Understanding the One Big Beautiful Bill Act - What Changed for Charitable Giving

Illustration of a donation box and a legislative document.
This landmark legislation represents the most significant overhaul of charitable giving incentives since the 2017 Tax Cuts and Jobs Act.
Gudsy Team

Gudsy Team

July 7, 2025

Part 1/5 - One Big Beautiful Bill Act and Charitable Giving

The One Big Beautiful Bill Act (H.R. 1) was signed into law by President Trump on July 4, 2025, following dramatic passage through Congress with narrow margins[1][2]. This landmark legislation represents the most significant overhaul of charitable giving incentives since the 2017 Tax Cuts and Jobs Act, creating both new opportunities and substantial challenges for nonprofits and their supporters.

The Legislative Journey

After months of negotiations, the Senate passed the bill 51-50 on July 1, 2025, with Vice President JD Vance casting the tie-breaking vote[3]. The House then approved the final Senate version 218-214 on July 3, clearing the way for President Trump’s signature during a Fourth of July ceremony at the White House[4]. The legislation utilized budget reconciliation procedures to bypass traditional filibuster rules, allowing passage with simple majority votes.

Five Key Changes to Charitable Giving

The enacted law fundamentally reshapes how charitable contributions are treated in the tax code through five major provisions:

1. Universal Charitable Deduction for Non-Itemizers (Section 70424)

What Changed: The law creates a permanent above-the-line deduction for taxpayers who take the standard deduction, allowing up to $1,000 for single filers and $2,000 for married couples filing jointly[5].

Who Benefits: Approximately 90% of taxpayers who don’t itemize their deductions can now receive tax benefits for their charitable giving[6]. Previously, these taxpayers received no tax benefit for charitable contributions.

Important Exclusion: Contributions to donor-advised funds are not eligible for this deduction[5].

Economic Impact: This provision is estimated to generate $74 billion over 10 years for nonprofit organizations[6][7].

2. 0.5% Floor for Itemized Charitable Deductions (Section 70425)

What Changed: Individual taxpayers who itemize can now only deduct charitable contributions that exceed 0.5% of their adjusted gross income[6][5]. This creates an “all or nothing” threshold where donations below 0.5% of AGI receive no tax benefit.

Impact Example: A taxpayer with $100,000 in adjusted gross income must give more than $500 to charity before any charitable deduction is allowed.

Economic Impact: This provision is estimated to reduce charitable giving by $64.9 billion over 10 years[5].

3. 1% Floor for Corporate Charitable Deductions (Section 70426)

What Changed: Corporations must now donate at least 1% of their taxable income to qualify for any charitable deduction[6][5]. The existing 10% ceiling remains, with a five-year carryforward provision for excess contributions.

Significant Finding: Ernst & Young analysis found that in 2021, corporate charitable giving averaged only 1.4% of taxable income nationally, with the median across 189 industries at just 1.0%[8][9]. This means many corporations will lose their deduction entirely.

Economic Impact: This change is projected to generate $16.6 billion over 10 years in government revenue while potentially reducing corporate charitable giving by $4.2-$4.8 billion annually[8][9].

4. Cap on Tax Benefits for Itemizers (Section 70111)

What Changed: The value of all itemized deductions—including charitable contributions—is now capped at 35 cents per dollar instead of the previous 37 cents for top earners[6][5].

Who’s Affected: Only taxpayers in the highest (37%) tax bracket are impacted by this change.

5. Enhanced Standard Deduction (Section 70102)

What Changed: The law permanently increases the standard deduction to $15,750 for single filers and $31,500 for joint filers in 2026[5].

Secondary Effect: This means even fewer taxpayers will itemize, further shrinking the pool eligible for traditional charitable deductions while expanding those who can benefit from the new universal deduction.

Net Impact: $7 Billion Reduction Despite New Benefits

While the universal deduction provides a $74 billion boost to potential charitable giving over 10 years, the various floors and caps are estimated to reduce giving by approximately $81 billion, resulting in a net reduction of about $7 billion over 10 years[6][7].

Historical Context: Learning from the 2017 Tax Cuts and Jobs Act

The most authoritative research on tax policy’s impact on charitable giving comes from Indiana University and the University of Notre Dame[10][11]. Their study, published by the National Bureau of Economic Research, found that the 2017 Tax Cuts and Jobs Act led to a $20 billion annual reduction in charitable giving in 2018.

Key findings from this research include:

  • 23 million households switched from itemizing to taking the standard deduction[10][11]
  • $880 average decrease in giving per switcher household[10]
  • 57% decline in taxpayers claiming charitable deductions[10]
  • About 20% of the drop reflected timing shifts, with the remainder representing permanent changes[11]

The researchers found a permanent price elasticity of 0.6, meaning that for every 10% increase in the “price” of giving (reduction in tax benefits), charitable donations decreased by 6%[11].

Documentation Requirements Remain the Same

Importantly, the law maintains existing IRS substantiation requirements for all charitable contributions, including those claimed under the new universal deduction:

  • Under $250: Bank record or written acknowledgment sufficient
  • $250 and above: Must have contemporaneous written acknowledgment from charity
  • No simplified procedures for the universal deduction

Implementation Timeline

All charitable giving changes take effect for tax year 2025, meaning nonprofits and donors must adapt their strategies immediately. The universal deduction provides immediate opportunities for the 90% of taxpayers who don’t itemize, while the various floors and caps create immediate challenges for traditional donor groups.

Looking Ahead

This legislation represents a fundamental shift in America’s charitable giving landscape. Organizations that can successfully engage the expanded base of non-itemizers while maintaining relationships with existing donors may find opportunities within these challenges. However, the overall reduction in tax incentives means nonprofits must increasingly focus on building authentic relationships based on shared values rather than tax benefits alone.

The complexity of these new provisions requires careful implementation planning, both for nonprofits optimizing their fundraising strategies and for donors navigating new requirements. As we’ll explore in subsequent parts of this series, these changes have differential impacts on various stakeholder groups and create both strategic challenges and opportunities for forward-thinking organizations.

Sources