The OBBBA and Charitable Giving: A New Playbook for Philanthropy and Tax Planning

The “Tush Push” survived for 2025. Fans of the National Football League closely followed the vote on whether to ban this controversial play (where players push their quarterback forward through the defensive line), but the maneuver remains legal—at least for now. Major sports leagues like the NFL may seem like unchanging monoliths, yet they regularly adopt rule changes to close loopholes or fix ongoing problems. In 2004, for example, the “Ty Law Rule” significantly limited how defenders could interact with receivers, reshaping defensive strategy and making it easier for quarterbacks to complete passes. When rules change, players must adapt immediately or risk penalties—often yardage losses that can shift the momentum of an otherwise winnable game.

Financial and legal professionals face similar challenges when laws shift. The One Big Beautiful Bill Act (OBBBA), passed on July 4, 2025, brings a mix of stability and change. Like the Tush Push, many provisions of the Tax Cuts and Jobs Act (TCJA) survived, creating welcome predictability in the estate planning arena. But the charitable giving changes under the OBBBA are more like the Ty Law Rule, altering the playing field and requiring donors to adjust their strategies.

In this issue, we explore key charitable giving changes under the OBBBA, analyze the implications for donors, and outline actionable strategies that attorneys, advisors, and other professionals can use to help clients achieve their philanthropic goals while navigating the new rules.

• New rules for charitable deductions
• Strategies for tax-efficient giving
• Non-grantor trusts
• Charitable trusts

New rules for charitable deductions

The OBBBA redefines the tax landscape around charitable giving, creating both expanded opportunities and subtle new limits. Understanding these changes is crucial to providing informed guidance to philanthropically-minded clients—particularly high-net-worth clients.

• New charitable deduction for nonitemizers. Beginning in 2026, nonitemizers can deduct up to $1,000 ($2,000 for joint filers) for cash gifts to qualified public charities (excluding donor-advised funds, supporting organizations, and private foundations) (26 CFR § 1.664-1) (One Big Beautiful Bill Act, 2025). For the approximately 90% of taxpayers who do not itemize (26 CFR § 1.664-2), this may provide an incentive to make small but meaningful gifts (Internal Revenue Service, 2020). This represents a policy shift toward encouraging charitable giving among a wider range of donors.
• New floor for charitable deductions. Beginning in 2026, itemizers are only allowed to deduct contributions that exceed 0.5% of the donor’s contribution base (defined as adjusted gross income, or AGI, computed without regard to things like net operating loss deductions) (26 CFR § 1.664-3) (OBBBA, 2025). (26 CFR § 1.664-3) For example, someone with a contribution base of $200,000 would need to give more than $1,000 before being able to claim any deduction. Carryover of excess amounts is allowed only if the 0.5% threshold is met. With the OBBBA raising the state and local tax (SALT) deduction from $10,000 to $40,000 for tax years 2025 to 2029 ($40,400 in 2026 with indexing), more taxpayers may find it beneficial to itemize (26 U.S. Code § 170) especially those in high-tax states—possibly encouraging some people to add on deductible charitable gifts (Tax Policy Center, 2025).
• Deduction limit for charitable gifts of cash. The temporary 60%-of-AGI limit for cash gifts to qualified charities is now permanent (26 U.S. Code § 642), ensuring stability for high-value donors (OBBBA, 2025).
• Itemized deduction limit for top earners. Starting in 2026, those in the top 37% tax bracket (less than 1% of all taxpayers) face a 35% cap on deductions—including deductions for charitable gifts (26 U.S. Code § 644) (OBBBA, 2025). (26 U.S. Code § 644) For high-income donors, this reduced tax benefit may influence how and when they give.

With the higher standard deduction (now made permanent under the OBBBA) (26 U.S. Code § 671), fewer people are choosing to itemize (OBBBA, 2025). Research predicts that these changes will reduce charitable giving by billions of dollars annually (26 U.S. Code § 2522) (Independent Sector, 2025). (26 U.S. Code § 2522) However, when discussing charitable goals with clients, it’s important to highlight the potential tax benefits of strategic giving methods that can maximize impact and align with both financial and philanthropic objectives—even if the tax rules have become more complicated.

Strategies for tax-efficient giving

Although the new rules impose certain limitations, consider the following approaches to help clients maximize tax-efficient giving opportunities without the complexity associated with more sophisticated charitable giving strategies.

