Review Charitable Giving Before Year End

The One Big Beautiful Bill Act (OBBBA) changed the federal tax rules relating to charitable gifts, effective for the 2026 tax year. The basic charitable deduction framework remains in place but there are three changes which may impact the tax benefit of your charitable giving.

A New Deduction If You Take The Standard Deduction

If you don’t itemize you can now deduct up to $1,000 of cash gifts to charity per year (or $2,000 if you’re married filing jointly). That’s on top of your standard deduction.

Some limits apply:

• Only cash gifts made directly to public charities qualify. Gifts of stock or other property don’t count. Document
• Gifts to donor advised funds and to supporting organizations do not qualify.

Keep in mind that any amount you give above the cap is lost (it doesn’t carry forward to the next year).

Example: a single filer giving $100 a month to a qualifying charity can deduct the full $1,000. A couple giving $300 a month can claim a $2,000 deduction and get no further federal benefit for the other $1,600.

A New Floor If You Itemize

If you itemize, only the amount of your total charitable gifts that exceeds 0.5% of your adjusted gross income is deductible.

The 60% of AGI limit on cash gifts to public charities is now permanent and the existing carryforward rules remain in place.

Example: with an AGI of $400,000, the first $2,000 of your gifts provides no tax benefit. If you give $20,000 you can deduct up to $18,000. If you give $4,000 you can only deduct $2,000.

A New Floor for Corporations

Corporations can now only deduct charitable gifts in excess of 1% of taxable income. The 10% of taxable income cap remains in place.

Charitable Giving Now Has Three Levels

• Below 1%: no current deduction.
• Between 1% and 10%: deductible that year.
• Above 10%: can be carried forward for up to five years. Carryforwards are only usable in a later year when that year’s gifts also clear the 1% floor and stay under the 10% cap.

If you are an S corporation, the 1% floor does not apply.

Example, a company with $5,000,000 of taxable income that gives $25,000 gets no deduction. If it gives $75,000, only $25,000 may be deductible.

Planning ideas

• “Bunch” your gifts. Putting several years of planned giving into one year can help you clear the new floors, then take the standard deduction in the off years.
• If you don’t itemize, give cash directly to public charities, at least up to the $1,000 or $2,000 cap.
• Businesses should check giving budgets against expected taxable income. This matters most when income fluctuates from year to year. Some payments tied to advertising or marketing may be better treated as ordinary business expenses.

If you have questions on this or other matters affecting you or your business, please call 215.675.8364 or email us to speak with a CPA today.

DISCLAIMER: All communications by Wouch, Maloney & Co., LLP intend to provide general information, as of the date of the communication, and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. Please be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.