As we continue to roll through Estate Planning Awareness Week, the ongoing link between income tax planning and estate planning shows itself again. This time, in the charitable planning world. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) became law.1 This sweeping bill addresses many topics both inside and outside the tax world. One of the more profound changes in the OBBBA was a modification of the charitable deduction rules for income tax purposes.
One change in the bill helps many taxpayers who are charitably inclined. For those who do not itemize, the OBBBA stipulates that you can deduct up to $1,000 as a single person and up to $2,000 as married taxpayers for gifts to public charities. These deductions are “above the line.” This means the deduction lowers your taxable income dollar for dollar before applying the standard deduction. This is akin to the brief deduction allowed during COVID, which at the time was a $300/$600 deduction. This gift can only be made in cash and only to qualified public charities.
For those who itemize, the rules are much more complex and, frankly, not taxpayer friendly. To take an itemized charitable deduction, there is a new floor that must be met. Now, deductions will only be allowed for contributions exceeding 0.5% of your modified adjusted gross income (MAGI). For example, if you have a $500,000 MAGI and make a $10,000 gift, you can only deduct $7,500 of the gift because the first 0.5% of your MAGI ($2,500) is a floor threshold that must be surpassed before you can take the deduction. In other words, if you only gifted $2,500 in this scenario, you would not be allowed to deduct any of the gift.
You may ask yourself why this is an estate planning discussion. The reason is there are many charitable planning techniques estate planners use that will be affected by these new rules. For example, many people with highly appreciated stock holdings or those who may be selling a closely held business interest often consider a charitable remainder trust as a planning tool. This type of planning usually defers capital gains over a longer period while providing an income stream to the trust beneficiary and an immediate charitable deduction for a portion of the assets donated to the trust. These new deduction floors may make this planning less attractive. Moreover, the OBBBA limits those in the 37% tax bracket to a near 2% “haircut” on all itemized deductions, including charitable deductions. Accordingly, the OBBBA adds yet another layer of consideration to certain planning goals.
On the other hand, the OBBBA did not make any changes to charitable deductions on a federal estate tax return. With this in mind, it may be worth considering larger charitable gifts at death versus during life so you can get a “dollar for dollar” deduction for the gift on your estate tax return. Of course, that means there is no income tax deduction for the gift, and the charity can’t benefit from your gift until your passing, but for some this may seem like a better planning option. Especially for those who may face a taxable estate.
In short, the OBBBA has changed the planning landscape. The “old standbys” may not be as attractive as they once were. If you are charitably inclined, work with your tax and legal professionals to see what type of planning techniques may be best for you. Your Benjamin F. Edwards financial advisor has access to many high-level planning articles that may help you better understand these issues as well. Be sure to work with your entire professional team to make sure your charitable planning goals can be met in the most efficient manner possible.
1 For a more comprehensive review of the OBBBA, ask your Benjamin F. Edwards Financial Advisor for a copy of our Tax Considerations for 2026 planning piece.
IMPORTANT DISCLOSURES: The information provided is based on internal and external sources that are considered reliable; however, the accuracy of this information is not guaranteed. This piece is intended to provide accurate information regarding the subject matter discussed. It is made available with the understanding that Benjamin F. Edwards & Co. is not engaged in rendering legal, accounting or tax preparation services. Specific questions on taxes or legal matters as they relate to your individual situation should be directed to your tax or legal professional.
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