• Gift bunching. The OBBBA permanently extended the higher standard deduction. Many taxpayers have already shifted from itemizing to taking the standard deduction, and some have begun “bunching” two or more years’ worth of charitable contributions into one tax year to make itemizing worthwhile. For instance, a donor who typically gives $12,000 annually could contribute $36,000 in 2026 and claim the itemized deduction, then take the standard deduction in the following two years before making another gift. This strategy may also help some donors surpass the new 0.5%-of-AGI floor.
• Donor-advised funds (DAFs). DAFs remain a versatile option for taxpayers who want to make a large charitable contribution during a high-income year, qualify for an immediate income tax deduction, then recommend grants to charities over time. Donors concerned about the new giving floor or the cap on deductions (for those in the 37% tax bracket) might want to explore the idea of making a larger gift to a DAF, surpassing the giving floor, then recommending grants over the next few years equivalent to their usual annual gifts. This can be particularly useful for donors who are planning multiyear gifts.
• Qualified charitable distributions (QCDs). IRA owners age 70½ or older can continue to use QCDs to donate directly from their IRAs. These gifts are not deductible, so they are not impacted by the new giving floor or limitations on deductions. Instead, they are tax-free distributions that count toward the donor’s required minimum distribution (RMD) if one is due. For example, a 75-year-old could make a QCD from an IRA, pay no tax on the distribution, satisfy their RMD, and preserve eligibility for the new senior deduction (learn more below).
• Opportunities for nonitemizers. If bunching gifts is not feasible or desirable, donors can take advantage of the new deduction for nonitemizers. This may even present a fresh incentive for increased giving.
• Strategic noncash donations. Now that the new limitations on deductions are in place, high-income donors might want to explore gift options that offer substantial tax advantages, such as gifts of appreciated stock or real estate. The ability to bypass the capital gains tax on these assets may make up for the limitations on deductions.
• Legacy gifts. While bequests and charitable beneficiary designations don’t offer any income tax advantages, they also aren’t impacted by the new deduction limitations. Some donors may find these to be easy, powerful alternatives to annual gifts.

Non-grantor trusts

The non-grantor trust can be a powerful, strategic tool for reducing income taxes and maximizing charitable deductions after the OBBBA. It is particularly effective for donors who do not want to itemize and are not concerned about estate tax inclusion (those with estates well under $15 million).

Because these irrevocable trusts pay their own taxes, a grantor who funds a non-grantor trust with income-producing assets (e.g., dividend stocks or rental property) can reduce taxable income while allowing the trust to manage and distribute income in a more tax-efficient manner. And, as the assets in the trust are held outside of the grantor’s estate, they are not subject to estate tax—the grantor can meet philanthropic goals while preserving the bulk of the estate for heirs.

A donor may choose to fund a non-grantor trust, at least partially, with assets intended for charitable giving. Funding a non-grantor trust with income-producing investments and authorizing the trustee to make distributions to qualified charitable organizations from the trust’s gross income will allow the trust to take a full deduction for those gifts, thereby reducing the trust’s taxable income. The trust is not subject to the 0.5%-of-AGI giving floor and may also deduct up to $40,400 (in 2026) in state taxes under the newly increased SALT cap deduction. The donor can use this strategy multiple times to meet charitable goals efficiently while preserving control over trust assets.

Considerations

Donors should carefully weigh the costs of a non-grantor trust, then ensure that the trust is structured properly to achieve the desired tax benefits. Important considerations include the following:

• Trust income management. Non-grantor trusts are subject to compressed income tax brackets, meaning they reach the highest tax rate at much lower income levels than individuals. Proper planning is needed to ensure efficient management of the trust’s income. The grantor might consider funding the trust with low-income-producing assets (such as tax-exempt bonds) and having the trustee limit the trust’s taxable income by making timely charitable contributions.
• Administrative costs. Setting up and maintaining a non-grantor trust involves legal, accounting, and administrative expenses. The grantor must decide whether the tax savings and charitable benefits will outweigh these costs.
• Qualified charitable organizations. Contributions must be made to qualified charitable organizations to qualify for income tax deductions. Donors should ensure that their philanthropic goals align with the trust’s structure.
• Coordination with other strategies. Non-grantor trusts can complement other estate planning tools, such as donor-advised funds or charitable remainder trusts, to further enhance tax efficiency and charitable impact.
• State tax implications. Review state-specific tax laws, as some states may have different rules regarding non-grantor trusts, charitable deductions, and income taxes. States imposing income tax also establish rules to determine if a trust is a “resident” or “non-resident” of the state, often based on the trustee’s residency.

