One Big Beautiful Bill Tax Act – How Can You Benefit?

Focus: Charitable Contribution Deductions     

On July 4, 2025 President Donald J. Trump signed into law H.R.1 – One Big Beautiful Bill Act (“OBBBA”).  OBBBA contains hundreds of provisions including permanently extending the individual tax rates Trump signed into law in 2017, which were originally set to expire at the end of 2025. The passing of the OBBBA introduced several changes to charitable contribution deductions.

Important Rules On Charitable Contributions.

A charitable contribution is a donation or gift to, or for the use of, a qualified organization.  A charitable contribution requires a contribution or gift – i.e., a voluntary transfer of money or property made by the donor without receipt or expectation of financial or economic benefit. Individual taxpayers can deduct charitable contributions only in the year they actually make them (or in a succeeding carryover year).

Generally, a contribution is considered to be made at the time of its unconditional delivery. The unconditional delivery or mailing of a check that subsequently clears in due course constitutes a contribution on the delivery or mailing date. Contributions a taxpayer charges on a bank credit card are deductible in the year the taxpayer makes the charge. For contributions a taxpayer makes through a pay-by-phone account, the date the financial institution pays the amount is the contribution date. This date should be shown on the statement the financial institution sends the taxpayer.

Prior Law.

Maximum Benefit From Charitable Deduction Limited to 35 Percent Tax Rate.

Prior to OBBBA, charitable deductions served to reduce a taxpayer’s income such that the benefit of the deduction was calculated at the highest marginal tax bracket for the taxpayer. OBBBA provides that the maximum benefit for a charitable contribution deduction shall be calculated using a 35 percent marginal income tax rate if the taxpayer’s actual highest tax rate is in the 37 percent or the 35 percent marginal income tax bracket. This limitation is effective starting January 1, 2026.

Larger Donations to Public Charities Made Deductible.

Prior to OBBBA, a limitation that capped cash donations to public charities at 60 percent of the taxpayer’s AGI was set to expire on December 31, 2025, after which the limitation would have reverted to 50 percent of AGI. OBBBA made the 60 percent of the adjusted gross income (AGI) limitation permanent.

Current Law.

New Deduction for Cash Contributions For Non-Itemizing Taxpayers. 

Beginning in 2026, OBBBA provides a charitable contribution deduction for non-itemizers of up to $1,000 in cash contributions for single filers ($2,000 for married filing jointly). This deduction does not apply to gifts to donor-advised funds or supporting organizations. This provision is designed to allow a wider range of donors to receive a tax benefit for their charitable giving directly to charitable organizations, potentially encouraging increased donations from both older and younger donors.

Charitable Deduction Floor For Itemizing Taxpayers.

For individuals who elect to itemize, OBBBA imposes a new 0.5% Adjusted Gross Income (AGI) floor on charitable contributions (meaning only contributions exceeding this floor are deductible).  Previously, there was no minimum threshold for charitable deductions for itemizers. For example – If your AGI is $100,000, only the amount of your contributions above $500 (0.5% of $100,000) will be deductible.

The existing 60% of AGI ceiling for deducting cash charitable contributions remains permanent. Additionally, starting in 2026 taxpayers in the highest tax bracket will have their itemized deductions, including charitable contributions, capped at a 65% limitation.

But Beware……

Taxpayers must keep records to prove the amount of the contributions they make during the year.

Recordkeeping and Substantiation Requirements for Cash Contributions

No charitable contribution deduction is allowed for any contribution of a cash, check, or other monetary gift unless the donor maintains as a record of such contribution a bank record or a written communication from the donee showing the name of the donee organization, the date of the contribution, and the amount of the contribution.  Where the cash contribution is $250 or more, the taxpayer must obtain a contemporaneous written acknowledgment from the donee.

Recordkeeping and Substantiation Requirements for Noncash Contributions

For a contribution not made in cash, the recordkeeping requirements that apply depend on whether the claimed deduction for the contribution is:

• less than $250 – the donor maintains for each contributiona receipt from the donee showing the following information: (a) the name and address of the donee; (b) the date of the contribution; (c) a description of the property in sufficient detail under the circumstances (taking into account the value of the property) for a person who is not generally familiar with the type of property to ascertain that the described property is the contributed property; and (d) in the case of securities, the name of the issuer, the type of security, and whether the securities are publicly traded securities.
• at least $250, but not more than $5,000 – in addition to item (1) above, the donor must obtain a contemporaneous written acknowledgment from the donee.
• over $5,000 – in addition to items (1) and (2) above, the donor obtains a qualified appraisal prepared by a qualified appraiser.

Potential strategies for taxpayers who itemize:

Accelerate Donations – Consider making significant donations in 2025 to avoid the new floor and deduction cap that take effect in 2026.

Bunch Contributions – Consolidate multiple years’ worth of donations into a single year to exceed the 0.5% AGI floor and maximize the deduction.

Donate Appreciated Assets – Gifting appreciated securities held for more than a year can help donors avoid capital gains tax and claim a deduction for the fair market value of the assets.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. It’s important to consult with a tax professional for personalized advice on how these changes might affect your specific tax situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles, San Francisco Bay Area (including San Jose and Walnut Creek) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.