributions to public charities remain deductible up to 60% of adjusted gross income (AGI). Appreciated assets contributed to charities are deductible up to 30% of AGI.
3. New 0.5% Floor on Charitable Deductions – This floor means before applying the usual AGI limits (60% for cash, 30% for appreciated assets), the first 0.5% of your income can’t be deducted if you are itemizing.

   In plain terms: if your income is $100,000, the first $500 of giving doesn’t count as a deduction. If your income is $200,000, the first $1,000 doesn’t count. After that, the normal deduction rules apply.

4. Scholarship Gift Credit (2027) – Starting in 2027, taxpayers will be eligible for a federal tax credit up to $1,700 per taxpayer for contributions made to qualified K–12 scholarship funds depending on the state they live in. Unlike a deduction, which lowers taxable income, a credit reduces tax liability dollar-for-dollar—a much more powerful incentive. This provision is specifically designed to encourage support of educational opportunities for K–12 students, not colleges or universities.

Expanded Examples

Martha, 45, giving faithfully every year
Martha doesn’t itemize because her deductions don’t exceed the standard deduction. Before OBBB, her $1,500 annual donation to her church offered no tax benefit. Starting in 2026, she can use the above-the-line deduction—$1,000 if she files single, $2,000 if married filing jointly—to reduce her taxable income even without itemizing.

Sam and Priya, parents in their 50s
Sam and Priya have two children and care deeply about supporting educational opportunities for families in their community. In 2027, their $5,000 annual contribution to a qualified K–12 scholarship fund will qualify for the new tax credit if they live in an applicable state. Depending on the credit percentage, this could shave thousands directly off their tax bill. Their generosity doesn’t change, but the incentive is now far stronger.

The Reynolds Family
The family makes large annual gifts of appreciated securities. The continuation of the 60% AGI cash limit and 30% limit for appreciated stock ensures they can still maximize deductions without hitting ceilings as quickly.

Planning Considerations

1. Standard deduction filers – Beginning in 2026, even if you don’t itemize, you can deduct up to $1,000 (single) or $2,000 (married) in charitable gifts. For many, this will be the first time their annual giving shows up on their tax return.
2. Bunching strategy – Families can still consider “bunching” larger gifts into one year to itemize and maximize benefits, but the above-the-line option adds a safety net in off years.
3. Scholarship credit timing – Donors considering education-related giving may want to align gifts with 2027 and beyond to capture the new credit.
4. RMDs and QCDs – Qualified Charitable Distributions from IRAs remain intact and remain one of the most tax-efficient ways for seniors to give. Pairing QCDs with the above-the-line deduction or scholarship credit could enhance strategy.