BBB Reduces Charitable Deduction?

[Senator]

Am I understanding it correctly that the "big, beautiful, bill" reduces the charitable deduction of the first .5% of AGI for itemizers?

[webbles]

22 minutes ago, Senator said:

Am I understanding it correctly that the "big, beautiful, bill" reduces the charitable deduction of the first .5% of AGI for itemizers?

My understanding is that it is a floor.  To itemize charitable donations, the amount must exceed .5% of AGI.

[Senator]

10 minutes ago, webbles said:

My understanding is that it is a floor.  To itemize charitable donations, the amount must exceed .5% of AGI.

So, you are saying if my AGI is $100k,  I must give at least $501 in order to be able to deduct it?

 

[rpn]

My understanding that you have a choice.  You can claim all of your tithe and offering if you  itemize.   And if you choose not to itemize (the standard deduction being something like 12K (?) a person, you can never the less claim $1000 for charitable donations per person.  

Edited July 11, 2025 by rpn

[The Nehor]

It means you can deduct up to $1000 in charitable giving ($2000 for a couple) if you take the standard deduction. If you do not take the standard deduction and itemize nothing changes.

Disclaimer: Not a lawyer or tax expert. Following my advice has been known to cause chronic head pain, seizures, coma, death, and halitosis. Nehor advice is not for everyone. Consult with a doctor before use.

Edited July 10, 2025 by The Nehor

[CV75]

14 hours ago, Senator said:

Am I understanding it correctly that the "big, beautiful, bill" reduces the charitable deduction of the first .5% of AGI for itemizers?

 

[Stargazer]

18 hours ago, The Nehor said:

It means you can deduct up to $1000 in charitable giving ($2000 for a couple) if you take the standard deduction. If you do not take the standard deduction and itemize nothing changes.

Is this new with the BBB? I don't seem to recall being able in the past to deduct charitable giving with the standard deduction...

18 hours ago, The Nehor said:

Disclaimer: Not a lawyer or tax expert. Following my advice has been known to cause chronic head pain, seizures, coma, death, and halitosis. Nehor advice is not for everyone. Consult with a doctor before use.

There was a time in the distant past when I ran a small, independent tax filing business during the tax season. Just for people who didn't have complicated tax situations. There were plenty of people who were completely clueless and/or anxious over how to file just a standard uncomplicated 1040. When tax software became a thing I stopped doing that business. The software was much better than me.

[The Nehor]

22 minutes ago, Stargazer said:

Is this new with the BBB? I don't seem to recall being able in the past to deduct charitable giving with the standard deduction.

It has been done before with lower caps. During Covid there was a temporary one in 2020 I think. It was also tried in the 80s for a while. Might have the year wrong. In general though yeah, it is new.

The idea is that upping the standard deduction had a negative effect on charitable giving and this may alleviate it. I doubt it. It didn’t help much before. On the positive side this is theoretically permanent so there is more time to publicize and get people used to it. On the downside this is a very easy cheat on taxes to claim you donated when you didn’t and with the IRS being defunded lying on taxation is pretty low risk. Even if the IRS were well-funded this would still be pretty easy to cheat on. It is probably not worth pursuing for the IRS when someone takes the standard deduction and cheats on this.

There is also a change for those who itemize and you have to meet a minimum of giving to itemize. Same with corporations.

I am a bit more concerned at the changes in education taxation. They are raising the taxes on endowment funds. This obviously targets Ivy League schools but also smaller schools funded by investments. There is also a pretty vague tax deduction for private school scholarships for K-12 education which I don’t understand but I am cynical about.

[Teancum]

21 hours ago, Senator said:

Am I understanding it correctly that the "big, beautiful, bill" reduces the charitable deduction of the first .5% of AGI for itemizers?

