Charitable Contributions for Individuals
On July 4, 2025, President Trump signed the One Big Beautiful Bill (OBBBA) into law. The OBBBA includes a number of tax changes affecting individuals, including modifications to the deduction for charitable contributions.
Background
In general, an individual may claim an itemized deduction for contributions to a qualified charitable organization. However, the charitable deduction for any tax year is limited to a percentage of the taxpayer's contribution base determined by the type of organization receiving the donation and the type of property donated. The contribution base is the taxpayer's adjusted gross income (AGI), calculated without considering the charitable deduction itself or any net operating loss carrybacks. Any amount in excess of the percentage limitation for the tax year may be carried forward for five years.
Under the 2017 Tax Cuts and Jobs Act (TCJA), the percentage limitation on the charitable deduction contribution base was increased from 50 percent to 60 percent of an individual’s AGI for cash donations to public charities in 2018 through 2025. In addition, the TCJA also increased the standard deduction which resulted in fewer taxpayers itemizing their deductions.
For tax years beginning in 2020, an individual could claim an above-the-line deduction in computing AGI of up to $300 for any qualified charitable contribution made during the year. For tax years beginning in 2021, an individual who did not elect to itemize deductions could claim an adjustment to AGI of up to $300 ($600 in the case of a joint return) for charitable contributions made in cash during the year.
New Law Explained
Under the OBBBA, the increased contribution limitation for cash gifts made to qualified charities is permanently extended. For tax years after 2017, the percentage limitation on the charitable deduction contribution for cash donations to public charities is 60 percent.
In addition, the deduction for taxpayers who elect not to itemize is expanded and permanently reinstated. Specifically, for tax years after December 31, 2025, nonitemizing taxpayers can claim a deduction as an adjustment to AGI of up to $1,000 for single filers ($2,000 for married filing jointly) for certain charitable contributions.
The OBBBA also creates a 0.5-percent floor on charitable contributions for taxpayers who elect to itemize on their returns for tax years after December 31, 2025. Taxpayer’s must reduce the amount of their charitable contributions for the tax year by 0.5 percent of the taxpayer’s contribution base for that year.
Carryovers. The application of this deduction floor to the aggregate allowable contributions is done in a specified order determined by the type of organization receiving the donation and the type of property donated. Also, the rules are amended to coordinate the deduction floor under the OBBBA for carryovers by referencing back to the year of contribution, such that excess deductions carried forward from tax years before the effective date of the floor are not subject to the floor subsequently applied, but excess deductions carried forward from tax years after the floor is effective are reduced by the 0.5 percent floor.
Contact Us
Please call our office if you would like to discuss how you might benefit from changes to the charitable contribution deduction for individuals. We are here to assist you.
© 2025