The One Big Beautiful Bill Act (OBBBA) brings major changes to the AGI percentage limits for charitable contribution deductions. Key provisions introduce a 0.5% AGI “floor” for individual deductions and a 1% floor for corporations, impacting how much taxpayers can deduct for charitable gifts. This update is crucial for anyone using AI tax research, AI tax tools, or AI tax planning solutions—especially as agentic AI in tax becomes essential for modern planning. Read on for the latest details, actionable insights, and best-in-class resources. Unlock the full power of your charitable giving strategy—see how AI-driven tax planning tools can help you maximize deductions under OBBBA!
OBBBA’s New Charity Deduction AGI Limits: An Overview
The One Big Beautiful Bill Act, set to take effect for tax years beginning after December 31, 2025, enacts the most significant update to charitable contribution AGI limits in decades. Here’s what tax professionals need to know:
1. Individuals: 0.5% AGI Floor
- What Changed?
Individuals can now only deduct charitable contributions to the extent the aggregate gifts exceed 0.5% of their AGI (contribution base) in a given year. - How It Works:
- If a taxpayer’s AGI is $100,000, the first $500 of charitable contributions are not deductible; only gifts above $500 can be deducted.
- Applies to both itemizers and, via a separate provision, expands the above-the-line deduction for non-itemizers (now up to $1,000 for single filers or $2,000 for joint filers).
- If a taxpayer’s AGI is $100,000, the first $500 of charitable contributions are not deductible; only gifts above $500 can be deducted.
- Carryforwards:
Unused deductions due to the 0.5% floor can be carried forward, but only from years in which the floor limits apply, and for up to 5 years.
2. Corporations: 1% AGI Floor, 10% Cap
- What Changed?
For corporations, only contributions exceeding 1% of taxable income are deductible, with an upper limit of 10% of taxable income per year. - How It Works:
- If a corporation’s taxable income is $1,000,000, the first $10,000 in gifts are not deductible; only the amount above that, up to $100,000 (10% cap), is eligible for deduction.
- If a corporation’s taxable income is $1,000,000, the first $10,000 in gifts are not deductible; only the amount above that, up to $100,000 (10% cap), is eligible for deduction.
- Carryforwards:
Contributions above the 10% limit may be carried forward to future years, per modified rules.
3. Cash Contribution Rules: 60% Limit Remains
- Cash contributions to qualifying public charities remain subject to the 60% of AGI limit, which was made permanent under OBBBA. However, the new 0.5% (individuals) and 1% (corporate) floors must be considered first in calculating allowed deductions.
4. Expanded Non-Itemizer Deduction
- Above-the-line deduction for charitable gifts by non-itemizers is made permanent and expanded to $1,000 (single) or $2,000 (married).
Why This Matters: Tax Planning in the OBBBA Era
These new AGI percentage limits require new strategies:
- Charitable bunching may become less effective for modest donors but remains a core strategy for higher-income clients and corporations.
- Careful tracking of multi-year giving is now more important than ever, especially with carryforward rules.
- AI tax research and planning tools can rapidly model scenarios, project optimal giving strategies, and maximize tax benefits by analyzing the interaction between AGI floors, caps, and carryforwards.
Leverage AI Tax Tools for Smarter Charitable Giving
Navigating the new OBBBA charitable deduction rules can be complex, but modern AI tax research tools and AI tax planning tools make it easier. Hive Tax AI, for example, helps professionals:
- Instantly calculate optimal giving amounts under new AGI limits.
- Track multi-year carryforwards and alert clients to missed deductions.
- Generate personalized reports for clients, factoring in all OBBBA provisions.
Conclusion: OBBBA Ushers in a New Era for Charitable Giving
The One Big Beautiful Bill Act resets the charitable deduction landscape. Whether you advise individuals or corporate clients, understanding and planning for these new AGI limits is crucial. Modern, agentic AI in tax can help you stay ahead of the curve, minimize lost deductions, and make every charitable dollar count.
Ready to take your tax planning to the next level? Try our AI tax research and planning tool for a smarter, easier way to maximize your charitable deductions under OBBBA.