The “Big Beautiful Bill” Charitable Deduction Floor: What It Means for You

The One Big Beautiful Bill Act – often dubbed the “big beautiful bill” – has ushered in major tax reforms that will affect how Americans donate to charity. Passed in July 2025, this sweeping law includes a new charitable deduction floor effective in 2026, fundamentally changing how itemized charitable deductions work. For high-earning professionals like dentists and physicians who regularly give to charity, it’s crucial to understand these changes and adapt your giving strategy accordingly.

A New Tax Break for Non-Itemizers (Above-the-Line Deduction)

One headline change in the new law is a benefit for taxpayers who take the standard deduction. Starting in 2026, anyone can deduct a portion of charitable donations even without itemizing. Specifically, individuals can deduct up to $1,000 (and married couples up to $2,000) in cash contributions to qualified public charities each year, above and beyond the standard deduction. This essentially creates a universal “above-the-line” charitable deduction that did not exist before (except temporarily in 2020-2021 under the CARES Act).

Why is this important? Previously, tax benefits for giving were mostly limited to those who itemize deductions (typically higher-income taxpayers). Now “the tax code is becoming charitable to many more donors” by extending deductions to non-itemizers. In fact, experts estimate that this new universal deduction could generate tens of billions in additional giving – one projection put it at about $74 billion over the next decade flowing to nonprofits. The goal is to encourage broader charitable participation, so even if you don’t have enough expenses to itemize, you still get a tax break for up to $1k (or $2k for joint filers) of your generosity.

However, restrictions apply: this new deduction is only for cash gifts to operating charities – donations to donor-advised funds, private foundations, or gifts-in-kind won’t count. Still, for many middle- and upper-middle-class professionals who previously got no tax benefit from writing a $500 check to their favorite charity, this is welcome news. It effectively levels the playing field so that all Americans, not just the wealthy, can get a tax incentive for charitable donations.

Introducing the 0.5% Charitable Deduction Floor for Itemizers

Alongside the new break for standard filers comes a significant change for those who do itemize their deductions. The “big beautiful bill” establishes a 0.5% of AGI floor on charitable deductions for itemizing taxpayers. In plain language, if you itemize your deductions, you will only be able to deduct charitable contributions that exceed 0.5% of your adjusted gross income (AGI) starting in 2026.

Think of it like the medical expense deduction threshold (where medical costs only count once they exceed 7.5% of AGI) – now charitable giving has a modest hurdle of 0.5%. For example: if your AGI is $100,000, the first $500 of your annual charitable donations will not be deductible – only giving beyond that amount can be written off. A higher-income example: with an AGI of $500,000, your first $2,500 in gifts (0.5%) gets no deduction; if you donate $10,000 total, only $7,500 of that would be tax-deductible.

Under previous law there was no such floor – even a $50 donation could be deducted by an itemizer. The reform “replaces the prior ‘no floor’ structure and creates a modest threshold before deductions apply”. Lawmakers have effectively raised the bar for deducting charitable gifts, possibly to discourage a flurry of small deduction claims and encourage more substantial giving. If you’re truly generous, this floor might not change your overall approach to philanthropy – but it could affect timing and tax planning for many donors. Those who budget a certain amount for charity each year might now delay or bundle donations to ensure they clear the 0.5% AGI threshold in a given tax year.

Notably, this floor applies to cash and non-cash contributions alike for itemizers. In practice, it means itemizing donors will need to be a bit more strategic. Small, regular gifts throughout the year may not all yield a deduction unless in total they top the 0.5% mark. Interestingly, this change makes the new above-the-line deduction for non-itemizers even more attractive for modest givers. If you don’t have enough to itemize, you at least get up to $1k/$2k of deductions automatically. But if you do itemize and give only a few hundred dollars a year, you might get no charitable deduction due to the floor. This dynamic could influence donors’ decisions on whether to itemize or take the standard deduction in some cases.

Additional Changes Affecting Charitable Deductions

Beyond the headline of the 0.5% floor, the “big beautiful” tax law made a few other notable tweaks that charitable donors should keep in mind:

• 60% AGI Limit for Cash Gifts Made Permanent: The ability for itemizers to deduct cash contributions up to 60% of AGI (raised from 50% by 2017’s tax law) was set to expire, but the new law makes the 60% limit permanent. This is good news for very generous donors who give large portions of their income – you can continue to deduct a high percentage of AGI (subject to the new floor and caps).

• Cap on Itemized Deduction Benefits: For high-income taxpayers, there is now a 35% cap on the value of itemized deductions. In effect, if you’re in the top 37% bracket, your charitable (and other) deductions only reduce your tax bill as if you were in a 35% bracket. This prevents top earners from getting a full dollar-for-dollar tax saving at their highest rate. While this doesn’t limit how much you can give, it slightly diminishes the tax perk for those in the highest tax bracket.

