One Big Beautiful Bill Act (OBBBA): Charitable Giving and Philanthropy Provisions
A sweeping overhaul of charitable tax policy reshapes who benefits from giving, how deductions and credits are claimed and the planned giving strategies donors and nonprofits must use to maximize philanthropic impact.
Key takeaways:
- OBBBA restructures charitable tax incentives, expanding limited deductions to nonitemizers while reducing marginal benefits for high-income donors.
- New floors, caps and excise taxes increase complexity for donors, corporations, nonprofits and large university endowments.
- Targeted credits and planned giving strategies gain importance, particularly for K-12 scholarships and structured philanthropy.
Key changes under the One Big Beautiful Bill Act (OBBBA)
The One Big Beautiful Bill Act (OBBBA), also known as H.R. 1, enacts sweeping tax reforms with significant implications for charitable giving and the philanthropic sector. It permanently extends many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) and introduces new rules affecting donors, corporations and nonprofit organizations. Learn more about these charitable giving tax changes.
1. Individual charitable giving
Charitable deduction for itemizers: The OBBBA retains the TCJA's increased limit on cash contributions to qualified charities—60% of adjusted gross income (AGI)—but introduces a 0.5% floor, meaning deductions are only allowed for contributions exceeding 0.5% of AGI. Additionally, the tax benefit is capped at 35 cents per dollar for high-income taxpayers, down from 37 cents.
Charitable deduction for nonitemizers: A new permanent deduction is created for nonitemizers, capped at $1,000 for individuals and $2,000 for joint filers, beginning in 2026. This deduction excludes contributions to donor-advised funds and provides a tax benefit to roughly 90% of taxpayers who previously could not claim charitable deductions.
Standard deduction: The standard deduction is further increased to $15,750 for individuals and $31,500 for joint filers and will be indexed to inflation. While this simplifies filing for many taxpayers, it reduces the number who itemize and thus claim charitable deductions.
2. Corporate charitable giving
Corporate deduction floor: Corporations must now contribute at least 1% of taxable income to qualify for a charitable deduction. The 10% ceiling remains, and excess contributions may be carried forward for five years.
3. Targeted incentives
Scholarship tax credit: A nonrefundable tax credit of up to $1,700 is available for contributions to certain 501(c)(3) organizations that primarily grant scholarships to K-12 students. This credit is limited to cash donations and takes effect in 2027.
4. Regulatory and compliance changes
Executive compensation: A 21% excise tax now applies to nonprofit executive compensation exceeding $1 million, including former employees.
University endowments: The OBBBA significantly expanded the excise tax, created by the TCJA, on the net investment income of certain university endowments. Instead of a flat 1.4% rate, the OBBBA establishes a graduated tax based on endowment size per student and student enrollment thresholds, with rates ranges from 1.4% to 8%.
To be subject to the tax, a university must be private, enroll at least 3,000 tuition-paying students—half of whom must be in the U.S.—and have endowment assets of at least $500,000 per full-time equivalent student.
Looking ahead
While OBBBA's expansions, especially benefiting non-itemizers and K–12 scholarship donors, may foster broader participation in charitable giving, its new floors and reduced benefits for high earners introduce new complexity. To navigate this landscape effectively, charitable givers should engage philanthropy and tax experts to design gift structures, like scholarship donations, charitable trusts or corporate giving, that align with both client values and evolving rules.
For more information on charitable giving and the One Big Beautiful Bill Act, contact your Fifth Third Private Bank advisor.