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HOW THE ONE BIG BEAUTIFUL BILL ACT AFFECTS CHARITABLE GIVING

Overview

In this webinar, philanthropy expert Rick Peck, CFP®, ChFC®, CAP®, IPA® explained how the One Big Beautiful Bill Act (OBBBA)—also known as H.R. 1—affects charitable giving in tax years 2025 and 2026. The webinar detailed how executive orders issued in early 2025 affected nonprofits, how new tax provisions shift charitable deduction strategies, and how changes to donor-advised funds (DAFs), gift thresholds, and Qualified Charitable Distributions (QCDs) alter planning for high-income and non-itemizing donors.

Rick emphasized that 2025 is a highly strategic year for charitable giving because several deduction advantages expire or change on January 1, 2026.

FULL SUMMARY (Expanded + Fact-Checked)

1. Executive Orders and Nonprofit Landscape (2025)

Rick began by outlining the turbulence nonprofits experienced after a wave of executive orders issued shortly after President Trump’s 2025 inauguration. These orders affected:

● Diversity, Equity, Inclusion (DEI) programs

Executive orders sought to eliminate DEI-related activities in federal grants and training programs. Nonprofits receiving federal funding for DEI were instructed to halt related activities immediately.

● LGBTQ+ nonprofit services

Separate orders related to “gender ideology” caused nonprofits serving LGBTQ+ communities to fear possible funding losses or strained agency relationships.

These orders created uncertainty and heightened caution across nonprofit sectors, even before some were challenged in court.

2. Key Tax Provisions of the One Big Beautiful Bill Act (H.R. 1)

The OBBBA, signed into law July 4, 2025, preserves the backbone of the Tax Cuts and Jobs Act (TCJA) of 2017, but adds several new charitable-related provisions. Most substantial changes begin in 2026.

A. Above-the-Line Deduction for Non-Itemizers (2026+)

Beginning in 2026:

• $1,000 deduction for single filers
• $2,000 deduction for joint filers
• Cash gifts only
• Cannot be used for:
  • Donor-Advised Funds (DAFs)
  • Supporting organizations
  • Private foundations

With 90% of U.S. taxpayers not itemizing, this deduction is intended to broaden participation.

B. Cap on High-Bracket Charitable Deductions (2026+)

Taxpayers above the 35% bracket will see their deduction value capped at 35%, even if their top rate is 37% or more.
This makes 2025 the final year for high-income donors to receive their full marginal deduction benefit.

C. New Floors for Itemizers (2026+)

Starting 2026:

• Individuals may deduct only the portion of charitable gifts exceeding 0.5% of AGI
• Corporations receive deductions only for amounts above 1% of taxable income

D. Case Studies: Why 2025 Is More Favorable for Tax Benefits

Rick reviewed three case studies demonstrating how taxpayers lose deduction value in 2026:
(Examples taken directly from a recent article cited by Rick during the webinar.)

Example:
A single filer with $400,000 AGI giving $5,000:

• 2025 deduction: full $5,000
• 2026 deduction: only $3,000 due to the 0.5% floor
• Tax savings lost: $700

Similar examples showed a 10% loss in value for six-figure gifts if donors wait until 2026.

3. Wealth Transfer Rules, Gift Limits, and Charitable Deductibility

Federal Estate & Gift Tax Exemption (2026 Update)

• $15 million per individual
• $30 million per married couple

Many nonprofits were disappointed—the exemption did not drop to ~$7M as previously forecast, meaning fewer taxpayers feel pressure to use charitable strategies for estate planning.

Annual Gift Tax Exclusion

• $19,000 per recipient (2025)
  Gifts at or below this level avoid Form 709 filing and do not use lifetime exemption.

4. Qualified Charitable Distributions (QCDs)

QCD Limits

• $108,000 per taxpayer (2025)
  • Indexed for inflation (estimated ~$115,000 in 2026)
• Must be age 70½ or older
• Reduces taxable income and can offset RMD requirements

New: One-Time QCD to CRT or CGA

• Up to $54,000 may be directed to:
  • Charitable Remainder Trust
  • Charitable Gift Annuity
• No charitable deduction
• All distributions are ordinary income

This provision is new and represents significant planning flexibility.

