This article is part of KJK’s ongoing series analyzing the One Big Beautiful Bill Act (OBBBA) and its implications across taxpayers and industries.
Signed into law on July 4, 2025, the OBBBA permanently extends many provisions from the 2017 Tax Cuts and Jobs Act while introducing new rules for charitable giving and increasing estate and gift tax thresholds starting January 1, 2026.
Key Provisions for Charitable Donors
New Deduction for Non-Itemizers
Beginning in 2026, non‑itemizers may claim an above‑the‑line deduction for cash charitable contributions of $2,000 for married joint filers and $1,000 for single filers. Contributions of property, stock and donor‑advised fund gifts do not qualify.
KJK Take: This provision allows certain taxpayers who do not itemize to deduct cash charitable gifts. It may affect whether some filers choose to itemize or take the standard deduction in future years.
Floor for Itemized Charitable Deductions (0.5% AGI)
Itemizers must now reduce charitable deductions by 0.5% of adjusted gross income (AGI). This functions as a threshold that limits the portion of charitable giving eligible for deduction.
KJK Take: Taxpayers who itemize may need to compare the value of deductions under this new floor with other itemized deductions to determine potential benefits.
High‑Income Limit on Itemized Deduction (35% cap)
Taxpayers in the highest bracket will have charitable deductions capped at 35% instead of 37%, combined with the 0.5% AGI floor.
KJK Take: The cap reduces the maximum value of charitable deductions for high‑income taxpayers. This change could influence decisions regarding the timing and structure of larger contributions.
Qualified Charitable Distributions (QCDs)
QCDs from IRAs are unaffected by the new provisions. Individuals age 70½ and older can continue making direct transfers to charities from IRAs without including those amounts in taxable income.
KJK Take: This continuity may be relevant for individuals who use QCDs to satisfy required minimum distributions and manage taxable income.
60% AGI Cap Made Permanent
The 60% AGI limit for cash contributions to public charities becomes permanent, rather than reverting to the prior 50% limit.
KJK Take: This change provides consistency in planning for individuals making significant cash charitable contributions to public charities.
Appreciated Stock Donations Remain Unchanged
Donations of long‑term appreciated stock continue to allow donors to avoid capital gains tax and claim a deduction equal to the asset’s fair market value.
KJK Take: This provision preserves an existing charitable giving strategy and maintains parity with pre‑OBBBA planning rules.
Key Estate and Gift Tax Changes
Increased Lifetime Exemption
Effective January 1, 2026, the federal estate, gift and generation‑skipping transfer (GST) tax exemption increases to $15 million per individual ($30 million per married couple) and will be indexed for inflation beginning in 2027.
KJK Take: The higher exemption amount may affect decisions regarding lifetime gifts, trust structures and timing of wealth transfers for certain high‑net‑worth individuals.
Planning Implications for Trusts and Future Generations
The increase in the federal estate, gift and generation-skipping transfer (GST) tax exemption under the OBBBA may affect the structure and administration of existing trusts. Trustees and individuals with irrevocable trusts may consider:
- Whether unrealized gains within trust assets could result in future capital gains exposure under current or potential future tax regimes.
- Whether dividing or restructuring trusts could provide benefits in light of the expanded exemption amount and changes to charitable deduction rules.
The higher exemption thresholds may influence how existing trusts align with long-term family wealth transfer goals, particularly for taxpayers in high-tax states or those with multigenerational planning objectives.
Planning Opportunities for 2025
With key provisions effective January 1, 2026, donors and families have several months to act:
- Accelerate charitable contributions into 2025 to avoid new deduction limits.
- Front-load wealth transfers to leverage appreciation outside the estate tax system.
- Review trust structures to align with increased exemptions and updated charitable strategies.
Looking Ahead
The OBBBA’s updates will reshape charitable giving and estate planning for individuals at all income levels.
