Charitable Income Tax Updates Under OBBBA

Exploring limits for itemizers and non-itemizers

Table of Contents

1. Background

2. Effective Dates

3. Permanence of the 60% Limitation

4. Non-Itemizers

5. The New 0.5% Contribution Base Floor

6. Application of Floor to Non-Itemizers

7. Broader Impact of Itemized Deductions

8. Application to Trusts

9. Conclusion

10. Subscriber Bonus - Audio Overview (Generated by Google NotebookLM)

Background

Many individual taxpayers rely upon the income tax deduction for charitable contributions under IRC Section 170. Without exploring the mechanics of this deduction (especially as concerns non-cash contributions, AGI limits, and types/classifications of organizations), the deduction is usually applied as an itemized deduction. Thus, charitable contributions may not be deductible for those not electing to itemize and instead using the standard deduction. (Enhancements to the standard deduction will be covered in a subsequent article.)

There is, however, a smaller charitable deduction available for certain types of contributions by taxpayers who elect not to itemize. This smaller deduction is the subject of one of the One Big Beautiful Bill Act (OBBBA) changes. However, there are also fairly significant changes with regard to the creation of a new “floor” which must be exceeded before itemized charitable contributions become deductible.

Effective Dates

The changes discussed below will be effective for individuals starting in 2026. In other words, contributions made in 2026 will be subject to these new rules.