5. Donor-Advised Funds (DAFs)

Rick reviewed the National Philanthropic Trust 2024 report showing:

• $54.77 billion in DAF grants in 2023
• $251 billion in DAF charitable assets
• Nearly 2 million DAF accounts
• Average DAF account size: $141,000
• DAF payout rate: 23.9% (exceeds 20% every year on record)

Despite having no mandatory payout, DAFs outpace the 5% required payout of private foundations.

Why donors choose DAFs

• Ability to give anonymously
• Simpler administration (DAF sponsor issues grants)
• Ability to “bunch” deductions by contributing multiple years of charitable giving in one tax year
• Flexibility in grant timing

Rick also emphasized the rise of tools such as DAFpay / DAF Widget that make giving simpler for donors.

6. 2025 Giving Strategies

Because 2026 introduces new limits and floors, Rick urged advisors and donors to consider:

● Accelerating charitable gifts into 2025

Especially for:

• High-income donors (avoid the 35% cap)
• Large planned gifts (avoid AGI floors)
• Non-itemizers using bunching strategies

● Using combination gifts (cash + appreciated securities)

• Cash gifts: 60% AGI limit
• Appreciated assets: 30% AGI limit

● Bunching via DAF contributions

Allows donors to:

1. exceed the standard deduction in strategic years
2. grant to nonprofits over time

7. Additional Transcript-Based Details

From the Q&A and conversation, further important items include:

● QCDs to DAFs remain prohibited

No pending legislation is expected to change this.

● Contributions for tax year 2025 must be completed by Dec 31

Rick warned against attempting gifts on Dec 28–31 due to transfer and processing delays.

● Endowment tax

Universities with >$2M per student in endowment assets now face a 1.4%–8% tax on investment earnings.

● School voucher donation credit (2027)

Up to $1,700 credit per taxpayer for gifts supporting private & religious K–12 scholarship programs.

● SALT deduction cap increases

• $40,000 in 2025
• Increases 1% per year through 2029
• Reverts to $10,000 in 2030

● Post-death treatment of DAF assets

Subject to sponsor rules; often involves:

• Successor advisors
• Conversion to a field-of-interest or endowment fund
• Distribution to charities per donor instructions

FACT-CHECK SOURCES 

Executive Orders & Nonprofit Impacts

• National Council of Nonprofits – Analysis of Executive Orders
  https://www.councilofnonprofits.org/trends-policy-issues

Tax Cuts & Jobs Act (2017 baseline)

• IRS summary of TCJA
  https://www.irs.gov/newsroom/tax-cuts-and-jobs-act-a-comparison-for-businesses

QCD Rules & Limits

• IRS Publication 590-B (Qualified Charitable Distributions)
  https://www.irs.gov/publications/p590b
• SECURE Act 2.0 inflation indexing for QCDs
  https://www.congress.gov/bill/117th-congress/house-bill/2617

Donor-Advised Fund Statistics

• National Philanthropic Trust 2024 DAF Report
  https://www.nptrust.org/research/daf-report/

Estate & Gift Tax Exemption

• IRS Unified Gift & Estate Tax Exemption Updates
  https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax

Annual Gift Tax Exclusion

• IRS Gift Tax FAQ
  https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes

University Endowment Tax (TCJA)

• IRS Excise Tax on Net Investment Income of Private Colleges & Universities
  https://www.irs.gov/newsroom/excise-tax-on-net-investment-income-of-private-colleges-and-universities

SALT Deduction Rules

• IRS: State and Local Tax Deduction
  https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2025

DAF Regulations & Definitions (Pension Protection Act of 2006)

• Library of Congress – Pension Protection Act text
  https://www.congress.gov/bill/109th-congress/house-bill/4