Charitable giving has long been encouraged through the U.S. tax code, offering incentives to those who support nonprofits and mission-driven causes. But the recently passed One Big Beautiful Bill (OBBB) could change that calculus — especially for high-income donors.
While the bill touches many areas of federal policy, one provision has stirred debate: a reduction in the tax benefits tied to charitable giving.
That's especially troubling given that charitable giving in the U.S. declined by 10.5% in 2022 — the largest drop in decades. These changes could deepen that slide.
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Still, for most high-net-worth (HNW) donors, the motivation to give extends far beyond tax deductions.
If you're considering significant charitable gifts, now is the time to take action: Have a conversation with your tax adviser about your plans and ensure your giving priorities reflect your deeper values, not just financial optimization.
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A new set of rules
Under the new rules, high-income donors will get a smaller tax break. Previously, you could deduct up to 37% of your donation.
Now, no matter your tax bracket, you can deduct only 35% of your donation. So, if you give $1,000, you'll get a $350 tax deduction instead of $370.
There's also a new rule for itemizers that puts a 0.5% floor on charitable deductions. Essentially, only the portion of your charitable contribution that exceeds 0.5% of your adjusted gross income is deductible starting in 2026.
So, if you make $1 million a year, you can't deduct the first $5,000 you donate. Businesses will face a similar change — they can only deduct gifts that are more than 1% of their income.
The bill also reinstates a universal above-the-line charitable deduction for people who don't itemize. Individuals may deduct up to $1,000, and married couples filing jointly can claim up to $2,000.
However, this doesn't apply to donor-advised funds (DAFs) or private non-operating foundations, and it isn't indexed for inflation, meaning its value may diminish over time.
These changes come on top of structural reforms already in place. The Tax Cuts and Jobs Act of 2017 nearly doubled the standard deduction, and as a result, only about 9% of households itemize. For many, the charitable deduction has already been out of reach.
To put this into context: A couple with $1 million in adjusted gross income (AGI) could normally deduct up to $600,000 in qualified charitable donations, based on the 60% limit. Under the new law, the first $5,000 doesn't count, so they would need to donate $605,000 to receive the full benefit.
With these changes looming in 2026, it's smart for both high earners and business owners to review their giving strategy. Consider timing larger gifts or "bunching" donations into a single year for potential tax benefits.
How will giving be affected?
It's easy to assume that these changes will discourage donations. From my experience, high-income families tend to give because they care about causes and community — not simply because of the tax deduction.
According to the Bank of America Study of Philanthropy, 85% of affluent households gave to charity in 2022, and for most, the motivation was personal. Nearly 70% said their donations were driven by values and beliefs, not tax incentives.
While deductions still play a role, especially for larger gifts, they aren't the deciding factor. So even with a smaller tax benefit or a new income threshold, most donors are likely to continue supporting the causes they care about.
If you want your giving to have the biggest impact, take some time now to clarify your top priorities and talk openly with your family or advisers about your philanthropic goals.
Setting up regular giving or making a long-term commitment to a nonprofit you trust ensures that your impact remains strong, even with evolving tax incentives.
Broader giving at risk, but there's a possible upside
For middle-income Americans, the impact may be more noticeable. A household earning $300,000, for instance, would only be able to deduct charitable donations exceeding $1,500.
That threshold could discourage smaller or one-time gifts that are made with tax incentives in mind.
Despite this, Americans continue to give at high levels. In 2021, 74% of U.S. adults donated to non-religious causes, according to Gallup, up from 64% in 2020.
Even in challenging times, generosity endures. The cultural norm of giving is strong — and not easily undone by tax changes.
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The return of the universal charitable deduction may encourage broader participation in giving, particularly among non-itemizers. While the amount isn't huge, it could reinforce the habit for households that already give.
Those who are just beginning to build their philanthropic routines might use this modest deduction as a foundation for more intentional, long-term giving — even if it starts small.
If you're concerned about thresholds, track your giving throughout the year to see when you qualify for a deduction, and don't underestimate the power of small but consistent gifts.
Whenever possible, take advantage of employer matching programs or join community fundraisers to stretch the impact of your donations, even if the tax benefit is modest.
Strategic giving in a shifting landscape
The OBBB underscores the importance of approaching charitable giving with a clear strategy.
Charitable trusts and family foundations offer flexibility and help preserve a philanthropic legacy. Non-cash gifts, such as appreciated securities, may still provide strong tax advantages under the new rules.
For families, now is an ideal time to make philanthropy a shared value — involving the next generation in giving decisions and conversations.
Even if itemizing no longer makes sense for your household, your charitable impact doesn't have to diminish.
The One Big Beautiful Bill might change the way we give — but it doesn't change why we do it.
If you haven't already, now is a smart time to sit down with your adviser and revisit your charitable plan.
Make it a habit to review your giving strategy annually so you can adapt, stay informed and make the most powerful difference possible with every gift you give.
ALINE Wealth is a group of investment professionals registered with Hightower Securities, LLC, member FINRA and SIPC, and with Hightower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities, LLC; advisory services are offered through Hightower Advisors, LLC.
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