Example

In 2026, Susan has a $10 million estate and a strong commitment to two specific charities. She funds a non-grantor trust by transferring ownership of dividend-paying stocks valued at $500,000 to the trust. The trust becomes the legal owner of the portfolio and receives the dividend income generated by the stocks. The trust donates $25,000 of its gross income annually to the qualified charities (allocated equally between the two)—donations that are specifically allowed under the terms of the trust.

The trust deducts the full $25,000 for these contributions each year, reducing its taxable income and potentially moving it into a lower tax bracket for further savings on federal income taxes. If Susan makes the same contributions as an individual with an AGI of $750,000, her deduction would be reduced by two new limitations: It would be capped at 35% (even though she’s in the 37% tax bracket), and only the amount exceeding 0.5% of her AGI would be deductible. These limits mean she would only receive a charitable deduction for donations exceeding $3,750, which would limit the tax benefit to $7,438 ($21,250 deductible amount × 0.35 cap rate).

By using a non-grantor trust, Susan achieves her philanthropic goals while preserving the estate for her heirs. The principal of the trust remains intact and grows, and the trust’s charitable deductions reduce taxable income, preserving more wealth for heirs.

Reviewing existing trusts

The OBBBA necessitates a thorough review of existing irrevocable trusts, as those created when the exemption limits were significantly lower may benefit from strategic modifications. Grantors should review trust distribution powers, powers of appointment, trustee succession plans, tax allocation clauses, and generation-skipping transfer tax provisions. It may be possible to enhance existing trusts through decanting (transferring assets from an old trust to a new one with updated terms), which allows grantors to consolidate multiple trusts, adjust trustee powers to meet current needs, and leverage tax-saving strategies.

If a charitably-minded individual finds they no longer need an existing non-grantor trust due to the higher estate tax exemption or for other reasons, they may wish to repurpose it to make charitable contributions from the trust income to facilitate a full deduction under IRC § 642(c). This approach not only reduces taxable income but also supports philanthropic goals.

Charitable trusts

The OBBBA’s increased estate and gift tax exemption amount ($15 million in 2026) provides greater flexibility for passing on generational wealth; however, it remains as critical as ever for taxpayers at all levels to review and update their estate plans. Those with significant wealth must continue to plan strategically to avoid the federal estate tax. While philanthropically-minded individuals with a net worth below $15 million may feel less urgency, they should also revisit their estate plans to explore the opportunity to couple larger tax-free transfers with the fulfillment of charitable goals. Charitable remainder trusts (CRTs) and charitable lead trusts (CLTs) remain strong options for balancing philanthropy with tax-efficient wealth transfer and estate planning.

Note: The OBBBA did not change the rules relating to CRTs or CLTs—these tools still offer important tax and planning benefits. However, the changes to charitable deduction rules could reduce the immediate tax benefit of funding split-interest gifts for some donors.

Charitable remainder trusts

A CRT is an irrevocable trust (a separate legal entity). A donor transfers assets (typically appreciated property like securities or real estate) to the trust to provide income to the donor or one or more beneficiaries designated by the donor for a specified period (for life, joint lives, or a term of up to 20 years). The CRT is a gift of a remainder interest (to the charitable remainderman) with a retained income interest (for the amounts in the trust paid to the income beneficiary). When the income beneficiary’s interest ends, the trust assets pass irrevocably to a qualified charity.

The donor determines the terms of the trust based on their own unique planning needs. Donating appreciated assets provides the promised income stream and allows the donor to avoid capital gains tax on the increase in the property’s value (26 U.S. Code § 644).

A donor can establish a CRT during life (an inter vivos transfer) or in a will (a testamentary transfer). Generally, an inter vivos trust provides more tax benefits because the gift qualifies for an income tax charitable deduction equal to the present value of the remainder interest in the year the trust is created (subject to the limitations discussed earlier) (26 U.S. Code § 2522). However, assets placed in the trust during the donor’s lifetime are no longer under the donor’s complete control. Donors who would be more comfortable having full enjoyment of the property during their lifetime should opt for a testamentary trust.

