Charitable Contributions: New AGI Floor & Above-the-Line Deduction

Mar 13

3 min read

Charitable giving remains an important part of many taxpayers’ year-end planning—but for 2025, the rules have changed.

Under the One Big Beautiful Bill Act (OBBBA), charitable contribution deductions now come with a new limitation for taxpayers who itemize, while non-itemizers gain a new opportunity to deduct certain charitable gifts without having to itemize at all.

What Changed for 2025?

OBBBA made three notable changes to the charitable contribution rules for individuals:

A new 0.5% of AGI floor applies to itemized charitable deductions
The 60%-of-AGI limit for certain cash gifts is now permanent
Non-itemizers may claim an above-the-line charitable deduction of up to $1,000 ($2,000 for joint filers)

These changes create both new planning opportunities and new limitations, depending on how a taxpayer gives and whether they itemize deductions.

1. New 0.5% AGI Floor for Itemizers

Beginning in 2025, taxpayers who itemize deductions must clear a 0.5% of adjusted gross income (AGI) floor before receiving a tax benefit from charitable contributions.

That means a portion of total charitable giving may no longer be deductible.

Example:

If a taxpayer has $200,000 of AGI, the first $1,000 of charitable contributions may not produce a deduction. Only contributions above that threshold would count as itemized charitable deductions, subject to the usual applicable percentage limitations.

For taxpayers who make smaller annual gifts, this new floor could reduce or eliminate the federal deduction benefit they previously expected.

2. Above-the-Line Deduction for Non-Itemizers

A significant new benefit under OBBBA is the return of a charitable deduction for taxpayers who do not itemize.

For 2025:

Single filers and most other non-itemizers may deduct up to $1,000
Married couples filing jointly may deduct up to $2,000

This deduction is especially valuable for taxpayers who claim the standard deduction and previously received no federal tax benefit for charitable giving.

In practical terms, this creates a new planning opportunity for taxpayers who are unlikely to itemize but still want some tax recognition for their donations.

3. 60%-of-AGI Cash Contribution Limit Made Permanent

OBBBA also makes permanent the 60%-of-AGI ceiling for certain cash gifts.

For taxpayers making large charitable donations, this preserves a favorable deduction limitation that had previously been subject to legislative uncertainty. While the new 0.5% floor creates a hurdle at the front end, larger donors may still benefit from the continued availability of a relatively generous ceiling for qualifying cash contributions.

Planning Considerations for Year-End Giving

As 2025 planning continues, charitable contribution strategy may require a closer look than in prior years.

Taxpayers who itemize should consider:

Whether total annual giving meaningfully exceeds the new 0.5% AGI floor
Whether bunching contributions into one year may increase deductibility
Whether contribution timing should be adjusted before year-end
Whether documentation and substantiation are complete

Taxpayers who do not itemize should consider:

Whether they can benefit from the new $1,000 / $2,000 above-the-line deduction
Whether year-end gifts should be timed to maximize the available deduction
Whether gifts are made to qualifying organizations and properly documented

Bottom Line

OBBBA changes the charitable giving landscape in two important ways: it makes charitable deductions a bit less favorable for some itemizers, while opening a new deduction opportunity for non-itemizers.

For 2025, the key question is no longer just whether a taxpayer gave to charity—it is how much, when, and whether they itemize.