New tax rules bring both opportunities and challenges for faithful donors looking to give wisely and generously
Briefly:
- The One Big Beautiful Bill Act changes how charitable deductions are calculated, making timing and method of giving more important than ever.
- Donor-advised funds and IRA gifts remain powerful tools for tax-efficient giving, especially for retirees and high-income earners.
- Recent tax changes, including a higher SALT cap and permanent income tax brackets, open up strategic opportunities for mid-income donors to enhance their impact.
If you’re considering a charitable contribution, you may be wondering how recent changes in the tax law affect not only what you give, but how and when you give. The passage of the One Big Beautiful Bill Act (OBBBA) in 2025 represents a shift in the tax landscape that may influence the type and timing of charitable giving you choose to prioritize.
Changes to tax laws could influence the deductibility of charitable contributions, potentially affecting how much donors are able to give. For those who prioritize philanthropy, these adjustments may also have a significant impact on long-term financial planning, including tax and estate strategies.
This article is meant to help you understand the new rules clearly, consider practical strategies and reflect on how thoughtful giving can strengthen the mission of faith-based causes you believe in.
What is the One Big Beautiful Bill Act? (In plain language)
Under OBBBA, several long-standing tax provisions were made permanent, and new rules governing charitable deductions were introduced. Here are the changes most relevant for charitable donors:
- The larger standard deduction (first introduced under the 2017 tax law reforms) becomes permanent. For 2025, the standard deduction is roughly $15,750 for single filers and $31,500 for married couples filing jointly; it remains adjusted for inflation going forward.
- For taxpayers who continue to itemize deductions, charitable donations are subject to a new “floor” and cap. Only the portion of donations exceeding 0.5% of adjusted gross income (AGI) may be deducted. In practical terms: if your AGI is $100,000, only contributions above $500 qualify for deduction.
- For those who do not itemize, but instead take the standard deduction, the law restores an “above-the-line” charitable deduction of up to $1,000 for single filers, or $2,000 for married joint filers. (This new deduction cannot be used for gifts to donor-advised funds or private foundations.)
- For high-income donors, the tax benefit of itemized deductions (including charitable gifts) is now effectively capped at 35% for taxpayers in or above the top 37% marginal rate.
In short: the same charitable gift may no longer yield the same tax benefit, depending on income level, the size of your gift and whether you itemize.
Timing is everything: When and how to give
With the new rules, the timing and size of your charitable gifts matter more than ever. Financial advisors recommend the following strategies for maximum impact on both the causes you wish to support and your overall financial health.
- “Bunching” gifts. Instead of spreading moderate gifts over several years, donors may find it more tax-advantageous to concentrate their donations in one year, enough to exceed the 0.5% AGI floor and maximize itemized deductions for that year.
- Leveraging high-income years. If you anticipate a spike in income (for example from the sale of a business, capital gains, stock-based compensation or other windfalls) that may be an ideal year to make a significant charitable gift, thereby offsetting higher tax liability.
- Giving before 2026. Since the new floor and caps apply starting with the 2026 tax year, donors considering a major gift might benefit by accelerating a gift into 2025 before the stricter thresholds take effect.
- Adjusting frequency. Smaller, regular annual gifts may yield less tax benefit under the new floor; donors may wish to combine giving into fewer, more substantial gifts.
Suppose a married couple with $200,000 AGI regularly donates $3,000 each year. Under the new law, only the portion above $1,000 counts for the above-the-line deduction, meaning $2,000 might be deductible, but not as favorably as before.
If instead they “bunch” $10,000 in 2026, the part above 0.5% of AGI (i.e., above $1,000); $9,000, may be deductible, making the larger gift more tax-efficient.
Two tools that maximize impact: Donor-advised funds and IRA giving
Beyond timing, the type of giving matters. Some methods remain especially advantageous under OBBBA. Beyond timing, the type of giving matters. Some methods remain especially advantageous under OBBBA.
- Donor-advised funds (DAFs): If you itemize deductions, contributing to a DAF can produce a current-year deduction even if you plan to distribute to charities later. For donors uncertain of exactly where they want to direct the funds, this offers flexibility: you “deduct now, decide later.”
- Qualified charitable distributions (QCDs) from IRAs: For individuals age 70½ or older, directing a distribution from a traditional IRA directly to a qualified charity remains a powerful strategy. Because such distributions are excluded from taxable income, they don’t require itemizing, an advantage especially if you plan to take the standard deduction.
Example scenario: A couple in their late 70s might direct $25,000 from their IRA to support formation at The Saint Paul Seminary. That $25,000 is excluded from income, satisfying all or part of the required minimum distribution and accomplishing a meaningful gift without complicating itemized deductions under the new floor and cap rules.
New features that could work in your favor
OBBBA affects more than just charitable deductions. Here are a few additional tax-planning developments that may offer unexpected opportunities:
- Expanded state and local tax (SALT) deduction cap: For 2025–2029, the cap on deductible state and local taxes is raised from $10,000 to $40,000 (subject to a phasedown for incomes above certain thresholds). This expansion may make it advantageous for some taxpayers to itemize, which could in turn enhance the benefit of charitable deductions under the itemized route.
- Stability and predictability of tax rates and deductions: The bill makes permanent the standard deduction and the seven federal tax-bracket rates (10%, 12%, 22%, 24%, 32%, 35%, 37%), avoiding the scheduled reversion to pre-2018 higher rates. This permanence offers reassurance: donors can plan confidently ahead, without worrying about sudden tax hikes that might distort giving strategies.
- Flexibility for moderate-income and high-tax state donors: Because of the SALT cap expansion, individuals who previously relied on the standard deduction may now find itemizing worthwhile, which might make their charitable gifts more tax-effective if they itemize in eligible years. For donors in high-tax states, or those facing fluctuating income, these changes may open new windows for strategic generosity, especially for those guided by faith and long-term philanthropic vision.
Making every gift count
Tax planning is important, but so is ensuring your gift has the greatest possible impact. Here are three timeless principles recommended by financial advisors for thoughtful, cost-effective giving:
- Give directly to the charity: While phone solicitations and door-to-door appeals may seem legitimate, many are managed by paid fundraisers, or worse, by groups misrepresenting themselves. Whenever possible, donate directly to the organization through its secure website or by mail. Avoid giving out personal information over the phone or email unless you initiated the contact.
- Check the charity’s track record: Use tools like Charity Navigator, Candid or CharityWatch to review how effectively a nonprofit manages its funds and fulfills its mission. Look for financial transparency, responsible use of resources, and clear alignment with your values.
- Look for “leverage” opportunities: Many corporations or benefactors offer to match gifts within specific campaigns or giving windows. Some employers also match charitable gifts made by their employees. These can double or even triple the impact of your gift.
Plan now, give with confidence
As the One Big Beautiful Bill Act reshapes key aspects of the U.S. tax code, it is more important than ever to reflect thoughtfully on your charitable giving: when you give, how much and by what method.
We encourage you to speak with your trusted financial advisor or estate planner and to consider how your generosity can align your values, support beloved ministries like The Saint Paul Seminary and steward your resources wisely.
Thank you for your faithful generosity. With prayerful discernment and thoughtful planning, you can continue to give with confidence and watch God multiply the good from your gift for the sake of the Church’s future.
NOTE: The Saint Paul Seminary does not give tax or financial advice. If you have specific questions, please consult with a licensed. tax or financial advisor.