Navigating Charitable Giving in the Wake of New Tax Reform

Signed into law on July 4, 2025, the “One Big Beautiful Bill” Act (OBBB, H.R.1) extends several provisions in the 2017 Tax Cuts and Jobs Act that were due to sunset at the end of 2025. The legislation also introduces tax law changes that will impact the future of giving for donors, advisors, and nonprofit organizations alike.

Key Changes for Donors (Starting in 2026 and beyond)

Beginning in 2026, new tax rules will affect how individual donors can deduct charitable gifts if they itemize deductions on their personal income tax return. Under the new law:

• You can only claim a charitable deduction if your total annual giving exceeds 0.5% of your Adjusted Gross Income (AGI). This new charitable deduction “floor” means that, for example, if your AGI is $100,000, you must donate more than $500 in a year before any of your charitable contributions become deductible.
• There is a new 35% cap on the value of itemized deductions, including the charitable contribution deduction. This means that high earners in the 37% tax bracket will not get dollar-for-dollar value from the deduction for their charitable gifts.
• The 2017 Tax Cuts and Jobs Act included a provision that allows itemizers to deduct cash donations up to 60% of AGI. With the new legislation, this provision is now made permanent.
• Starting in 2027, taxpayers can claim a nonrefundable credit up to $1,700 (or 100% of the gift, whichever is lower) for contributions to K-12 scholarship-granting organizations.
• The legislation introduces a new universal charitable deduction of $1,000 for individual taxpayers and $2,000 for married couples filing jointly—even if you do not itemize. This permanent deduction is available to anyone taking the standard deduction, making it easier for all donors to receive a tax benefit for giving. It is important to note that gifts made to donor-advised funds (DAFs), supporting organizations, or private foundations do not qualify for this new universal deduction.
• Corporations can now deduct charitable gifts only if they exceed 1% of their taxable income. This new corporate “floor” includes a 10% cap, and a 5-year carry forward for unused deductions.

How Donors Can Respond

National Philanthropic Trust (NPT) reaffirms its commitment to elevating donors, advisors, and nonprofits as core stakeholders in the philanthropic ecosystem. Our focus is on building resilient partnerships and advocating for trust-based grantmaking principles that strengthen long-term impact. To that end, there are potential actions donors can take to maximize their giving under these new rules:

• Accelerate your giving right now — High earners may benefit from front-loading charitable giving in 2025 before tighter itemized deduction caps begin in 2026.
• Bunch contributions to clear the 0.5% AGI floor — Beginning in 2026, itemizers can deduct charitable contributions only to the extent their contributions exceed 0.5% of their AGI. “Bunching” has been an effective donor strategy since the standard deduction was increased in the 2017 TCJA. Donors who bunch their giving by consolidating multiple years’ worth of planned donations into a single tax year may be able to receive greater tax benefits for tax year 2025.
• Remember the power of noncash and illiquid assets — It is important to keep in mind that donors can still avoid capital gains tax by giving long-term appreciated assets.

DAF Advisors: A Moment of Opportunity

For advisors working with DAF donors, this is a moment to strengthen relationships with clients. As donors (both individual and corporate) reassess their giving strategies, advisors are in a pivotal position to enable a more sustained, impactful philanthropy. While tax benefits may be a motivator, donors are inspired by results, relationships, and purpose. Consider the following as you help clients increase their impact:

• Consider future scenarios now — Advisors can conduct financial simulations to determine when clients will clear the 0.5% AGI threshold or may be affected by the 35% cap on the value of their deductions (starting in 2026 for those in the 37% tax bracket) in order to better advise clients on the timing and types of their giving.
• Coordinate charitable and estate planning — The new legislation raises the estate and gift tax exemption to $15 million per individual ($30 million per couple), meaning far fewer estates will face federal estate tax. This creates a prime opportunity for advisors to align charitable giving with estate planning. By making lifetime gifts now—to donor-advised funds or other charitable vehicles—clients can reduce their taxable estate, gain immediate tax benefits, and preserve flexibility in their philanthropy.
• Bundle gifts for corporate giving — Corporate clients now face a 1% of taxable income “floor” for deductions. Contributions that fall below this threshold will no longer be deductible in the current tax year. However, H.R.1 also introduces a 5-year carry-forward provision, which allows unused deductions to be applied in future years.

This shift may drive increased adoption of “bundling” or “bunching” strategies, where corporations consolidate multiple years’ worth of planned donations into a single tax year to surpass the 1% of taxable income threshold and maximize deductibility. Pairing philanthropic planning with broader business strategies—such as aligning giving with years of higher taxable income or planning around significant liquidity events—can help corporations maintain tax efficiency while meeting philanthropic goals.

National Philanthropic Trust: Your Partner in Giving

For those seeking to maintain or grow their charitable commitment amid changing rules, DAFs provide clarity, control, and continuity. NPT supports efforts to preserve the integrity of the charitable deduction, expand philanthropic inclusion, and ensure nonprofits are actively represented in public policy conversations. We will continue to monitor developments and collaborate with donors, advisors, and peer institutions to ensure that giving remains responsive and effective.

As we contend with these changes, NPT remains steadfast in our belief that DAFs are a giving vehicle uniquely positioned to navigate this period of uncertainty, thanks to their flexibility and capacity to inspire and enable philanthropy. We recognize DAFs as a source of critical support for the more than 1.8 million nonprofits across the United States and encourage DAF donors to remain steadfast in their commitments. With smart planning and shared purpose, we can ensure that philanthropy not only endures—but thrives.