There are two types of charitable remainder trusts (26 CFR § 1.664-1):

• A charitable remainder annuity trust (CRAT) pays out a set amount every year, determined as a fixed percentage of the initial value of the trust assets. The trust is required to make distributions at least annually (including the year of the trust’s creation). Thus, an illiquid asset that does not generate income may not be a good funding choice unless sufficient cash is also part of the gift. It is also important to note that a CRAT does not allow additional contributions after the initial contribution (26 CFR § 1.664-2).

• A charitable remainder unitrust (CRUT) pays out a variable amount every year, determined as a specified percentage of the trust assets as revalued each year (26 CFR § 1.664-3). This gives a CRUT more flexibility than a CRAT, including allowing additional contributions. There are several types of CRUTs, including straight or fixed-percentage unitrusts, net income (without makeup) unitrusts (NICRUTs), net income with makeup unitrusts (NIMCRUTs), and flip unitrusts.

CRT terms require the trustee to distribute a specified annual annuity payment of at least 5% of the trust’s initial value (and not more than 50%). The value of the charitable remainder eventually passed on to the charity must be at least 10% of the property’s fair market value (26 U.S. Code § 7520).

CRTs are not for everyone. Because of their relative complexity and the expense associated with their establishment and administration, CRTs are generally feasible only for gifts of $100,000 or more (depending on the type of CRT). Furthermore, they are irrevocable, involve legal and administrative complexities, and pass their remaining value to charity rather than heirs, which may not align with every donor’s goals.

Charitable lead trusts

A CLT is an irrevocable trust, established during life or at death, that provides an income interest to a charitable beneficiary for a period of time. At the end of the income period, the property reverts to the grantor (or a noncharitable beneficiary) and must meet certain criteria to preserve the availability of income and gift (or estate) tax deductions. A CLT can generate immediate tax deductions (subject to the limitations discussed earlier)—the longer the charitable income term, the larger the deduction—while also preserving long-term family wealth.

A CLT is a taxable trust. How the income is taxed depends on whether the CLT is a grantor or non-grantor trust. Qualified distributions to charities from a non-grantor trust are eligible for an income tax deduction under IRC § 642(c). The key to non-grantor CLT status is ensuring the donor does not retain any powers (e.g., a reversionary interest in the trust property or certain administrative powers) that cause them to be treated as the owner of the income interest (26 U.S. Code § 671).

There are two types of CLTs—qualified and nonqualified. Transfers to qualified CLTs are eligible for income, gift, and estate tax charitable deductions, while transfers to nonqualified CLTs are not. For a CLT to be qualified, the lead interest payable to the charity must be a qualified annuity or unitrust interest. Therefore, qualified CLTs must be one of the following:

• Charitable lead annuity trust (CLAT). A CLAT makes fixed periodic payments (a percentage of initial trust assets) to the charitable beneficiary. Unless the principal is depleted, the charity receives a known payment for the annuity’s duration.
• Charitable lead unitrust (CLUT). A CLUT makes variable periodic payments (a percentage of the annually revalued trust assets) to the charitable beneficiary.

A CLT generally does not offer the possibility of avoiding or deferring income tax by transferring appreciated assets, but it does offer numerous other benefits, including:

• Transferring wealth to future generations at a reduced tax cost
• Avoiding the deduction limitations under the OBBBA (for non-grantor CLTs)
• Providing the donor with the satisfaction of contributing to charity without permanently giving up their assets
• Allowing the donor (or the donor’s beneficiaries) to share in the appreciation of the trust assets
• Helping minimize the donor’s income tax in the year the trust is established (26 U.S. Code § 170)

Winning strategies under the OBBBA

Just as athletes must adjust their play when the rules shift, donors and financial professionals must adapt to the new landscape created by the OBBBA. The new legislation has introduced both opportunities and complexities. By staying informed and aligning charitable strategies with each client’s unique financial and legacy goals, you can help them stay on offense—maximizing impact while avoiding costly penalties. Understanding and leveraging the OBBBA’s provisions will help you secure tax efficiency for your clients and solidify your role as a trusted partner in turning their philanthropic vision into lasting, meaningful results.