Three insights for philanthropy
July 9, 2025
The One Big Beautiful Bill Act was signed into law by President Trump on July 4, 2025, after the House of Representatives approved the Senate’s changes to H.R. 1, which passed the House by a narrow margin in May.
The OBBBA, with nearly 900 pages of provisions, reshapes policy across major sectors of the U.S. economy. While the proposed increase to the net investment tax on private foundations that appeared in earlier versions was removed, the OBBBA does include several provisions that affect philanthropy.
Three major takeaways are of particular importance to anyone trying to navigate charitable planning opportunities over the months and years ahead.
1: OBBBA increases the standard deduction and further limits charitable deductions for those who itemize.
The new law makes permanent the standard deduction increases under the Tax Cuts and Jobs Act of 2017, increasing the standard deduction for 2025 to $15,750 for single filers and $31,500 to taxpayers who are married and filing jointly.
What’s more, under the new law, people who itemize can take charitable deductions only if those deductions exceed 0.5% of their adjusted gross income. Furthermore, taxpayers in the top bracket can only claim a 35% tax deduction for charitable gifts instead of the full 37% that would otherwise apply to their income tax rate. Note also that the final bill permanently extended the contribution limitation for cash gifts made to certain qualifying charities at 60% of adjusted gross income.
What does this mean for charitable giving?
With even fewer taxpayers eligible to itemize thanks to the increased standard deduction, and deductions capped for high-income earners, we’re likely to see a continuation of the chilling effect on charitable giving that occurred in the wake of the Tax Cuts and Jobs Act.
What can you do?
If you regularly support nonprofit organizations, it’s important to continue to do even if you’re not you’re benefiting from a tax deduction. Our community needs you, now more than ever. Philanthropy can remain an important priority for many families outside any tax benefits their giving might provide.
2: OBBBA introduces a charitable deduction for nonitemizers.
The new law includes a provision, effective starting in 2026, allowing taxpayers who don’t itemize to take a charitable deduction of $1,000 for single filers and $2,000 for taxpayers who are married and filing jointly. As has been the case in the past, gifts to donor advised funds are not eligible.
What does this mean for charitable giving?
After the TCJA went into effect, households that itemize deductions dropped to less than 10%. Parallel to this trend, the number of U.S. adults who give to charity in any given year has dropped over the last 20 years from nearly two-thirds to less than half, according to some studies. Against this backdrop, this new deduction for nonitemizers has the potential to increase charitable giving among a significant number of households.
What can you do?
Whether you itemize or not, now is the time to take a serious look at your charitable giving plans and determine how you’re going to support the causes you care about over the years ahead. We’d be happy to help make a plan that supports the organizations and causes that you choose, and even explore how to accomplish other philanthropic goals, like getting your children and grandchildren involved.
3: The higher estate tax exemption will not sunset.
Under the OBBBA, the TCJA’s increase to the estate tax exemption will not sunset at the end of 2025, ending the uncertainty for taxpayers updating financial and estate plans. The new law makes permanent the increase in the unified credit and generation-skipping transfer tax exemption threshold.
The 2025 exemption is $13.99 million for single filers and $27.98 million married taxpayers filing jointly. In 2026, these numbers increase to $15 million and $30 million respectively.
What does this mean for charitable giving?
Purely estate tax-based incentives to give to charity continue to apply only to the ultra-wealthy, likely resulting in a continuation of the taxpayer behavior triggered by the TCJA. In other words, most people will give to charity during their lifetimes and in their estates for reasons other than a tax deduction.
What can you do?
There is no guarantee that the estate tax exemption will stay high forever. As families work with their tax and estate planning advisors, many are viewing the next two years as an important window to plan ahead. The upshot of the new law is that high net-worth taxpayers now have more time to thoughtfully consider estate planning strategies, including charitable giving.
Need additional assistance with your charitable giving? If so, MCF would be happy to help! Please contact our Donor Engagement team at legacy@madisongives.org or 608-232-1763.
Please note that this article has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice.
