The One Big Beautiful Bill Act: Effects on Philanthropy

Why This Matters Now

The landscape of American philanthropy has entered its most significant shift in decades. With the One Big Beautiful Bill Act (OBBBA) now fully in effect as of January 1, 2026, the architecture of charitable giving has been redesigned. While the law provides technical clarity by permanently extending the 60% AGI limit for cash gifts to public charities, it introduces new “floors” and “benefit caps” that increase the after-tax cost of giving for high earners.

For investors, the 2026 tax year is the first time these mechanics will be applied. Understanding these dynamics is no longer just about generosity; it is about institutional-grade tax planning and capital preservation.

The New Mechanics of Giving

The OBBBA (P.L. 119-21) alters the deductibility of gifts for top-bracket taxpayers through two primary mechanisms:

The 0.5% AGI Floor: Itemizers now face a “floor” on deductions. Contributions are only deductible to the extent they exceed 0.5% of the taxpayer’s Adjusted Gross Income (AGI).
The 35% Benefit Cap: For taxpayers in the 37% bracket, the tax benefit of all itemized deductions—including charity—is now capped at 35%.

Impact Analysis: The Price of a $100,000 Donation

Assumes a Joint Filer in the 37% Tax Bracket with $2 Million AGI

Provision	2025 Rules (Past)	2026 Rules (Current)
Gross Contribution	$100,000	$100,000
0.5% AGI Floor	$0 (None)	$10,000 (Non-deductible)
Deductible Portion	$100,000	$90,000
Tax Benefit Rate	37%	35% (Capped)
Actual Tax Savings	$37,000	$31,500
After-Tax Cost of Gift	$63,000	$68,500

2026 Strategy: Adjusting the Playbook

1. Qualified Charitable Distributions (QCDs)

For those aged 70½ and older, QCDs are now the “gold standard” for efficiency.

The Logic: A QCD goes directly from an IRA to a charity and is excluded from AGI.
The Benefit: Because it bypasses AGI entirely, a QCD ignores both the 0.5% floor and the 35% benefit cap.
The Limit: The 2026 limit is inflation-adjusted; early estimates suggest a range of $111,000 to $115,000.

2. The New “Universal” Deduction

For clients who take the standard deduction ($32,200 for joint filers in 2026), the OBBBA has introduced a new above-the-line deduction. You can now deduct cash gifts up to $1,000 ($2,000 for joint filers) even if you do not itemize. Note: Gifts to Donor-Advised Funds (DAFs) generally do not qualify for this specific incentive.

3. Donating Appreciated Securities

Contributing long-term appreciated stock (held >1 year) remains a premier strategy for avoiding capital gains tax. While these gifts are now subject to the 0.5% floor and 35% cap for itemizers, they still offer a fair-market-value deduction, subject to the usual 30% of AGI limits and substantiation rules.

Looking Ahead: The 2027 Scholarship Credit

The OBBBA also introduced a powerful future incentive: starting in 2027, a federal tax credit of up to $1,700 per person ($3,400 joint) will be available for contributions to state-approved Scholarship Granting Organizations (SGOs). Unlike a deduction, this acts as a dollar-for-dollar reduction of your tax liability.

Estate Planning and the $15M Exclusion

Finally, the OBBBA has provided long-term certainty for estate planning by setting the basic exclusion amount at $15 million per individual ($30 million joint) for 2026, indexed for inflation thereafter. This high ceiling allows for aggressive legacy planning without the “sunset” fears that dominated the previous decade.

Takeaway

The OBBBA has made giving more complex, but it has also provided new avenues for efficiency. By shifting focus toward QCDs for annual giving and preparing for the 2027 SGO credits, donors can ensure their philanthropic impact remains high even as the tax code evolves.

This article is for informational purposes only and does not constitute legal, tax, or financial advice. Tax laws are subject to change and individual circumstances vary significantly. You should perform your own research and consult with a qualified tax professional or financial expert before making any significant charitable or estate planning decisions.

References:

Primary Tax Law & Government References