By: Carl W. Davis, CFRE, CFRM

Carl Davis is a Senior Major Gifts Officer with The Rotary Foundation and works with donors who live in AL,MS,LA,TN,KY,AR and parts of KS and MO. He can be reached at carl.davis@rotary.org

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. As the word “Big” in the bill’s title implies, this law is vast and has many impacts. One impact of the bill that many media outlets have not covered well is the bill’s impact on charitable giving. Here is an overview of the changes this bill makes to the landscape of charitable giving in the United States.

STANDARD DEDUCTION AMOUNT

ISSUE: The bill makes permanent the standard deduction amounts established by the Tax Cuts and Jobs Act of 2017. This means that the current deduction amounts are here to stay. It basically maintains the status quo of $15,750 for single filers and $31,500 to taxpayers who are married and filing jointly. When these amounts were increased in 2017 many people who used to file an itemized return and therefore deduct their charitable giving were no longer able to do so because the amount of their itemized deductions was less than this new higher standard deduction amount. This change gave less incentive to make charitable gifts. This change is now here to stay.

RESPONSE: Donors can use a Donor Advised Fund (DAF) to respond to this change. A DAF is a tool that allows the donor to receive a tax receipt for their charitable gift in one tax year and have the charity they support receive their gift in a different tax year. The Rotary Foundation offers DAFs as a service to our donors and many Community Foundations as well as commercial brokerages also offer them. Not all DAFs are created equal, and each donor must ensure that the DAF they choose will meet their needs. Rotarians should talk with their Major Gifts Officer or Planned Giving Officer if they have questions about how a DAF might fit into their personal plan of giving. Let’s say a donor is single and usually gives $10,000 per year to charity. Under the pre-2017 rules that donor could have itemized his tax return and deducted his charitable giving. Since the new standard deduction is $15,750 for that donor, he cannot deduct the giving. However, if he gives $20,000 to a Donor Advised Fund this year, he can then deduct the $20,000 from this year’s tax return because he will have given more than the standard deduction. He then advises his newly created DAF to make a grant of $10,000 to the different charities he always supports. That leaves $10,000 still in his DAF. Next year, he gives no money to charity from his personal funds and takes the standard deduction. Since there is still $10,000 in his DAF, he uses that $10,000 to support his charities that year as always. He repeats the process in the third year with another gift of $20,000 to his DAF, refilling it. This strategy allows the donor to deduct all of his charitable giving from his taxes, benefit from filing short form every other year and the charities he supports notice no difference to their income.

DEDUCTIONS FOR NON-ITEMIZERS

ISSUE: The new law includes a provision, effective after 2025, allowing non-itemizers 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. This means that even donors who do not itemize their charitable giving can take a tax deduction for some gifts to charity. Such provisions have been made temporarily to our tax code in the past. This law enacts them permanently.

RESPONSE: Starting in 2026 everyone can give money to charity to minimize their tax bill. This benefit is now available to everyone who files a tax return, not just itemizers! Singles can max out this deduction by giving $1,000 per year to charity and married couples $2,000. For Rotarians, this level of giving can make the donor a member of the Paul Harris Society. Anyone can now deduct their Paul Harris Society level giving from their taxes even if they don’t itemize. There has never been a better time to give for these donors.

NEW LIMITS ON DEDUCTIONS FOR TOP TAX BRACKET DONORS

ISSUE: Starting in 2026, the law now caps the tax benefits of itemized charitable deductions at 35%, even for those in the 37% tax bracket. That means a high-income donor giving $1,000 would receive a $350 deduction instead of the current $370 deduction.

RESPONSE: Give in 2025. Donors in the higher tax bracket who were planning a large charitable gift in the coming years may want to think about making their gift in 2025 to maximize their deduction under the current marginal rate before the new cap goes into effect. Such donors may benefit from putting money in a Donor Advised Fund today at the higher deduction rate, then giving it to their charities of choice in future years via the DAF.

NEW FLOOR ON CHARITABLE DEDUCTION

ISSUE: This is a brand-new change to our tax law starts in 2026 and reduces the amount of tax deductions donors can take for their charitable giving. Donors who itemize won’t be able to claim charitable deductions below 0.5% of their Adjusted Gross Income (AGI). For instance, a person with an AGI of $200,000 would have a $1,000 floor because 0.5% of $200,000 is $1,000. Therefore, for that person a $500 donation would yield no deduction at all, and a $1,200 donation would yield only a $200 deduction. Obviously, the higher a donor’s AGI the higher their floor will be.

RESPONSE: Donors should consider maximizing their charitable giving in 2025 before this law takes effect. This is another case where a donor may wish to make use of a Donor Advised Fund in 2025.

CONCLUSION

Having been a professional nonprofit fundraiser for more than 25 years, through five presidential administrations, the dotcom bust, the Great Recession and the Great Recovery, I can tell you that donors do not give to charity because of tax laws. They give because they truly want to make our world a better place. When the economy is good and they have more money, they give more. When the economy is down, they do what they can, and the percentage of their giving that is done via planned gifts that do not impact cash flow tends to increase during those times. However, in good times or bad, smart donors always want to give in the way that has the most efficiency. So, the timing of a donor’s gift, or what asset the donor uses to fund a gift will change based on what the tax laws of the time incentivize most. Smart donors who want to do the most good, should take these final months of 2025 to talk with their trusted advisors and strategically plan their charitable giving to have maximum impact through maximum tax efficiency given the changes to the tax law made by the “One Big Beautiful Bill Act”. The laws have changed so giving plans may also need to change to keep pace with the times. Now is the time for conversations with advisors and gift officers so that the most good can be done in the best ways possible.

Nothing in this article is offered as tax, legal or financial advice. The article may contain errors. Every person is encouraged to speak with his or her own advisors before making any decisions or taking any action.