Charitable Deduction Gets Caps, Floors and “Haircuts” in the OBBBA

What the new rules mean for your giving strategy

If you’re someone who gives regularly to charities, the OBBBA (Ongoing Budget, Benefits & Business Act) brings some changes you’ll want to know about. Lawmakers kept the charitable deduction in place, but they added new limitations that can affect how much you’re allowed to deduct each year.

Below is a simple breakdown of what changed and what it means for your tax planning moving forward.

When Do These Changes Start?

The new rules take effect for tax years beginning after December 31, 2025.That means most taxpayers will see these changes apply starting in 2026.

Your 2025 charitable giving will still follow the current rules. The caps, floors and deduction reductions only begin with donations made in 2026 and beyond.

A New “Cap” on Large Donations

Under the OBBBA, the charitable deduction now comes with an annual cap based on a percentage of your adjusted gross income.

In the past, high-income taxpayers often had flexibility to deduct a large portion of their charitable gifts. The new cap limits how much can be written off each year, even if you give more.

Why it matters:If you typically make one large donation annually or donate appreciated assets, you may need to spread those contributions over multiple years to get the full benefit.

A “Floor” Before You Can Deduct Anything

The new rules also introduce a floor, which means you must donate above a certain threshold before you can deduct anything at all.

Think of it like a deductible on insurance: the first portion of your giving doesn’t count toward your tax break.

Why it matters:Taxpayers who make smaller or occasional contributions may no longer see a tax benefit from those gifts. If maximizing deductions matters to you, you may want to consolidate giving into fewer, larger donations.

The Return of the “Haircut”

A “haircut” is a reduction in the value of your deduction. Even after meeting the floor and staying under the cap, the deduction you’re allowed to take may be reduced by a percentage based on your income level.

Why it matters:High-income donors could see their charitable tax benefit reduced more than expected, even when giving the same amount as before.

Planning Ahead: What You Can Do

These changes don’t mean charitable giving is less worthwhile. It just means planning becomes more important.

1. Review your giving strategy

Spreading donations over several years, consolidating gifts or using donor-advised funds may help you stay within the most favorable limits.

2. Consider non-cash donations

Gifts of appreciated stock or property can still offer strong tax advantages, even under the new rules.

3. Watch your income

Because the caps and haircuts depend on AGI, income fluctuations can affect how much you can deduct each year.

4. Work with your advisor

We can run projections based on your income and giving patterns to help you time and structure your donations effectively.

Final Thoughts

Charitable giving is still a meaningful way to support the causes you love while receiving tax benefits. The OBBBA simply adds new limits that call for a bit more strategy. With thoughtful planning, you can continue giving confidently and efficiently.

If you’d like help reviewing your giving plan for 2025 or mapping out a strategy for 2026, Kamish & Associates is here to help.