1. Above-the-line charitable deductions for non-itemizers
   Beginning in the 2026 tax year, a new deduction allows non-itemizers to deduct charitable gifts—up to $1,000 for single filers or $2,000 for married couples filing jointly. This provision is not indexed for future inflation.
   Implication: Since the TCJA increased the standard deduction, only about 10% of households have itemized deductions,¹ making them ineligible for charitable giving tax deductions. With the introduction of this provision, all households are now eligible to receive a tax deduction for qualified charitable contributions, potentially increasing participation in giving. A similar provision during the COVID-19 pandemic allowed a $300 deduction for charitable giving under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Approximately 90 million taxpayers claimed it in 2020—2021.
2. New limits to deductions for itemizers in the top tax bracket
   The new legislation caps the tax benefits of itemized charitable deductions at 35%, even for those in the 37% marginal tax bracket. In other words, these high-income filers donating $1,000 would receive a $350 deduction instead of the current $370. This change goes into effect in the 2026 tax year.
   Implication: Donors in higher tax brackets who are considering a significant philanthropic gift may want to think about accelerating their gift to 2025 to maximize their deduction under the current marginal rate before the new cap goes into effect.
3. New floor on deductions for itemizers and corporations
   Effective in the 2026 tax year, itemizers who make charitable contributions will only be able to claim a tax deduction to the extent that their qualified contributions exceed 0.5% of their adjusted gross income (AGI). For example, a couple with an AGI of $300,000 could only deduct charitable donations in excess of $1,500. Similarly, corporations will only be entitled to deduct charitable contributions to qualified charities that exceed 1% of their taxable income.
   Implication: High-income individuals who itemize deductions should carefully consider the timing and amounts of their giving, and the strategies to maximize their deduction. For example, a bunching strategy or an approach of making larger gifts with less frequency can be more effective under the new rules. Corporations may want to take steps to proactively manage (and potentially increase) their giving to ensure they exceed the 1% threshold.

https://www.fidelitycharitable.org/articles/obbb-tax-reform.html#:~:text=Beginning in the 2026 tax,not indexed for future inflation.

[Teancum]

20 hours ago, Senator said:

So, you are saying if my AGI is $100k,  I must give at least $501 in order to be able to deduct it?

 

Yes.  Anything below $500 would not be deductible if you itemize in your example. If you do not itemize you have the above the line deduction that I posted about.

[Teancum]

19 hours ago, rpn said:

My understanding that you have a choice.  You can claim all of your tithe and offering if you  itemize.   And if you choose not to itemize (the standard deduction being something like 12K (?) a person, you can never the less claim $1000 for charitable donations per person.  

$15,000 for single filers and $30,000 for joint filers. Personal exemption repealed. Sunsets in 2026 to $8,350 for single filers and $16,700 for joint filers, with return of personal exemption.

A number of the the beneficial provisions of the new law conveniently sunset in only a few years.  This one seems pretty dramatic.

 

[Teancum]

19 hours ago, The Nehor said:

It means you can deduct up to $1000 in charitable giving ($2000 for a couple) if you take the standard deduction. If you do not take the standard deduction and itemize nothing changes.

No there is a floor you have to exceed if you itemize.  See my summary,

[Stargazer]

On 7/11/2025 at 7:11 PM, The Nehor said:

It has been done before with lower caps. During Covid there was a temporary one in 2020 I think. It was also tried in the 80s for a while. Might have the year wrong. In general though yeah, it is new.

Well, that's nice. I shall surely take advantage.

On 7/11/2025 at 7:11 PM, The Nehor said:

The idea is that upping the standard deduction had a negative effect on charitable giving and this may alleviate it. I doubt it. It didn’t help much before. On the positive side this is theoretically permanent so there is more time to publicize and get people used to it. On the downside this is a very easy cheat on taxes to claim you donated when you didn’t and with the IRS being defunded lying on taxation is pretty low risk. Even if the IRS were well-funded this would still be pretty easy to cheat on. It is probably not worth pursuing for the IRS when someone takes the standard deduction and cheats on this.

In the past when I actually had enough deductions to itemize, short of an audit there was still no requirement to prove one had actually donated to charity. Cheating in the past was extremely easy, and as long as you kept your cheating within reasonable limits it was unlikely to get triggered based on that alone. But I believe that the IRS would compare your claimed charitable giving with "reasonability" standards. Or so said some "authorities."

On 7/11/2025 at 7:11 PM, The Nehor said:

There is also a change for those who itemize and you have to meet a minimum of giving to itemize. Same with corporations.

I am a bit more concerned at the changes in education taxation. They are raising the taxes on endowment funds. This obviously targets Ivy League schools but also smaller schools funded by investments. There is also a pretty vague tax deduction for private school scholarships for K-12 education which I don’t understand but I am cynical about.

There is always room for cynicism when it comes to taxation.