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July 9, 2025

One Big Beautiful Bill Act Changes Tax Incentives for Charitable Giving

On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill Act (H.R.1) into law. Among many other things, H.R.1 changes the tax incentives for charitable giving, significantly broadening the pool of donors who may deduct a portion of their charitable contributions and reducing the charitable contribution deduction for large donors.

Reinstatement and Expansion of Deduction for Charitable Contributions for Individuals Who Do Not Itemize

The CARES Act1 of 2020 introduced a temporary charitable deduction for non-itemizers, allowing them to deduct up to $300 for cash contributions to eligible charities in 2020. Congress extended this deduction in 2021 and increased the amount of the deduction for joint filers to $600. This temporary measure expired at the end of 2021. 

H.R.1 reinstates the charitable deduction for non-itemizers beginning in 2026 and increases the $300 cap on the deduction ($600 for joint filers) to $1,000 ($2,000 for joint filers).2 This change reinstates and enhances a popular tax incentive for individuals who make charitable contributions but do not itemize.

Extension and Enhancement of Standard Deduction

The Tax Cuts and Jobs Act of 2017 (TCJA) significantly increased the standard deduction for individuals beginning in 2017. The TCJA increased the standard deduction for joint filers and surviving spouses from $12,600 to $24,000, for heads of household from $9,300 to $18,000, and for single persons and married persons filing separately from $6,300 to $12,000.3 These changes significantly reduced the percentage of individuals claiming itemized deductions. In 2017, approximately 31 percent of filers itemized deductions. In 2022, this percentage was only 9.5 percent. In that same timeframe, the portion of returns claiming the standard deduction grew from 69.4 percent to 90.5 percent.4 The increased standard deduction was scheduled to expire in 2025.

H.R.1 makes the increased standard deduction permanent and further increases the amount of the deduction. Beginning in 2025, the standard deduction is $31,500 for joint filers and surviving spouses, $23,500 for heads of household, and $15,750 for single persons and married persons filing separately.

The increased standard deduction should continue to drive down the percentage of taxpayers who itemize. As a result, fewer taxpayers will receive a tax benefit for charitable donations that exceed the deduction limit for non-itemizers.5

New Floor on Deduction for Charitable Contributions by Individuals

Effective in 2026, H.R.1 introduces a floor on deductibility of charitable contributions for individuals who itemize. For these individuals, charitable contributions will be deductible only to the extent that they exceed 0.5 percent of the taxpayer’s contribution base (generally, their adjusted gross income). The floor does not apply to the reinstated deduction for charitable contributions for persons who do not itemize.  

New Floor on Deduction for Charitable Contributions by Corporations 

H.R.1 also introduces a new 1 percent floor on deductibility of charitable donations made by corporations. Effective for tax years beginning in 2026, donations by corporations will be deductible only to the extent that they exceed 1 percent of the corporation’s taxable income.6 The 10 percent cap on corporate charitable contribution deductions remains unchanged. Thus, H.R.1 creates a deductibility window for corporations, permitting deductions for donations that exceed 1 percent, but do not exceed 10 percent, of a corporation’s taxable income.

Impact on Recipients of Charitable Donations

H.R.1 significantly changes the tax incentives for charitable giving. The reinstatement of the deduction for non-itemizers will significantly expand the pool of taxpayers who may claim a deduction for their donations but only in a limited amount ($2,000 for joint filers and $1,000 for all others). At the same time, the increase to the standard deduction will further reduce the percentage of individuals who itemize, and the 0.5 percent floor on deductibility for those who do will reduce the tax benefit for individuals who make sizable donations.

Corporate donors, which are already subject to a cap on their charitable donations of 10 percent of taxable income, are now squeezed in two directions. H.R.1 denies corporations a deduction for charitable donations that do not exceed 1 percent of taxable income, thereby creating a 9 percent deductibility window for corporate donations, permitting deductions only for donations that exceed 1 percent, but do not exceed 10 percent, of taxable income.

Tax incentives are only one reason that individuals and corporations support charitable organizations. Therefore, it is impossible to predict how H.R.1 will impact charitable giving. However, H.R.1 spreads the tax incentives for charitable giving to a much broader base of donors, although limited in amount. At the same time, H.R.1 reduces tax incentives for individuals who itemize and tend to make larger donations and on corporations. Organizations that rely on charitable donations to support their services may wish to reformulate their fundraising programs beginning in 2026 to take advantage of the new landscape in tax incentives for charitable giving.

If you have any questions regarding the content of this alert, please contact Ray McCabe, partner, at rmccabe@barclaydamon.com, or another member of the firm’s Corporate Practice Area.
                                                                                               
1Coronavirus Aid, Relief, and Economic Security Act.
2Internal Revenue Code (26 USC) Section 170(p), as amended by Section 70424 of H.R.1.
3Internal Revenue Code Section 63(c)(7)(A), as amended by Section 11021 of the TCJA.
4USAFacts, “How has TCJA Impacted Individual Income Taxes?”
5Internal Revenue Code Section 170(b), as amended by Section 70425 of H.R.1.
6Internal Revenue Code Section 170(b)(2)(A), as amended by Section 70426 of H.R.1.

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