✦ TL;DR
The One Big Beautiful Bill Act (Public Law 119-21, July 4, 2025) is the most significant change to U.S. charitable-giving tax rules in a generation. Beginning with the 2026 tax year: a permanent above-the-line charitable deduction up to $1,000 single / $2,000 joint for non-itemizers (Section 70424); a 0.5% AGI floor below which itemized contributions yield no benefit (Section 70425); a 35% cap on itemized deduction value for the top 37% bracket (Section 70111); and a 1% AGI floor on corporate charitable deductions (Section 70426). The Lilly Family School with CCS Fundraising estimates a net ~$5.69B annual reduction in giving alongside 6-8.7 million additional donor households. Our view: not 'fewer dollars and fewer donors' — 'fewer dollars from concentrated sources, more donors at the small end.'
What OBBBA Changes for Charitable Giving in 2026
OBBBA leaves the basic Section 170 framework for charitable deductions intact, but adds three new constraints on itemizers and corporations and one new pathway for non-itemizers. The combined effect is a shift in who gets a tax benefit for giving and how much — not a wholesale dismantling of the charitable deduction.
For the 2026 tax year, the standard deduction is $16,100 (single) / $32,200 (joint), continuing to push roughly 90% of taxpayers into non-itemizer status (per the Bipartisan Policy Center). For itemizers, Section 70425 introduces a 0.5% AGI floor: only contributions above 0.5% of AGI are deductible. A household with $250K AGI loses the deduction on the first $1,250 of giving; at $1M AGI, the first $5,000.
For taxpayers in the 37% top bracket, Section 70111 caps the value of itemized charitable deductions at 35%. Every $1 donated yields at most 35¢ of federal tax savings rather than 37¢ — a small percentage but consequential at scale across the cohort of top-bracket itemizing households.
⚠ Operational implication
Wealth advisors are already directing clients toward bunching strategies and DAF contributions in response to the 0.5% floor. For nonprofits relying on consistent annual giving from itemizing households, the timing of revenue is likely to shift even when totals don't.
The New Universal Deduction for Non-Itemizers
Section 70424 permanently restores and expands the above-the-line charitable deduction for non-itemizers. Beginning in tax year 2026, taxpayers who don't itemize can deduct up to $1,000 (single) / $2,000 (joint) in cash contributions to qualified public charities. The deduction is permanent, the dollar cap is fixed and not indexed to inflation, and it's restricted to cash gifts to public charities (DAFs, private foundations, and Section 509(a)(3) supporting organizations are excluded).
This is the single most consequential charitable provision in OBBBA for grassroots giving. The Lilly-CCS analysis estimates the new deduction will increase total household giving by about $4.39 billion annually and bring an estimated 6 to 8.7 million additional donor households into the system. A precedent: when a smaller version existed under the CARES Act, roughly 29.4% of standard-deduction filers used it.
Our view: the new deduction creates a meaningful opportunity for nonprofits that can serve a much larger pool of small-dollar donors at low marginal cost. It creates a problem for those who can't, because a non-itemizer who can't easily get a compliant receipt for a $25 gift has a real reason to redirect that gift to an organization that can — even if the smaller charity is the better mission fit.
Read the full briefing
The complete briefing covers the operational bar small nonprofits now face, the Lilly-CCS projection in detail (with all four provision-level effects), the 2027 SGO credit and what it may pull, and the practical takeaways for organizations whose donor base is concentrated vs. broad-based.
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The Operational Bar for Small Nonprofits
Section 70424 creates a real opportunity — millions of new tax-incentivized small donors — but the operational bar to capture them at scale is non-trivial. We think this is where the tax-policy story turns into a technology story for small-to-medium nonprofits...
When a non-itemizer needs documentation to claim a $200 deduction across eight $25 gifts, the charity that delivers that documentation cleanly has a structural advantage. This isn't a new IRS rule — it's an old rule that now applies to many more donors and many more small gifts...
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What Lilly School Projects, and the 2027 SGO Credit
The Lilly-CCS report decomposes the OBBBA impact into four pieces: +$4.39B from the universal deduction (Section 70424), -$2.43B from the 0.5% AGI floor (Section 70425), -$6.10B from the 35% top-bracket cap (Section 70111), and -$1.55B from the corporate 1% floor (Section 70426). Net: approximately -$5.69B annually...
Beginning January 1, 2027, Section 70411 establishes a federal nonrefundable tax credit of up to $1,700 (single) / $3,400 (joint) for donations to state-certified Scholarship-Granting Organizations supporting K-12 education. For a donor whose primary motivation is tax efficiency, the SGO credit is mechanically more valuable per dollar than the Section 70424 deduction...
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