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Understanding the New Tax Law: Impacts on Philanthropy

Aug 06, 2025

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On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBBA)—a sweeping, nearly 900-page piece of legislation that touches nearly every sector of the U.S. economy. While much of the national conversation has focused on economic and regulatory reform, the OBBBA includes several important provisions that impact philanthropy—and by extension, the way donors think about and plan their giving.

At Greater Houston Community Foundation, we are committed to helping donors, fundholders, professional advisors, and nonprofits understand what these changes mean—and to uncover philanthropic opportunities that align with each donor’s unique financial goals and charitable values. In times of change, giving remains essential. Houston is an incredibly generous community, and we believe that spirit of generosity is more important than ever.

In this blog, we’ll highlight three key insights from the OBBBA and what they could mean for you, your clients, or your organization.

Insight #1: Higher Standard Deduction—and New Limits on Itemized Charitable Deductions

What’s in the law?

The OBBBA makes permanent the higher standard deduction levels introduced in the TCJA, raising them to $15,750 for single filers and $31,500 for joint filers in 2025. Additionally, the new law expands the “bonus” deduction for taxpayers 65 and older through 2028.

The law also introduces new limitations for itemizers. Starting in 2026, the maximum tax savings from charitable giving is limited to a tax rate of 35%, even if the taxpayer’s marginal tax rate is higher (currently 37% for top individuals and trusts). This effectively caps the tax benefit of all itemized deductions—including charitable deductions—at 35%. However, the 60% AGI limit for cash gifts to qualifying public charities remains in place.

For example, if you’re earning $2 million annually and planning to give $500,000 in 2025 and another $500,000 in 2026, you may benefit significantly from contributing the full $1 million to your donor advised fund (DAF) now. Here’s why:

  • Larger deduction at a higher bracket: By giving the full $1 million this year, you secure a larger deduction at your top marginal tax rate (e.g., 37%).
  • Avoid deduction limits: Taxpayers who itemize may only deduct charitable gifts that exceed 0.5% of their adjusted gross income (AGI). If you wait to give the second $500,000 next year, a portion may fall below the adjusted gross income (AGI) limit for charitable deductions. In this example, $10,000 wouldn’t be deductible at all, and the remaining $490,000 would be subject to a 35% limit—reducing the total value of your deduction by $37,000 or more.
  • Front-loading amplifies impact: You can determine when and how grants are made from your DAF, but you capture the full deduction now.

An Additional Advantage: Sidestep the “Deduction Floor”

This strategy also helps avoid the “deduction floor exclusion.” Instead of spreading your giving evenly year to year—risking a portion of your donations falling below the itemization threshold—you can contribute two or more years’ worth of gifts to your DAF in a single year. This allows you to maximize your itemized deductions in high-giving years and take the standard deduction in off years, without interrupting your support for the nonprofits you care about.

Why it matters:

With fewer taxpayers itemizing, and new deduction limits for high earners, we may see continued pressure on charitable giving. We’re likely to see a continuation of the chilling effect on charitable giving that occurred in the wake of the TCJA.

What you can do:

While tax deductibility may be shifting, the need for giving has not. Houstonians have always stepped up in times of need and today is no different. Whether you itemize or not, your support makes a tangible difference. The Community Foundation is here to help you develop a personalized giving strategy that reflects your financial situation, values, and long-term philanthropic goals.

Insight #2: A New Universal Deduction for Non-Itemizers

What’s in the law?

Beginning in 2026, the OBBBA allows non-itemizers to take a charitable deduction of up to $1,000 for single filers and $2,000 for joint filers.  It’s important to note that this deduction excludes gifts to donor advised funds (DAFs), supporting organizations, and private foundations.

Why it matters:

Approximately 90% of taxpayers currently do not itemize. Parallel to this trend, the number of U.S. adults who give to charity in any given year has dropped over the last 20 years from nearly two-thirds to less than half, according to some studies. This new universal deduction could inspire non-itemizers to start—or continue—giving in meaningful ways.

What you can do:

Whether you’re just beginning your philanthropic journey or consistently giving through a fund at the Community Foundation, this is a great time to revisit your giving strategy.

  • If you’re a parent or grandparent, it’s also a powerful opportunity to introduce younger generations to giving.
  • If you’re a nonprofit, the universal deduction opens the door to cultivating new donors.
  • And if you’re an advisor, make sure your clients know how this deduction could factor in to their charitable and financial planning.

Insight #3: Estate Tax Exemption Made Permanent (For Now)

What’s in the law?

For affluent taxpayers updating financial and estate plans, and for the attorneys, CPAs, and wealth managers advising them, the last couple of years have been a roller coaster because of the looming possibility that the Tax Cuts and Jobs Act (TCJA) increase to the estate tax exemption would sunset at the end of 2025. Finally, there is clarity:  The OBBBA makes permanent the TCJA’s increased estate and generation-skipping transfer tax exemptions. For 2025, the exemption is $13.99 million per individual and $27.98 million per couple—rising to $15 million and $30 million in 2026.

Why it matters:

Planned giving remains a critical tool to ensure your values extend to future generations and strengthen the causes you care about most. The Community Foundation works alongside your estate attorneys, CPAs, and wealth advisors to design long-term charitable strategies, such as legacy gifts, DAFs, or charitable trusts.

What you can do:

For high-net-worth families, this is an opportunity—not a reason to delay. As families work with their tax and estate planning advisors, many are viewing the next two years as an important window to plan ahead.

Partnering for Purpose

Greater Houston Community Foundation stands ready to support donors and advisors in navigating this changing landscape. While tax law may evolve, the impact of philanthropy remains constant. Together, we can build a more generous, resilient Houston—one gift, one plan, and one family at a time.

If you’d like to explore how these changes may affect your giving—or want to start a conversation about new opportunities—we’re here to help.

More Helpful Articles by Greater Houston Community Foundation:

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