Strategic charitable giving under the One Big Beautiful Bill Act

The passage of the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, has fundamentally reshaped the charitable giving landscape, creating new opportunities and limitations that demand careful strategic planning. For donors who view philanthropy as both a personal commitment and a tax-planning tool, understanding these changes is essential to maximizing charitable impact and tax efficiency as we approach year-end.

A Critical Window: Understanding the 2025-2026 Split

The OBBBA’s most significant changes take effect in 2026, creating a unique planning window for 2025. Beginning next year, taxpayers who claim the standard deduction will gain a new benefit: deducting up to $1,000 for single filers or $2,000 for joint filers in cash contributions to qualified charities. This above-the-line deduction allows virtually all households to benefit from charitable giving, though it excludes contributions to donor-advised funds, private foundations and supporting organizations.

However, the more dramatic changes affect those who itemize deductions, particularly high-income donors. Beginning in 2026, itemized charitable contributions will only be deductible to the extent they exceed 0.5% of adjusted gross income. For a household with $400,000 in AGI, this means the first $2,000 of charitable donations provides no tax benefit. The impact compounds further: Taxpayers in the top 37% bracket will see their overall itemized deduction benefit capped at 35%, reducing their tax savings from 37 cents to 35 cents per dollar donated.

Strategic Responses: Timing and Technique

These twin limitations create a compelling case for front-loading charitable contributions into 2025. High-income donors who accelerate planned 2026 gifts can capture the full 37% deduction rate while avoiding the new AGI floor entirely. This timing strategy becomes even more attractive when paired with the increased state and local tax deduction cap of $40,000 available in 2025, making it easier for many taxpayers to surpass the standard deduction threshold.

The concept of bunching donations has gained renewed relevance under the new rules. Rather than spreading $10,000 in annual gifts across multiple years, donors might consolidate several years of contributions into a single tax year, alternating between itemizing and claiming the standard deduction.

Donor-advised funds serve as an ideal vehicle for this strategy, allowing donors to take an immediate tax deduction for a significant contribution while distributing grants to charities over several years.

One strategy that remains powerfully effective under the OBBBA is donating long-term appreciated securities rather than cash. Donors who contribute stock held for more than a year can claim a charitable deduction for the full fair market value while avoiding capital gains tax on the appreciation. However, donations of appreciated property are subject to tighter AGI limits—30% for public charities compared to 60% for cash donations. Any excess contributions can be carried forward for up to five years.

A $15,000 stock donation with a $5,000 cost basis can save a top-bracket taxpayer nearly $8,000 in federal taxes compared to just $5,550 if cash were donated instead. For donors with substantial appreciated assets, the 30% AGI limit makes strategic timing even more important.

For retirees aged 70½ or older, Qualified Charitable Distributions offer a uniquely advantageous strategy that bypasses many of the OBBBA’s new limitations entirely. By directing up to $108,000 from an IRA directly to qualified charities, donors exclude that amount from taxable income altogether. This reduction in AGI helps donors avoid the itemized deduction benefit cap, reduces exposure to the Net Investment Income Tax and could potentially lower Medicare premiums.

The Path Forward: Integration and Action

The OBBBA highlights an important point about modern philanthropy: Meaningful charitable giving is most effective when personal values align with thoughtful, well-designed tax planning. The law’s complexity means that one-size-fits-all advice no longer suffices. Factors such as income volatility, future tax bracket expectations and the interplay between various AGI-related thresholds all demand personalized analysis.

As 2025 draws to a close, donors have a valuable but time-limited opportunity to position their charitable strategies advantageously before the new limitations take hold. Whether through accelerated giving, strategic asset donations or retirement account distributions, the key is acting with both generosity and intelligence. The most effective philanthropists will recognize that maximizing tax efficiency ultimately enables greater charitable impact, making professional guidance more valuable than ever.

Malia Wollerson is a tax partner in the Shreveport office of Heard, McElroy & Vestal, where she focuses on oil and gas taxation, high wealth individuals, and private foundation compliance and consulting.

Elizabeth Killough is a tax partner in the Shreveport office of Heard, McElroy & Vestal and has been with the firm since 2006. Liz specializes in tax compliance for closely held businesses and high wealth individuals, as well as estate tax matters for which she has experience as an expert witness at trial.