The One Big Beautiful Bill's Impact on Charitable Giving

Dear Clients and Friends,

Now that the passage of the One Big Beautiful Bill has been digested by the masses, one area that has garnished much attention has been the impact on the charitable giving landscape. Needless to say, we don’t let the tax tail wag the dog when it comes to our personal giving, especially in today’s world where wars are ongoing, natural disasters are driving near record-high losses worldwide, and food insecurity and malnutrition continues to reach new heights. We seek not only monetary returns, but also to maximize our social impact and the inherent value that giving provides.

That being said, the Big Beautiful Bill has made drastic changes to the monetary side of this equation: every American that makes donations will be impacted starting in 2026. Below I highlight the major revisions:

• Charitable Deduction – This was referenced in my first Big Beautiful Bill article, so I won’t reiterate all the details. But non-itemizers will be happy to hear that charitable gifts up to $1,000 for single taxpayers and $2,000 for married taxpayers filing jointly will now be deductible. It’s about time, right? 9 years and counting! This begins in 2026, and only cash gifts qualify - gifts made to Donor Advised Funds don’t qualify.

• 60% Limit = Permanent – The 60% limit for cash contributions made to public charities is now permanent under the OBBBA. This was formerly scheduled to be reduced back to 50% if the OBBBA hadn’t been signed into law.

• Charitable Tax Credit – Starting in 2027, individuals can claim a $1,700 tax credit for donations made to Scholarship Granting Organizations (SGOs), which grant scholarships to K – 12 private or religious schools. This is available to all taxpayers, regardless of whether you itemize or not. One key caveat is that this is a nonrefundable credit.

Feature	Refundable Tax Credits	Non-Refundable Tax Credits
Tax Liability Exposure	Can reduce your tax liability below zero, resulting in a refund	Can reduce your tax liability to zero, but not beyond
Refund?	Yes, whether or not you owe any taxes	No – taxes owed will be reduced to zero, with no refund beyond zero

• New Charitable Floor – Starting in 2026, itemizers that make charitable donations (cash and non-cash gifts) will only be able to deduct donations that exceed 0.5% of their Adjusted Gross Incomes (AGI). Let’s say that you make $300,000 of income and donate $3,000 to charity. Only donations that exceed $1,500 (0.5% of $300,000) will be tax deductible, so you lose $1,500 worth of tax deductions. This means that fewer clients will benefit from itemizing their charitable gifts going forward.

• Penalty Box for Highest Earners – Folks in the highest marginal tax bracket (37%) will see a haircut on their itemized deductions, including charitable ones. Instead of claiming a 37% tax benefit, you’ll only be allowed to claim a 35% tax benefit. The below example shows that you’ll lose out on $2,000 in benefits for a $100,000 donation.

Scenario	Charitable Gift	Your Tax Rate	Deduction Value	Tax Savings
Pre OBBBA	$100,000	37%	$100,000	$37,000
Post OBBBA	$100,000	37%	$100,000 @ 35%	$35,000

Since the majority of these new rules go into effect in 2026, the timing of your donations should be considered carefully. Here is what we’re currently recommending to donors:

• Accelerate Your Giving – Now that you have both a new floor and a possible cap, consider front-loading your donations this year rather than worry about next year’s limits - especially for your larger than average gifts.

• Bunching Your Donations – Why not combine several years’ worth of gifts into a single year? This way, you’re getting a larger tax deduction upfront while solidifying the certainty of your tax benefits before next year.

• Donor Advised Funds – If you decide to bunch your donations, consider using a Donor Advised Fund to manage your multiyear giving strategy. You’ll receive a tax deduction for the full fair market value of your gift and have flexibility and autonomy when deciding to disburse your donations.

• Think Beyond Cash Gifts – Consider making non-cash gifts of stocks, bonds, crypto, private investments, or privately held business interests. Instead of selling these outright and paying taxes on any gains you’ve accrued, you can avoid paying capital gains taxes by donating these investments directly to a charity or to your DAF. This way, the charity will receive more, and the government will receive less!

• Qualified Charitable Distributions – For folks 70.5 or older who have hefty retirement account balances, it will still make sense to continue making your donations using your Required Minimum Distribution and retirement accounts. Doing so gives the donor a slightly “better” tax deduction than a gift made from a regular investment account, even if the dollars gifted originated from an IRA. See my previous weekend reading that covers this in more detail.

• Hit the Pause Button – If you don’t itemize your taxes, consider waiting until 2026 so you can capture the new charitable tax deduction.

Post OBBBA, the charitable planning landscape has flipped and is more complicated. I’ll let you decide as to whether the changes are for the good, the bad, or the ugly. As many of you know, MORWM regards philanthropy as a fundamental piece of our culture and identity, and we are proud to support several charities. No matter what tax legislation is currently in force, your team here remains passionately committed to helping you achieve your philanthropic vision. If you need any help getting started, don’t hesitate to reach out to our Charitable Giving Coordinator: Kirsten.Warner@morwm.com. I think we can all agree that the social impact of your charitable giving doesn’t change much; if anything, your “social rate of return” only increases.

As always, reach out if you have any questions!

Devin