By Lynn Bossenbroek, CPA
The One Big Beautiful Bill Act (“the 2025 Act”), introduced several important modifications to increase charitable contribution deductions for individuals. The most impactful change being the reinstatement and permanent expansion of the above-the-line charitable contribution deduction for individuals. In addition, the 2025 Act created an itemized deduction for educator expenses in addition to the existing $300 above-the-line deduction for unreimbursed out-of-pocket classroom expenses.
For decades, the deduction for charitable contributions has incentivized individual taxpayers to support non-profit and community organizations. Under prior law, shaped by the Tax Cuts and Jobs Act (“TCJA”) and temporary provisions of the CARES Act during the pandemic, individual taxpayers could only deduct qualified charitable contributions if they itemized deductions on Schedule A of their returns. However, TCJA’s large increase to the standard deduction for individuals significantly reduced the number of individual taxpayers who itemized deductions, so that they no longer benefited from the charitable deduction on Schedule A. The CARES Act introduced an above-the-line deduction for charitable contributions in cash up to $300 for non-itemized filers, but that deduction expired for tax years after 2021.
Before 2002, educator’s classroom expenses were deductible by taxpayers who itemized as an employee business expense. In 2002, an above-the-line deduction (adjusted for inflation to $300 in 2025) was introduced for the classroom expenses of eligible educators. Any excess could be taken as a miscellaneous itemized deduction, subject to the relevant limitations, including the 2%-of-AGI floor. However, the TCJA “suspended” (disallowed) miscellaneous itemized deductions for 2018–2025, and the 2025 Act made this suspension permanent.
Charitable Contribution Deduction Changes
Beginning in 2026, under the 2025 Act, individual taxpayers who claim the standard deduction, rather than itemize, may now deduct up to $1,000 ($2,000 for married filing jointly taxpayers) in qualified cash contributions made to eligible charitable organizations each year. This permanent change and expansion of the charitable contribution deduction to an above-the-line deduction allows for a greater number of taxpayers to benefit from modest charitable giving.
To qualify for the charitable contribution deduction, donations must be made to a qualified organization under IRC 170(c). Eligible contributions include cash, checks, electronic payments and payroll deductions to recognized charities such as churches, nonprofit educational organizations, community foundations and the like. For total cash contributions of $250 or more, taxpayers must maintain documentation such as bank statements, cancelled checks, electronic payment confirmations and receipts. Contributions made to individuals, political organizations or any entity that lacks qualified charitable status under IRC 170(c) are not eligible for the deduction.
Eligible Educator Expense Deduction Enhancements
Eligible educators are still allowed the $300 above-the-line deduction ($600 if both taxpayers are eligible educators and file a joint return, with each taxpayer limited to $300), benefiting both taxpayers who itemize deductions and those who claim the standard deduction. The deduction is claimed on Line 11 of Schedule 1 (Form 1040) and included in the adjustments to income on Line 10 of Form 1040.
To be eligible the taxpayer must be a kindergarten through 12th grade teacher, instructor, counselor, principal or aide who works at least 900 hours a school year at a school that provides elementary or secondary education as determined by state law. Qualified expenses include books, classroom supplies, computer equipment/software, professional development courses, or other materials used in the classroom. Qualified expenses also include supplies that are used in health and physical education so long as the costs are related to athletics.
Beginning in 2026, the 2025 Act allows for a new itemized deduction for educator expenses in addition to the $300 above-the-line deduction. Thus, eligible educators who itemize their returns will be allowed to deduct certain unreimbursed classroom expenses both above the line (subject to a $300 limitation discussed above) and below the line (on Schedule A) beginning with the 2026 tax year.
The new itemized deduction allows a broader category of expenses to be deducted, as well as a broader category of taxpayers to be eligible, than the original above-the-line deduction. In addition to the expenses allowed for the above-the-line deduction, the deduction is available for nonathletic supplies for courses in health or physical education. Plus, interscholastic sports administrators and coaches will be eligible for the itemized deduction (in addition to the educators who are already eligible for the above-the-line deduction).
Tax advisors with educators as clients should advise them to keep receipts of potential eligible expenses, keeping record of the date, amount and purpose of each purchase to maximize both potential deductions in the current and future years.
Action Items
Here is what practitioners can be doing right now to prepare for 2026:
- Update organizers and engagement letters to capture: cash gifts to IRC 170(c) charities; educator roles (teacher, counselor, principal, aide, coach/admin) and hours; and unreimbursed classroom purchases by category.
- Refresh document requests: bank/e-payment records and charity acknowledgments over $250; detailed educator receipts with date, amount, business purpose, and course/activity. Remind clients that weekly offerings at the services of a religious congregation are deductible.
- Revisit tax planning scripts for late 2025 and 2026: coach non-itemizers on modest recurring gifts (including payroll deduction) and advise educators on timing larger classroom purchases to maximize both the $300 above-the-line and new Schedule A deduction.
- Adjust software and workpapers: add fields for the above-the-line charitable cap ($1,000/$2,000), the educator above-the-line cap ($300 per eligible taxpayer), and a separate Schedule A bucket for educator expenses.
- Proactively communicate: send a client alert summarizing what receipts to save for 2026 and how the rules differ for itemizers vs. standard deduction filers.
Conclusion
The 2025 Act provides straightforward, client-friendly opportunities practitioners should get ahead of. Beginning with 2026 returns, non-itemizers making small charitable gifts can claim the new above-the-line deduction with proper substantiation. Eligible educators retain the $300 above-the-line deduction ($600 MFJ if both qualify) and, critically, itemizers may now claim a new Schedule A deduction for broader unreimbursed classroom costs. These changes deliver tangible savings for teachers, coaches, and everyday charitable donors while giving firms a timely touchpoint to demonstrate year-round advisory value.
Editor’s Note: The full article presented above is available in the Practitioner’s Tax Action Bulletin, as National Tax Advisory Memo (NTA-1333), first published in Issue 20 Dated October 28, 2025, along with other valuable tax practitioner articles. Contact Our Sales Team for a Subscription to Checkpoint’s bi-monthly Practitioner’s Tax Action Bulletin, which is available in print, and online or to add Thomson Reuters Planner CS to your advisory toolkit.
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