The One Big Beautiful Bill Act affects charitable contributions for retirees and individuals considering their tax strategies.

I'm walking you through three major changes: the restoration of the charitable cash deduction for non-itemizers, new limitations on how much can be deducted for larger contributions, and a cap on itemized deductions for high earners.

Whether you give to charity every year, are planning a large gift, or just want to maximize your tax benefits, I'm sharing practical tips about when and how to make your contributions in light of these updates.

You will want to hear this episode if you are interested in...

• [00:00] More about increased standard deductions due to the SALT cap.
• [06:09] New charitable donation tax deduction limits starting in 2026.
• [10:20] The One Big Beautiful Bill Act limits itemized deductions in the highest tax bracket.
• [11:29] Front-load large charitable contributions this year for better tax deductions before a cap starts in 2026.

How the One Big Beautiful Bill Act is Changing Charitable Giving and Deductions

There are three pivotal ways the new One Big Beautiful Bill Act (OBBBA) is altering charitable contributions. Whether you're a casual donor or serious philanthropist, these changes will affect your strategy starting in the next tax year. Here's what you need to know:

1. Restoration: Above-the-Line Charitable Deductions for Non-Itemizers

For years, most taxpayers lost the ability to deduct their charitable contributions unless they itemized deductions—a rare scenario since the 2017 tax act doubled the standard deduction.

Previously, a temporary provision under the CARES Act allowed a small above-the-line charitable deduction for non-itemizers. However, that expired in 2021.

Thanks to section 70424 of the OBBBA, this above-the-line deduction is back, and it's here to stay—starting in 2026. The new rule permits single filers to deduct up to $1,000 and joint filers up to $2,000 in cash contributions, regardless of whether they itemize.

There are, however, clear conditions:

• Only cash gifts qualify: No clothing drop-offs or appreciated securities—just cash, checks, or debit card donations count.
• Certain charities excluded: Gifts to supporting organizations ("509A3" charities) or donor-advised funds won't count toward this deduction.

2. New Limitations for Itemized Deductions and Carryforwards

Historically, taxpayers who itemize could deduct up to 60% of their adjusted gross income (AGI) in cash gifts to public charities, and up to 30% or 20% for gifts of securities or for donations to private charities.

The OBBBA introduces a new wrinkle: starting in 2026, there's an additional cap—regardless of what percentage of your AGI you donate, your deduction will be reduced by half a percent (0.5%) of your AGI. Here's how it works:

• Apply the usual AGI percentage limits (60%, 50%, 30%, or 20%) per current IRS rules.
• Subtract half a percent of your AGI from your allowable deduction.

For example, if your AGI is $60,000 and you donate $50,000 in cash, ordinary limits allow a $36,000 deduction. With the new rule, you must subtract $300 (0.5% of $60,000), leaving $35,700 as your deductible amount for the year.

If your donation exceeds the limit, you can still carry forward the extra for five years, but the carry-forward will also be subject to the new cap in future years.

3. Caps on Itemized Deductions for Top Earners

For those at the pinnacle of the income scale, in the highest (soon to be 37%) tax bracket, the OBBBA imposes an extra limitation. Starting in 2026, you'll see a 2% reduction in the tax benefit of your itemized deductions.

That means a $10,000 gift, which may have saved you $3,700 in taxes under the old rules, might now only save $3,500. If you're planning a substantial charitable contribution and expect to be in the top tax bracket, aim to make your gift in 2025 to maximize tax savings before the cap bites.

Whether you itemize or not, these new caps and restored deductions mean you probably need to take a second look at your charitable plans.

Smart timing—waiting until 2026 for the non-itemizer deduction, and acting before then to maximize deductions for itemizers—can make a significant difference for your taxes and your favorite causes.

Resources Mentioned

• Retirement Readiness Review
• Subscribe to the Retire with Ryan YouTube Channel
• Download my entire book for FREE

Connect With Morrissey Wealth Management

www.MorrisseyWealthManagement.com/contact

Subscribe to Retire With Ryan