The One Big Beautiful Bill Act (OBBBA) has some eye opening changes that everyone should learn. The rules for 2025 haven’t changed.
But the changes for 2026 and forward include…
1 – Donors who don’t itemize their 1040 will be allowed up to $1K for single filers and $2K for married taxpayers in above the line donation deductions. Currently you can’t get a deduction for donations if you don’t itemize.
2 – Taxpayers who list their donations on Schedule A will have their deduction limited by 0.5% of their adjusted gross income (AGI). The current 100% deduction will become a thing of the past next year.
If you have $200K in AGI and $20K in donations, the first $1,000 of your donations will become non-deductible expenses. in 2026, you’d only receive a $19,000 deduction.
Your Schedule A may be limited next year.
3 – Taxpayers in the highest tax bracket of 37% will have their charitable donations limited further. Top bracket taxpayers will only get to take the deduction at the lower income tax rate of 35% rather than at 37%.
This year, if a married couple earns $900K and makes $100K in donations they’ll save 37% on their federal taxes or $37,000. Once this law goes into effect, their tax savings will only be $33,425.
Let me leave you with this…
If you’re planning on charitable giving and these changes will affect you, then you should probably complete it this year.
The limits on Schedule A are going to hurt everyone, but mostly Top Bracket Taxpayers. While limits on Schedule A Deductions are nothing new to Top Earners, limits on these deductions for Middle Class Taxpayers are entirely new and quite unexpected.
Again, if you were going to do some charitable giving, you might want to complete it by December 31st of this year while it’s still 100% deductible.
This is the seventh column in my series on tax law changes for Entrepreneurs. If you have any tax planning questions, you know my number.
We’re all going to get through this. Let’s get through it together.
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