• Corporate Giving Floor: For business owners or those involved in corporate philanthropy, note that C-corporations now face a 1% of taxable income floor on charitable deductions. A corporation must donate over 1% of its income for the gift to be deductible (with the usual 10% income cap still in place). This mirrors the individual floor concept and could influence companies’ giving patterns.

• Education Scholarship Credit: Starting in 2027, there’s a new credit (up to $1,700) for donations to certain state K-12 scholarship programs. This is a more specialized incentive, but it underscores the theme: the tax code is rewarding some types of giving while tightening rules on others.

In summary, the tax landscape for charitable giving is shifting. Many dental and medical professionals could see changes in their tax savings from donations – some will gain a new deduction where they previously got none, while others may find they need to give a bit more (or more strategically) to achieve the same tax benefit as before.

Implications for Donors: How to Navigate the New Rules

If you’re an established professional who gives to charity, how should you respond to these changes? The key is proactive planning. Here are a few considerations and strategies under the new rules:

• Plan Around the 0.5% Floor: Look at your typical annual giving relative to your income. If your charitable contributions are close to or below 0.5% of your AGI, consider “bunching” your donations into alternate years to clear the threshold. For instance, rather than giving $4,000 each year on a $500,000 income (which would yield only a partial deduction), you might donate $8,000 every other year to ensure the full amount above $2,500 is deductible. Tools like donor-advised funds can facilitate this strategy by letting you front-load donations in one year and grant them out over time.

• Take Advantage of 2025 (if you can): Because the floor and other limits kick in for tax year 2026, some advisors suggest accelerating planned gifts into 2025. High earners may benefit from making sizable donations in 2025 under the old rules (no floor, and slightly higher deduction value). This could mean pushing a gift you intended for early 2026 into December 2025 instead, to lock in a full deduction.

• Maximize the New Universal Deduction: If you normally don’t itemize (or are on the cusp of itemizing), be sure to take advantage of the above-the-line deduction in 2026 and beyond. It’s essentially “free” in the sense that it’s available on top of the standard deduction. Keep your receipts for cash donations up to $1,000 ($2,000 for couples) so you get this tax break. As one report noted, non-itemizers now have a real incentive to give, which charities hope will re-engage more modest donors.

• Consider Qualified Charitable Distributions (QCDs): If you’re over age 70½ and have retirement accounts, QCDs remain a powerful giving tool. The new 0.5% floor and 35% benefit cap don’t affect QCDs, since those donations come out of your IRA tax-free rather than as an itemized deduction. For older donors in our client base, using a QCD to make charitable gifts can yield greater tax savings than an itemized deduction under the new regime.

• Leverage Appreciated Assets: The law didn’t change the benefits of donating stocks, real estate, or other appreciated property. By gifting assets that have grown in value, you avoid capital gains tax and still deduct the full fair market value (subject to AGI limits). This becomes even more valuable if the new limits slightly chip away at the benefit of cash gifts. In short, make the most of what you give by donating in a tax-efficient form.

“The new charitable deduction floor raises the bar for itemizing donors,” says Laura Phillips, CPA and principal at The Phillips Group. “If you’ve been making the same donations each year, now is the time to rethink your approach. By strategically timing or consolidating gifts, you can ensure your generosity still yields a tax benefit.” This expert insight highlights a key point: while the rules are changing, with the right planning you can adapt and continue to give effectively. Don’t let a new threshold deter you from charitable giving – instead, plan around it.

Conclusion: Plan Your Giving Strategy Proactively

The introduction of a charitable deduction floor in the “big beautiful bill” underscores the importance of proactive and personalized tax planning. Whether you’re a dentist supporting local health charities or a physician donating to medical research, you’ll want to revisit your charitable giving game plan in light of these changes. There are new opportunities – like the universal $2,000 deduction – and new hurdles like the 0.5% floor, but with informed strategy you can maximize both your impact and your tax benefits.

Every taxpayer’s situation is unique. The best approach for one family might differ for another, depending on income level, donation habits, and overall financial picture. This is where professional guidance becomes invaluable. At The Phillips Group, we pride ourselves on proactive and strategic tax planning tailored to each client’s circumstances. Our team can help you navigate the nuances of the new tax law – from optimizing charitable deductions to integrating giving into your broader financial plan – so you can continue supporting the causes you care about while optimizing your tax outcomes.

Don’t wait until tax time to find out how these rules affect you. Now is the perfect time to review your 2025-2026 charitable giving strategy. Reach out to The Phillips Group for a personalized consultation. We’ll work with you to create a tax-smart giving plan that aligns with your philanthropic goals and financial well-being. With the right planning, you can turn the new charitable deduction rules into an opportunity – ensuring that your generosity delivers the greatest benefit to both your chosen charities and your own bottom line. Let’s craft a plan, together, that makes the most of your giving under the new tax code.