The One Big Beautiful Bill Act (OBBBA), H.R. 1, signed into law by President Trump on July 4, 2025, implements major changes to the federal charitable contribution tax regime for both individual taxpayers and corporations.

Laura L. Brownfield
General Counsel

Overview: The Charitable Tax Deduction

Under Section 170 of the Internal Revenue Code of 1986, as amended, (IRC) individual taxpayers who itemize and corporations may receive a charitable deduction for a contribution of property donated to a qualified U.S. charity. The amount deductible is subject to percentage limitations with respect to the amount of charitable deductions they can take, depending on both the type of donee charitable organization and the assets donated, although the limitations applicable to individuals and corporations are different.

Among the myriad changes to the federal tax landscape, OBBBA imposes new floors on individual and corporate charitable contributions. The following summarizes the floors and select provisions that will impact charitable giving.

New 0.5% AGI Floor on Individual Charitable Deductions

Beginning in 2026, there is a new floor in determining total charitable deductions for taxpayers who itemize. Charitable contributions will be deductible only to the extent that aggregate donations exceed 0.5% of the taxpayer’s contribution base, which is the taxpayer’s adjusted gross income (AGI) determined without regard to any net operating loss carryback to the taxable year. This rule applies across all otherwise deductible contributions, regardless of the type of donee organization or the form of property contributed. The 0.5% floor operates independently of AGI percentage limitations under IRC § 170(b)(1).

For example, if the taxpayer’s contribution base is $1,000,000, then 0.5% of that amount — $5,000 — is not deductible. So, if the taxpayer makes $20,000 in donations, only $15,000 would be deductible in the current year subject to the percentage limitations mentioned above.

Cap on Itemized Deductions

The reduction on individual charitable deductions applies in addition to another new rule under OBBBA imposing a cap on the value of itemized deductions for high-income individuals in the 37% marginal federal income tax bracket. The new rule permits only a 35% tax deduction for itemized deductions, including charitable contributions, even though the taxpayer’s income is within the 37% bracket.

Nonitemizer Charitable Deduction

Also beginning in 2026, individuals who do not elect to itemize deductions are permitted a charitable contribution deduction for qualified contributions up to $1,000 ($2,000 joint filers). These gifts must be made directly to public charities described in IRC § 170(b)(1)(A), excluding donor-advised funds, private nonoperating foundations, and supporting organizations.

New 1% Floor for Corporate Contributions

For corporate charitable deductions, OBBBA creates a new 1% floor under IRC § 170(b)(2)(A). Beginning in 2026, charitable deductions are allowed only for contributions exceeding 1% of taxable income. Contributions that fail the 1% floor are permanently nondeductible.

While the legislation limits the total charitable contribution deduction for corporations to a minimum of 1%, the existing 10% ceiling remains unchanged. OBBBA allows excess contributions to be carried forward up to five years, reduced to the extent they reduce taxable income and increase net operating loss.

OBBBA will require individuals and corporations to be more strategic in their annual giving or risk losing the charitable contribution deduction. Charitably inclined individuals and corporations should consider making contributions in 2025 under the current tax regime before the OBBBA provisions go into effect in 2026. This article addresses only a fraction of the changes to the provisions of the IRC applicable to individual and corporate taxpayers. Given the breadth of the changes and in anticipation of forthcoming rulings and clarifications to OBBBA, consult with your legal and tax advisors to assist you in navigating the changes.