Note: This summary reflects our best understanding as of July 2025 and will very likely evolve as Treasury issues implementing regulations. Always consult a tax professional or legal advisor before acting on these provisions.
A practical guide for nonprofits, donors & schools
Signed July 4 2025
| Winners | Losers |
|---|---|
| Small-dollar donors – permanent $1 000 / $2 000 above-the-line deduction (starts 2026) | High-income donors – 0.5 % AGI floor and Pease cap cut top benefit from 37 ¢ → ≈ 35 ¢ |
| K-12 SGOs – $1 700 credit redirects gifts their way (2027) | Corporations whose giving is < 1 % of taxable income – first dollars no longer deductible |
| Treasury – larger excise haul from elite endowments & $1 M+ pay packages | Elite universities – endowment tax tiers leap to 4 % / 8 % |
| Provision | Old Law | New Law | Practical Impact |
|---|---|---|---|
| Above-the-line deduction (non-itemizers) | Expired 2021 | Up to $1 000 / $2 000 cash gifts; no DAFs | Promote in every mass appeal |
| 0.5 % AGI floor (itemizers) | None | Only gifts above the floor deductible | Encourage bunching / DAF front-loads |
| Pease-style cap (§ 68)* | Suspended since 2018 | Flat 5.4 % haircut → top benefit ≈ 35 ¢ per $1 | Show after-tax cost in proposals |
| 60 % AGI cash limit | Sunsetting 2025 | Permanent | Keeps “mega-gift” ceiling high |
*Note: While commonly referred to as “Pease-style,” this is not a revival of the original Pease limitation. Instead, it’s a new flat 5.4% haircut that caps the tax benefit of itemized deductions at about 35¢ on the dollar for top earners.
Estate Planning Note:
The One Big Beautiful Bill Act also makes permanent the doubled estate and gift tax exemption—roughly $15 million per person (or $30 million per couple) starting in 2026. While this change affects only a fraction of estates, charitable contributions of retirement assets remain a powerful strategy for both tax savings and mission impact.
| New Rule | Detail | Fund-Raising Angle |
|---|---|---|
| 1 % taxable-income floor | Gifts below 1 % aren’t deductible; 10 % cap & 5-year carry-forward remain | Target firms already over 1 %; front-load multi-year sponsorships |
Tip: If your mission touches education equity, partner early with SGOs before donor dollars migrate.
| Assets per student | Rate |
|---|---|
| $500 K – $750 K | 1.4 % |
| $750 K – $2 M | 4 % |
| > $2 M | 8 % |
The 21 % excise now hits every current / former employee earning > $1 M – not just the top five. Boards should model costs for physicians, athletics coaches, and golden-parachute packages. The 21% excise tax previously applied only to the five highest-paid employees but now applies to all current or former nonprofit employees exceeding $1 million in compensation.
| Takes effect | Provision |
|---|---|
| Tax years after 12-31-2025 | Corporate 1 % floor • Expanded § 4960 pay tax • University tiers/reporting |
| 2026 return | Non-itemizer deduction • 0.5 % AGI floor • Pease cap |
| 2027 return | $1 700 scholarship credit |
All removed in conference.
Beginning in 2026, individuals can transfer $15 million tax-free ($30 million for couples), indexed annually. While this impacts fewer than 0.5% of estates, retirement accounts remain one of the most tax-efficient charitable assets.
Note: While we’ve aimed for precision, minor discrepancies may exist. Purely human interpretations often introduce greater variance—and occasionally, unintentional opinion masquerading as fact.
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On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) became law, reshaping several rules that affect charitable giving. Below is a donor-friendly summary and practical planning pointers.
Starting with 2026 tax returns, taxpayers who do not itemize may deduct cash gifts to qualified public charities up to:
Important: Gifts to donor-advised funds (DAFs), supporting organizations, or private foundations don’t qualify for this new universal deduction.
Smart move: If you don’t itemize, consider annual cash gifts up to your universal limit—and if you’re 65+, evaluate eligibility for the temporary $6,000 seniors’ deduction.
Smart moves: “Bunch” multiple years of giving into one tax year to clear the 0.5% floor; consider a DAF to time large itemized gifts (note: DAF gifts don’t qualify for the universal deduction); front-load pledges in a chosen year to exceed the floor.
| Change | Effective Date |
|---|---|
| $1,000/$2,000 non-itemizer cash-gift deduction | 2026 tax year |
| 0.5% AGI floor & ~35% cap (top bracket) | 2026 tax year |
| K–12 SGO federal credit (up to $1,700; state opt-in; nonrefundable) | 2027 tax year |
| Estate & gift exemption increased to $15M/$30M (indexed) | 2026 tax year |
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