The recently enacted One Big Beautiful Bill Act (“OBBBA”) brings several meaningful changes to the federal tax code. Understanding these changes can help you make informed decisions about your charitable giving strategy. For those who use Donor-Advised Funds (DAFs) as part of their philanthropy, here is how the new law may affect you.
Important Changes for Non-Itemizing Donors
Beginning with the 2026 tax year, the OBBBA introduces a new charitable giving deduction for taxpayers who take the standard deduction.
Universal Deduction for Non-Itemizers: Single filers can deduct up to $1,000 ($2,000 for married couples filing jointly) for cash gifts to qualified public charities.
DAF Contributions Excluded: Gifts made to donor-advised funds or private non-operating foundations do not qualify for this new deduction. The benefit applies only to direct cash gifts to operating public charities.
Limited Impact for DAF Users: Because most DAF donors already itemize deductions, this new rule is unlikely to change your giving strategy. It simply confirms that DAFs are best suited for donors who itemize.
Important Changes for Itemizing Donors
For those who itemize, several key provisions were made permanent or adjusted under the new law.
Permanent 60% AGI Limit for Cash Gifts: The 60% of Adjusted Gross Income (AGI) limit for cash gifts to public charities—including DAFs—has been made permanent. This offers continued flexibility for donors making significant cash contributions.
Strategic Giving Remains Valuable: Strategies such as “bunching” multiple years of gifts into a single tax year to exceed the standard deduction threshold remain effective.
Consider Accelerating Gifts: Beginning in 2026, the maximum tax benefit of itemized charitable deductions for top earners will be capped at 35%, even if their marginal tax rate is higher. Making large charitable gifts before the end of 2025 can preserve the current 37% deduction value.
DAFs Continue to Offer Key Advantages
Despite these changes, donor-advised funds remain a highly effective and flexible charitable planning tool.
Tax-Efficient Giving: Contributions of appreciated assets—such as stock or private business interests—continue to provide an immediate fair-market-value deduction while avoiding capital gains tax.
Separate Tax Planning from Giving: A DAF allows you to take a deduction in a high-income year, then recommend grants to charities over time as you wish.
Strategic Philanthropy: Even though the new universal deduction excludes DAFs, they remain ideal for itemizing donors who seek long-term charitable impact and control.
What to Expect in 2026: New “Floor” and “Ceiling” for Itemizers
Two additional limits take effect in 2026 that may influence the timing of charitable contributions.
35% Cap on Deduction Value for High-Income Donors: For individuals in the top tax bracket, the tax value of a charitable deduction will be limited to 35%. Under current law, deductions can offset income taxed at up to 37%, so delaying gifts until 2026 could reduce your overall tax benefit.
0.5% AGI “Floor” for Charitable Deductions: Only the portion of annual giving that exceeds 0.5% of your AGI will qualify for deduction.
- For example, if your AGI is $1,000,000, the first $5,000 of donations would not be deductible. While this threshold may have modest impact for large donors, it could affect those who make consistent smaller gifts throughout the year.
Next Steps
If you are charitably inclined and currently utilize a DAF—or are considering one—this is an excellent time to review your giving strategy.
- Review your overall tax picture and consider whether accelerating major gifts before year-end 2025 makes sense for you.
- If you typically take the standard deduction, explore whether “bunching” gifts in specific years could increase your deductions.
- If you itemize, consider donating appreciated assets to maximize both your deduction and your impact.
- Continue using your DAF as a flexible and strategic tool to support the causes you care about.
- As always, discuss your charitable giving plans with your financial and tax advisors to determine the best strategy for your individual circumstances.
Prepared by Johnny Wells, EA Senior Tax Associate and Bill Yeager, CPA:
Important Disclosures
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