The recently enacted One Big Beautiful Bill Act (OBBB) establishes several new rules related to individuals claiming charitable contribution deductions.
The purpose of this blog is to clarify the most significant changes.
- First, the 60% adjusted gross income limitation for cash gifts has now been made permanent starting in 2026. Any cash contributions in excess of the limit carry forward for five years.
- Second, non-itemizers can now deduct cash contributions up to $1,000 ($2,000 on a joint return) without itemizing deductions. This opportunity also begins in 2026 and is limited to cash gifts only.
- Third, for itemizers, a new .5% floor on itemized deductions begins in 2026. This means charitable contributions are lost to the extent they do not exceed .5% of a taxpayer’s modified adjusted gross income-think $500 if your modified adjusted gross income is $100,000. Any charitable contribution disallowed due to the .5% floor can be carried forward for 5 years under a fairly complicated ordering rule.
- Finally, the OBBBA did permanently repeal what was previously known as the Pease limitation on itemized deductions and replaced it with an overall limitation on itemized deductions. This new limitation is more favorable than the previous limitation allowing a high-income individual to keep 94.6% of total itemized deductions. Essentially this adjustment caps the value of each dollar of itemized deductions for those individuals who are in the highest marginal tax bracket.
Since the new rules are effective in 2026, 2025 may be a good year to “bunch” charitable gifts.
