The One Big Beautiful Bill Act (OBBBA), also known as H.R. 1, was signed into law in July 2025, bringing significant changes to the rules governing charitable contribution deductions for taxpayers who itemize.
If you regularly make charitable donations and claim them on your tax return, it is essential to understand these new limitations, as they could impact your tax planning and overall giving strategy beginning in 2026.
The New 0.5 Percent Floor Rule for Charitable Contributions
Starting in 2026, itemizers will only be able to deduct charitable contributions that exceed 0.5 percent of their adjusted gross income (AGI). This means the first 0.5 percent of your AGI donated to charity each year will not be deductible. Only amounts above this floor will count toward your itemized deductions.
Example:
If your AGI is $200,000, the first $1,000 ($200,000 x 0.5 percent) of your charitable contributions will not be deductible. If you donate $1,500 in 2026, only $500 ($1,500 - $1,000) will be eligible for a deduction.
This new rule is intended to encourage more substantial charitable giving while reducing the tax benefit for smaller donations, particularly among higher-income taxpayers. For many, it may mean adjusting annual giving strategies to maximize deductibility.
Cap on Deduction Value for High Earners
Another important change under the OBBBA is the cap on the tax value of itemized deductions for taxpayers in the top marginal tax bracket. Starting in 2026, the tax value of charitable deductions for those in the highest bracket will be limited to 35 percent. Previously, high earners in the 37 percent tax bracket could claim a deduction at their full marginal rate. Now a $10,000 donation will yield no more than $3,500 in tax savings, rather than $3,700.
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These changes could influence both the timing and amount of your charitable contributions. Taxpayers may wish to bunch donations into certain years to exceed the 0.5 percent floor or consider alternative giving strategies. High earners, in particular, should be aware of the reduced value of their deductions when planning large gifts.
Talk with your Zinner & Co. Tax Team representative to determine how these new rules will affect your unique situation and to develop a tax-efficient charitable giving plan under the new law.
