When it comes to charitable fundraising and giving, the final quarter of the year is the busiest season for advisors and investors. Successful philanthropy depends on the goals an investor is trying to achieve, whether these are social, wealth transfer, personal, or tax deductibility objectives.

The passage of the One Big Beautiful Bill Act (OBBBA) creates new tax rules and opportunities for investors to reach those goals. Here, we discuss how the OBBBA impacts charitable giving to help advisors and their clients maximize philanthropic success.

OBBBA: Key changes to charitable giving laws

The OBBBA introduced four important changes to tax laws surrounding charitable giving:

1. Standard deduction: Under Section 70424 of OBBBA, taxpayers who take the standard deduction can claim a deduction for charitable contributions of up to $1,000 for single filers and $2,000 for joint filers.
2. Itemized deductions: The individual deduction limit for cash contributions made to public charities is 60% of a taxpayer’s adjusted gross income (AGI). This limit was previously scheduled to “sunset” at the end of 2025 and revert to 50%. Section 70425 of OBBBA extends the current 60% limit.
3. 0.05% floor: For individual taxpayers who itemize deductions, per Section 70425 of OBBBA, only charitable gifts exceeding 0.05% of AGI are now deductible – that is $500 for every $100,000 in AGI.
4. Deductibility cap: For itemizers, Section 70111 of OBBBA also caps the benefit of the total itemized deductions at $0.35 per dollar for taxpayers in the 37% tax bracket.

These changes for individual taxpayers are effective for taxable years beginning after December 31, 2025.

Charitable giving options

Charitably inclined investors have a host of charitable giving options available, including the following:

-Direct cash donations
-Donations of appreciated assets
-Gifts “with benefits”
-Qualified charitable distributions (QCDs)
-Charitable gift annuities
-Charitable remainder trusts (CRTs)
-Charitable lead trusts (CLTs)
-Private foundations (PFs)
-Donor-advised funds (DAFs)

Understanding donor-advised funds

DAFs are charitable accounts funded by individual donors but maintained and operated by a charity. Once a donor makes a contribution, the sponsoring charity is responsible for maintaining the account, investing contributions, and distributing funds in line with the donor’s advice. Distributions are made whenever and to whomever the donor and the sponsoring charity direct.

Unlike private foundations, which require a 5% distribution each year, the law does not require DAF funds to be deployed – ever. DAFs are treated as public charities for tax-deduction purposes; however, it is important to remember that DAFs are not qualified recipients of Qualified Charitable Distributions (QCD). As a result, DAFs cannot receive qualified distributions from retirement accounts or from non-itemizers seeking to take advantage of the new $1,000 below-the-line deduction for cash contributions.