New charitable deduction floors under the One Big Beautiful Bill (OBBB) are lesser-known provisions that may sneak up on unprepared individual donors and corporations, as the law limits tax benefits for smaller gifts and may complicate long-standing giving strategies, according to a wealth tax planning expert.
In for a ‘Reckoning’
Under prior law, no floor existed for itemized charitable deductions for individuals, and corporate deductions were primarily limited by a ceiling of 10% of taxable income. This allowed for the full value of donations, no matter how small, to be potentially deductible.
According to Jamie Hopkins, CEO of Bryn Mawr Trust Advisors and chief wealth officer of Bryn Mawr Trust and WSFS, many taxpayers and their professional advisors may not be aware of the full scope of these changes. “I think there are so few people — advisors, CPAs, attorneys — that really kept all the way up with this last bill, especially when it came to the charitable changes,” he told Checkpoint.
Because the OBBB’s charitable giving provisions are effective beginning tax year 2026, Hopkins expects the biggest shock for the unwary to come next tax season. “I think we’re going to have a very big reckoning in 2027 where charitable contributions will come down substantially.”
New Deduction Floors for Individual and Corporate Donors
The OBBB introduces deduction floors for both individuals and corporations, a change that may reduce or eliminate the tax benefit of smaller contributions.
For individuals, the law provides for a floor of 0.5% of a taxpayer’s contribution base, which is generally their Adjusted Gross Income (AGI.) The practical effect of this change is that an otherwise deductible charitable contribution must be reduced by 0.5% of an individual’s contribution base for the tax year.
For example, a taxpayer with an AGI of $200,000 would face a deduction floor of $1,000. If that taxpayer donates $2,500 to a qualified charity during the year, only $1,500 of that donation would be potentially deductible ($2,500 donation minus the $1,000 floor).
Corporations will also face a new hurdle for their charitable giving. Under the OBBB an otherwise allowable charitable contribution by a corporate taxpayer will be allowed only to the extent that the aggregate of such contributions exceeds 1% of the taxpayer’s taxable income for the tax year. This 1% floor is applied before the pre-existing 10% of taxable income limitation on corporate charitable deductions.
The change has broad implications, especially for companies that have built marketing and brand identity around making many small, regular donations. “I even see companies that used to tout” giving 1% of all proceeds to charitable causes, said Hopkins. “That wipes that out. You’re … giving the money away with no benefits.”
He expressed concern that many corporations may be caught by surprise by this provision. “I would bet 99% of corporations are totally unaware that those de minimis donations they’re making to charities are just not going to qualify,” he said.
Giving Considerations
The new rules will require a shift in year-end giving strategies for both individuals and corporations to maximize the tax benefits of their charitable contributions. For individuals who are close to the new AGI floor, the timing of donations becomes more critical. A once-common practice of splitting a large donation between December and January to get a deduction in two separate tax years may no longer be effective and could result in losing the deduction entirely for one or both of the payments.
Hopkins explained that the mistake many donors might make is splitting a gift between two tax years. For instance, if a donor gives $10,000 in December and another $10,000 in January of the next year, and that amount falls below their deduction floor for each year, “they probably lost out on a $10,000 deduction by not just doing both of them in December.” Bunching contributions into a single tax year will become a more important strategy for individuals to ensure their total donations exceed the 0.5% of AGI floor.
For corporations, several potential strategies are available to manage the new 1% floor. One approach Hopkins gave is to “super-fund” donations by making a multi-year gift in a single tax year to exceed the threshold.
Another strategy is to establish a corporate foundation, Hopkins suggested. “You could kind of super-fund that up in a year, and then do those donations over time from the foundation out.” This would allow a corporation to make one large, deductible contribution to its foundation in a high-income year. The foundation could then handle the smaller, periodic donations to various charities over several years without the corporation having to worry about the 1% floor each year.
“But for nonprofits, the timing of donations really matter because often they’re running with tight budgets,” Hopkins said. If contributions that usually arrive in September are pushed to the following January, organizations will need to find ways to cover the cash-flow gap between those months, he cautioned.
For more on the floor on individual charitable deductions, see Checkpoint’s Federal Tax Coordinator 2d ¶ K-3684. For the corporate floor, see 2d ¶ K-3831.
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