One Big Beautiful Bill Act (OBBBA)
Recent changes in federal tax law under the One Big Beautiful Bill Act (OBBBA) bring both challenges and opportunities for nonprofit organizations in our community. The community foundation is here to help you prepare and consider how to update your strategies as the landscape shifts.
“What’s happening with the standard deduction, and how big of a deal is it?”
The nonprofit sector is no stranger to the challenges resulting from a high standard deduction. In the aftermath of the Tax Cuts and Jobs Act of 2017, which increased the standard deduction, the number of taxpayers who itemized deductions dropped significantly. This eliminated tax deductibility as a motivator for charitable giving for many Americans, which in turn, caused charitable giving to drop. Now, under the OBBBA, the standard deduction is going up again, which may continue to impact tax-motivated charitable giving, even with the uptick in itemizers thanks to the OBBBA’s new state and local tax deduction allowances.
So how big of a deal is this? In many ways, the increase in the standard deduction means more of the same. Tax motivations to give to charity will continue to apply to the relatively small number of donors who itemize deductions. That said, keep in mind that donors don’t give to charity solely for a tax deduction. Many other motivations come into play because people truly want to make a difference. What’s more, the additional changes coming in 2026, described below, may motivate certain donors to make big gifts this year.
“Could 2025 really be a big year for charitable giving?”
The answer is yes! Coupled with an increasing standard deduction, two OBBBA provisions that take effect in 2026 may provide incentives for your donors to “front-load” charitable contributions, not only to exceed the high standard deduction to allow them to itemize, but also to avoid two limitations to charitable deductions effective starting with the 2026 tax year. First, beginning in 2026, the deductibility of charitable contributions will be capped at 35% of adjusted gross income (AGI), even for itemizers in the 37% tax bracket. Second, also beginning in 2026, a 0.5% floor will apply to itemized charitable deductions, meaning that only contributions exceeding 0.5% of AGI will be deductible. These two upcoming changes reduce the value of charitable deductions for high-income taxpayers and may create a strong incentive for your donors to make big gifts in 2025.
“How can we make the most of the new deduction for non-itemizers?”
The OBBBA introduced a new deduction for charitable contributions starting in 2026: $1,000 for individual filers and $2,000 for married couples filing jointly. This provision, similar to the temporary pandemic-era incentive, allows non-itemizers to receive a modest tax benefit for their charitable gifts. This could meaningfully encourage new donors—particularly younger donors—to start making gifts to your organization.
Certainly, the OBBBA presents a mixed bag. You may discover that 2025 is a great year for large gifts, and, as the new laws take effect, 2026 will be an important time to add an additional focus on cultivating smaller gifts and broad-based support.
Tax Strategies
Promote gifts of appreciated stock! Giving appreciated stock is still one of the most tax-savvy ways for donors to support your organization because capital gains tax can be avoided. This is a no-brainer for fundraisers, but it is not automatic for donors who don’t deal with charitable giving every day. Donors tend to reach for the checkbook, which means they may miss out on significant tax benefits, especially because the stock market has been good to many donors’ holdings.
Qualified Charitable Distributions
A Qualified Charitable Distribution (“QCD”) is a very smart way for a donor who has reached the age of 70 ½ to give. A donor can direct up to $108,000 in 2025 from an IRA. Together, married couples can direct twice that amount. The donor avoids income tax on the funds distributed. Many eligible donors are still confused by, or totally unaware of, this great opportunity. Make sure your year-end communications include simple messages directed to donors over 70 ½, encouraging them to consider a Qualified Charitable Distribution–up to $108,000 per taxpayer–from an IRA. Distributions can flow either directly to your organization or to your organization’s endowment fund at the community foundation. Ask your donors to consult their tax advisors to evaluate whether the QCD is a good fit, and as always, reach out to the community foundation for assistance.
The team at the Community Foundation for the CSRA is happy to serve as a resource. This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.