The OBBBA will reduce charitable tax breaks for high-income donors starting in January. Here's how to prepare before year-end.
The One Big Beautiful Bill Act (OBBBA) substantially revamped the U.S. tax code, and there are major changes on the horizon. While the bill’s main goal was to lower overall tax rates, it offset some of that cost by trimming other tax breaks, including the charitable-giving tax deduction.
Starting in 2026, high-net-worth donors could see a smaller tax benefit for their philanthropic contributions. By accelerating gifts before the new rules take effect on Jan. 1, donors may be able to capture a higher deduction while offering more support to their favorite causes. With year-end approaching, here’s what to know about the upcoming OBBBA tax changes.
Beginning in 2026, the OBBBA tax rules will reduce savings for larger donors while introducing a modest new break for smaller ones.
For taxpayers who itemize, a 0.5 percent “floor” will apply before charitable contributions become deductible. This effectively lowers how much charitable giving is tax deductible for high-income households.
For example, a couple with $1 million in adjusted gross income (AGI) could deduct only $15,000 of a $20,000 donation once the 0.5 percent floor is applied (the first $5,000, or 0.5 percent of their AGI, is not deductible). The higher your income, the more you need to donate before being able to deduct.
For taxpayers in the top 37 percent income bracket, the value of charitable deductions will be slightly reduced. Beginning in 2026, deductions will be capped at 35 percent, meaning each dollar donated by those in this tax bracket will yield a smaller tax benefit than before.
Those in lower brackets will continue to receive deductions at their marginal rate, but the highest earners will see a modest reduction in how charitable giving affects taxes. That’s a concern for nonprofit organizations that rely heavily on generous donors.
“We’re seeing a lot of anxiety from nonprofits about charitable funding going forward,” says Cathy Walker, director of Trust and Philanthropic Solutions at RBC Wealth Management–U.S. “We’ve never seen changes like this.”
Not all the changes reduce the financial benefit of giving. The OBBBA also introduces a new charitable-giving tax deduction of up to $1,000 per year of donations for single filers and $2,000 per year for joint filers who take the standard deduction rather than itemizing.
If you expect to make substantial charitable gifts in the next few years, schedule a review with your tax and financial advisors before the end of 2025. Together, you can evaluate your income, donation plans and the potential tax advantages of giving more this year.
“The impact of accelerating donations isn’t always straightforward,” says Dean Deutz, a private wealth consultant at RBC Wealth Management–U.S. “It really depends on your income, your tax bracket and the size of your annual gifts. For some clients, the difference in savings may be only a few thousand dollars. For others, it can be far more significant.”
The only way to determine the impact to your specific situation is to run the numbers with your advisory team so you understand exactly how much you could save by donating before the new rules take effect.
If you and your advisors determine that it makes sense to accelerate your donations in 2025, here are a few charitable-giving tax strategies that may be fitting:
If you typically make similar annual gifts, you could consider combining several years’ worth of donations into a single, larger 2025 gift, a strategy known as “bunching.”For example, rather than giving $20,000 each year for the next five years, you could contribute $100,000 this year while the more favorable deduction rules still apply.
If you haven’t yet chosen specific charities or prefer not to disperse all the funds right away, you could use a donor-advised fund (DAF) to still benefit from the 2025 charitable tax rules. You can deduct your DAF contribution now and distribute the funds to charities later.
“A donor-advised fund gives you time to decide where and when to donate the money,” explains Deutz.
Your DAF contributions can also be invested for future tax-free growth, potentially creating a larger balance once you’re ready to give. These tax benefits make donor-advised funds a popular choice among high-net-worth individuals and families looking to manage the timing of their gifts.
Consider whether it makes sense to give appreciated assets instead of cash in 2025. Donating securities or business interests can often be more tax efficient than writing a check.
By contributing these assets to a qualified charity directly, you can typically deduct their full market value and avoid capital gains taxes on the appreciation, versus selling the assets, paying taxes on the gains and then donating the remaining money.
As you plan with your tax advisor, remember that the IRS limits how much you can deduct each year—currently 60 percent of your AGI for cash donations and 30 percent for securities. Any unused deductions may be carried forward up to five years and used to offset future taxes, but those deductions will fall under the new OBBBA tax rules.
The OBBBA’s charitable-giving changes arrive as Americans continue donating at record levels. In 2024, total charitable contributions were $592.5 billion, a 6.3 percent increase from the year before, according to Giving USA.
Looking ahead, Americans are expected to give trillions to philanthropic causes in the coming decades ($18 trillion by 2048, according to Cerulli) as part of the Great Wealth Transfer. Walker expects this will remain true even with the reduced deduction.
“America is one of the most charitable countries on the planet,” Walker says. “For most donors, the tax savings are a bonus, not the reason they give.” Still, if you plan on making substantial donations, it could make sense to act now while the more favorable deduction rules remain in place, as your tax savings could increase the amount of money available to give.
For both this year and in the future, your advisor can help you plan the timing and structure of your gifts to align with your financial and philanthropic goals.
Neither RBC Wealth Management, a division of RBC Capital Markets, LLC (“RBC WM”), nor its affiliates or employees provide legal, accounting or tax advice. All legal, accounting or tax decisions regarding your accounts and any transactions or investments entered into in relation to such accounts, should be made in consultation with your independent advisors. No information, including but not limited to written materials, provided by RBC WM or its affiliates or employees should be construed as legal, accounting or tax advice.
RBC Wealth Management, a division of RBC Capital Markets, LLC, registered investment adviser and Member NYSE/FINRA/SIPC.
We want to talk about your financial future.
Investment and insurance products offered through RBC Wealth Management are not insured by the FDIC or any other federal government agency, are not deposits or other obligations of, or guaranteed by, a bank or any bank affiliate, and are subject to investment risks, including possible loss of the principal amount invested.