Charitable Deductions Just Got Way More Complicated. Here’s the Real Play Behind OBBBA

The IRS Just Added a Cover Charge To Giving

For the first time since the pandemic rules expired, non itemizers get a tiny prize.
If you do not itemize, you get a 1,000 dollar deduction for cash donations. Married couples get 2,000.

That’s the good part.

Here’s the catch.
It doesn’t scale.
It doesn’t adjust for inflation.
It doesn’t apply to donor advised funds or private foundations.
And it disappears if you itemize.

Basically, Congress gave people a Costco sample and called it a tax benefit.

The AGI Floor: The Sneakiest Rule In the Bill

Itemizers get hit with a brand new floor. You only get a deduction after the first 0.5 percent of adjusted gross income.

Make one million dollars
The first five thousand dollars of giving does nothing.

Make five hundred thousand
You lose the first two thousand five hundred.

Every accountant is thinking the same thing
Small donors just got penalized.

The Haircut For High Earners

If you’re in the top bracket, the IRS gives your deduction a trim.
Your tax rate is still 37 percent, but the most you can benefit from charitable deductions is 35 percent.

That creates a double whammy
You lose part of your deduction because of the AGI floor.
Then you lose part of the value because of the haircut.

The IRS basically said
Donate if you want
Just don’t expect us to clap.

Why Advisors Are Telling Clients: “Give Now, Not Later”

Here’s the Ledger Lowdown cheat code
2025 is the last clean year before all these rules start squeezing deductions.

A lot of tax pros are already telling clients
If you’re going to give anyway, accelerate it.
Give in December.
Get the full deduction while you still can.

The benefits shrink in 2026, not this year.

Where Donor Advised Funds Become a Power Move

Donor advised funds go nuclear in 2025.
You can drop money in now, take the full deduction today and then drip it out to charities in 2026 at your normal pace.

This helps people who don’t want to double their giving simply because Congress updated a spreadsheet.

Plus, if you donate appreciated securities
Huge win.
No capital gains.
Full deduction under the current rules.

Corporate Giving Gets Tweaked Too

Companies get a new 1 percent floor. Not devastating. More like a paperwork annoyance. But corporate finance teams will need new logic in their models.

The bigger action is on the individual side.

So Who Wins And Who Loses

Winners
People who time their giving
People using donor advised funds
Non itemizers who never gave before

Losers
Small consistent donors
High earners
Itemizers who don’t plan ahead
Anyone who hates floors and phaseouts

FAQ

Do I get the new deduction if I use a donor advised fund
No. The above the line deduction only applies to direct cash gifts.

Does the 1,000 deduction scale with inflation
No. It stays flat.

Do itemizers get hit even if they give a lot
Yes. The AGI floor applies to everyone who itemizes.

Why would someone delay giving until 2026
To qualify for the new above the line deduction if they won’t itemize.

Why would someone accelerate giving into 2025
To avoid the AGI floor and the 35 percent cap.

Summary

Charitable giving used to be simple. OBBBA turned it into a timing game. If you want the best tax outcome, you need to choose whether you accelerate giving, delay giving or run everything through a donor advised fund. In 2026, the rules get tighter. In 2025, you still have options.