Planning in a New Tax Landscape
Giving back means supporting causes that matt er to us and driving positive changes in our communities. However, giving in a tax-efficient manner allows our gift s to have a greater impact – and that’s why we regularly discuss philanthropic
strategies with clients.
The One Big Beautiful Bill Act (OBBBA) became law on July 4, 2025. Though not solely focused on charitable giving, it contains several relevant provisions.
Effective this year, the bill increased the standard deduction for single taxpayers to $15,750 and for married couples filing jointly to $31,500. This provision continues the trend of significantly higher amounts that began with the 2017 Tax Cuts and Jobs Act – which nearly doubled the standard deduction. A higher standard deduction means many taxpayers do not receive any tax benefit from charitable giving – in fact, around 91% use the standard deduction instead of itemizing individual deductions.
Beginning in 2026, a popular COVID-era tax break is coming back, allowing a limited additional charitable deduction to taxpayers who take the standard deduction. The provision states that the fi rst $1,000 an individual taxpayer gives to charity may be stacked above the standard deduction. For married couples who file jointly, each spouse can obtain this extra benefit.
To get more tax savings from charitable giving, taxpayers may “bunch” their gifts in select years when the deduction is most advantageous. Bunching involves giving multiple years’ worth of donations in a single year to reach above the standard deduction threshold. In the alternative years, the taxpayer can pause donations but still take the full standard deduction. Over a multi -year period, the amount donated is the same – but the timing allows additional deductibility. Larger donations in select years can be even more beneficial when using appreciated assets and timing them in years that you’ll receive the largest tax break. This strategy is popular with vehicles like donoradvised funds or private foundations, which can hold charitable funds and disperse them on a regular basis to desired causes.
Even individuals who itemize may now benefit from this approach. Starting in 2026, charitable itemized deductions are limited to a 0.5% floor of a taxpayer’s adjusted gross income. Bunching gifts in select years will limit how often the haircut to deductibility impacts the taxpayer.
For taxpayers in the maximum 37% bracket, the benefit of charitable gift s will also be limited in 2026. Currently, every dollar donated enjoys a 37 cent reduction in tax owed. Starting next year, this savings drops to 35 cents, prompting some clients to accelerate their philanthropic efforts before the end of the year.
“Gifting in a tax-efficient manner allows our gifts to have a greater impact.”
Beginning in 2027, the bill introduces a nonrefundable tax credit for contributions to scholarship-granting organizations supporting elementary and secondary school students. Unlike deductions, tax credits reduce taxes dollar for dollar – making them especially attractive for clients who focus their giving around education.
Baird Trust offers a range of charitable solutions, including private foundation management, charitable remainder and lead trusts, and fiduciary and investment management services to nonprofits. We encourage you to review all possible solutions with your Estate Planner, Baird Financial Advisor and Trust Officer.
Baird Trust Company (“Baird Trust”), a Kentucky state chartered trust company, is owned by Baird Financial Corporation (“BFC”). It is affiliated with Robert W. Baird & Co. Incorporated (“Baird”), (an SEC-registered broker-dealer and investment advisor), and other operating businesses owned by BFC. The information offered is provided to you for informational purposes only. Neither Baird nor Baird Trust is a legal or tax services provider and you are strongly encouraged to seek the advice of the appropriate professional advisors before taking any action. The information reflected on this page is subject to change. The information provided here has not taken into consideration the investment goals or needs of any specific investor. Investors should not make any investment decisions based solely on this information. Past performance is not a guarantee of future results. All investments have some level of risk, and investors have different time horizons, goals and risk tolerances, so speak to your Baird Financial Advisor or a member of your Baird Trust team before taking action.
