On July 4, 2025, the President of the United States signed the One Big Beautiful Bill (the "Bill"), which included significant taxing and spending modifications. To pay for extending certain tax cuts and other changes, the bill adds an Adjusted Gross Income ("AGI") floor for charitable contribution deductions for both individuals and corporations.
The Bill applies a 0.5% of AGI floor on itemized deductions by individuals, which works separately from the AGI ceiling on deductible contributions for individuals. Contributions above the limitation may be carried forward for five years, but any amounts disallowed below the floor may only be carried forward if the aggregate corporate contributions exceed the individual's AGI limitation, including the disallowed amounts. The limitation for individual contributions to most charities remains at 50% of AGI, and the Bill extended the 60% limitation for cash contributions originally found in the TCJA.
There is an additional aggregate limitation for individual taxpayers on all itemized deductions equal to the dollar amount at which the 37% rate bracket begins for such taxpayer. This new limitation will also take effect for the 2026 tax year.
The bill also applies a 1% of AGI floor on charitable contribution deductions for corporations, which also operates separately from the 10% AGI limitation of charitable contribution deductions. The same carryforward rule for individuals applies to corporations exceeding the 10% limitation. The changes for both individuals and corporations will not take effect until the 2026 tax year. Because the changes do not take effect until next year, there may be an incentive to engage in charitable giving planning before the end of this year.
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