Maximizing Charitable Giving: Insights from a Spokane Financial Advisor
On July 4, 2025, a landmark piece of legislation known as the One Big Beautiful Bill Act (OBBB) was enacted, ushering in significant changes to the U.S. tax code. These modifications will have a direct impact on how donors can approach charitable giving across the nation. As a Certified Financial Planner (CFP) based in Spokane, I frequently collaborate with clients who are eager to ensure that their charitable endeavors are not only meaningful but also tax-efficient. In this engaging guide, I’ll delve into the key features of OBBB, outline important adjustments stemming from the 2017 Tax Cuts and Jobs Act (TCJA), and provide practical tips for planning your charitable contributions in 2025 and beyond.
Key Changes in Charitable Giving Under OBBB
The One Big Beautiful Bill Act introduces three fundamental changes to charitable giving that every donor should be aware of:
1. Above-the-Line Charitable Deductions for Non-Itemizers
Starting in the 2026 tax year, taxpayers who choose not to itemize deductions will have the opportunity to deduct cash donations made to qualified charities. Single filers can deduct up to $1,000, while married couples filing jointly may deduct as much as $2,000. However, it’s essential to remember that certain types of donations, such as those made to donor-advised funds or private non-operating foundations, are not eligible for this deduction.
Why This Matters: Historically, with the TCJA raising the standard deduction, only around 10% of households opted to itemize, limiting the availability of charitable deductions for many. This new provision aims to broaden participation in philanthropy by allowing almost all households to reap the benefits of tax deductions on their charitable contributions. A similar deduction was made available during COVID-19 under the CARES Act, with over 90 million taxpayers taking advantage of it in 2020–2021.
2. New Limits for High-Income Itemizers
Under OBBB, the tax benefit for itemized charitable deductions is capped at 35%, even for those in the highest marginal tax bracket of 37%. For example, a $1,000 donation will yield a $350 deduction instead of the $370 available under previous guidelines.
What This Means for Donors: High-income individuals may want to think about making charitable gifts early in 2025 to take full advantage of deductions under the current, higher marginal rates before this cap takes effect in 2026. Strategic planning today can help preserve the full value of deductions for more substantial contributions.
3. New Floor on Deductions for Itemizers and Corporations
Beginning in 2026, itemized deductions for charitable contributions will only apply to amounts that exceed 0.5% of a taxpayer’s adjusted gross income (AGI). For illustration, a couple with a $300,000 AGI can only deduct contributions exceeding $1,500. Corporations have a similar restriction, only able to deduct charitable contributions that exceed 1% of their taxable income.
The Bottom Line for Donors: These new rules could influence both the timing of your donations and your overall giving strategy. Donors might benefit from concentrating their charitable gifts in certain years to maximize deductions. For corporations, proactive planning regarding charitable contributions could help ensure they exceed the 1% threshold.
Extensions and Updates to TCJA Provisions
The OBBB also carries forward several key provisions from the 2017 TCJA, making them permanent or extending their applicability, which can significantly influence charitable planning:
- Income Tax Brackets: The current tax brackets (10%, 12%, 22%, 24%, 32%, 35%, and 37%) will remain in effect for the 2025 tax year.
- Standard Deduction Increases: The standard deduction increases by $1,000 for single filers and $2,000 for married couples, raising the amounts to $15,750 and $31,500, respectively.
- Adjusted Gross Income Limits for Charitable Contributions: Taxpayers can continue to deduct cash contributions to 501(c)(3) public charities up to 60% of AGI.
- Estate and Gift Tax Exemption: The federal estate and gift tax exemption is set to rise to $15 million per individual in 2026, with future inflation adjustments noted.
Additional Tax Changes Worth Mentioning
- Increased SALT Deduction: The state and local tax (SALT) deduction cap will rise from $10,000 to $40,000 starting in 2025, with phased-in increases of 1% annually through 2029, reverting to $10,000 in 2030 for higher-income taxpayers.
- Donations to School Voucher Organizations: Starting in 2027, taxpayers will be able to claim a credit of up to $1,700 per filer for donations to organizations that provide scholarships for private or religious K–12 schools, available to all taxpayers, regardless of itemization status.
- University Endowment Tax: A new tiered tax will be implemented on university endowment earnings, ranging from 1.4% to 8%, with the highest rates applying to institutions with endowment assets exceeding $2 million per student.
Practical Strategies for Charitable Donors
With these exciting changes on the horizon, it’s crucial for donors to embrace a proactive mindset regarding charitable giving:
- Timing of Contributions: Consider accelerating your charitable contributions in 2025 to take full advantage of current tax rules. Utilizing bunching strategies or donor-advised funds can help maximize your tax benefits by concentrating charitable giving into specific years.
- Diversifying Types of Gifts: Mixing cash and non-cash contributions may offer distinct advantages under the new itemizer limitations.
- Partner with a Spokane Financial Advisor: Collaborating with a qualified financial advisor can provide the guidance and assurance you need to navigate these changes effectively.
In embracing these opportunities, you can play an essential role in making a difference in your community while also maximizing the impact of your charitable contributions. Your generosity can lead to transformative change, both for the causes you support and for your financial well-being. Let’s embark on this journey together and unlock a world of possibilities in charitable giving! For more charitable giving strategies, check out our guide to some of the most powerful strategies we use with our clients as a CFP ® practitioner.
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About the Author
Noah Schwab CFP® is a financial advisor in Spokane, Washington, helping retirees with $ 1M+ maximize their 401(k) with Roth conversions and tax strategies.
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Noah Schwab, CFP®, is a Spokane financial advisor specializing in helping retirees with tax-efficient retirement income strategies, Roth conversions, and estate planning. This article is for educational purposes only and should not be considered tax or legal advice.
