Tax Overhaul Creates Universal Charitable Deduction With a Catch

For the first time in nearly a decade, Americans who don't itemize their taxes can deduct charitable donations. But the same law that grants that benefit quietly imposes new barriers that could erase its impact—and then some.

The Universal Deduction

The One Big Beautiful Bill Act, effective for the 2026 tax year, allows non-itemizers—more than 85% of all taxpayers—to deduct cash donations up to $1,000 for single filers and $2,000 for married couples filing jointly. The National Council of Nonprofits estimates this provision will generate $74 billion in additional charitable giving over the next decade.

There are exclusions worth noting: donations to donor-advised funds and private non-operating foundations don't qualify. And the deduction isn't indexed for inflation, meaning its real value will shrink every year Congress fails to adjust it.

The Hidden Costs for Large Donors

The law simultaneously introduces a 0.5% adjusted gross income floor for itemized charitable deductions. Itemizers can only deduct donations exceeding that threshold—turning small-to-moderate gifts into non-deductible contributions for many high-income donors.

The deduction cap drops to 35%, down from the 37% that top-bracket taxpayers previously received. A donor giving $100,000 now receives $35,000 in tax benefit instead of $37,000. Corporations face an even steeper hurdle: charitable deductions only apply above 1% of taxable income. Analysts at the Tax Foundation project corporate giving could fall by $4–5 billion annually as a result.

A Net Loss for the Sector

The math is concerning. While the universal deduction may bring in $74 billion over ten years, the restrictions on itemizers and corporations are projected to reduce giving by $81 billion over the same period—a net loss of roughly $7 billion for the charitable sector.

The estate tax exemption increase to $15 million further reduces planned giving incentives, as more than 99% of estates now fall below the threshold.

Nonprofits navigating this landscape should model the impact on their specific donor base. Organizations relying heavily on mid-level itemizing donors may face the steepest declines. Granted tracks these policy shifts alongside funding opportunities, helping organizations adapt their strategies before year-end giving campaigns. In-depth analysis of the OBBBA's full impact on the funding landscape is available on the Granted blog.