The One Big Beautiful Bill Act (OBBBA), signed into law earlier this year, overhauled major components of the federal tax code with provisions designed to encourage business growth, simplify certain deductions, and, importantly for the nonprofit sector, revitalize charitable giving incentives. While much of the public discourse has centered on Qualified Small Business Stock (QSBS) expansions and Opportunity Zone reforms, the changes to charitable giving rules are significant and deserve close examination by donors, nonprofit leaders, and tax professionals.
Above-the-Line Charitable Deduction for All Filers
One of the most notable provisions in the OBBBA is the return and expansion of the above-the-line charitable deduction. Previously offered temporarily under the CARES Act, the deduction has now been reintroduced with higher limits and broader accessibility. Under the OBBBA:
• All individual taxpayers, regardless of whether they itemize, are eligible for an above-the-line deduction. • The maximum deduction has been increased to $4,600 for single filers and $9,200 for joint filers. • Eligible contributions must be made in cash to qualified public charities. Donations to donor-advised funds (DAFs), private foundations, or supporting organizations do not qualify for this particular benefit.
This change is designed to incentivize charitable giving among middle- income taxpayers who typically do not itemize. According to MarketWatch, the provision could double the number of tax filers who benefit from making charitable contributions, potentially reversing a long-standing decline in the number of households that donate annually.
Expanded Itemized Deduction Limits and Carryforward Provisions
For taxpayers who do itemize, the OBBBA raises the cap on deductible cash contributions to public charities:
• The previous limit was 60 percent of Adjusted Gross Income (AGI). • The new law increases the cap to 70 percent of AGI. • Contributions exceeding this limit may still be carried forward for up to five years.
This provision allows high-net-worth individuals to contribute a greater percentage of their income in a single year, particularly in years when they realize significant capital gains or receive liquidity from asset sales.
Corporate Charitable Deduction Enhancements
The legislation also encourages corporate philanthropy by raising the deduction limit for C corporations:
• The allowable deduction increases from 10 percent to 25 percent of taxable income.
This expanded limit is expected to increase charitable engagement among corporations, particularly those with established Environmental, Social, and Governance (ESG) strategies or active employee matching programs. As noted by CLA Connect, the change aligns with broader public policy objectives to foster cross-sector solutions to social challenges.
Federal Credit for Scholarship-Awarding Organizations
The OBBBA introduces a new federal income tax credit for donations made to scholarship-granting charities:
• Individual donors may receive a nonrefundable tax credit of up to $1,000. • Married couples filing jointly may receive up to $2,000. • Donations must be made to 501(c)(3) organizations that directly award scholarships to financially disadvantaged students.
This provision mirrors several existing state-level programs and is expected to generate significant support for nonprofit organizations focused on education access and equity. No income phaseout.
Heightened Scrutiny of DAFs and Complex Gifts
In an effort to improve transparency and reduce perceived abuses, the OBBBA also imposes new compliance requirements on Donor-Advised Funds and certain non-cash gifts:
• DAFs must now report more detailed information about grantmaking timelines and distribution practices. • Failure to distribute funds within defined timeframes may result in excise taxes. • Contributions of non-cash assets such as privately held business interests are subject to stricter valuation and substantiation rules.
According to the Tax Policy Center, these changes are intended to accelerate the movement of funds from DAFs to working nonprofits and ensure that tax-advantaged giving provides timely public benefit.
Practical Implications for Nonprofits and Advisors
These legislative changes create new planning opportunities and administrative challenges. Nonprofits may need to revise their gift acceptance policies, enhance donor education efforts, and prepare for more nuanced conversations about valuation and tax substantiation. Tax professionals should be prepared to advise clients on:
• Structuring gifts to maximize the new universal deduction • Navigating the expanded AGI limits • Utilizing charitable giving in years with income spikes • Complying with substantiation requirements for non-cash and complex asset donations
Key Changes for Non-Cash Charitable Contributions under the OBBBA:
1. Enhanced Substantiation Requirements
• Donors of non-cash property must now provide more detailed documentation with their tax returns, including:
> The method of valuation used > A statement regarding how the property was acquired (purchase, gift, inheritance) > The date and cost basis of acquisition (even for long-held assets)
• IRS Form 8283 (Noncash Charitable Contributions) will expanded and must be fully completed or the deduction may be disallowed. (See the next section for specific Form 8283 probable changes)
2. New Valuation Standards
• Appraisals for donations of property valued over $5,000 must now:
> Be performed by a Qualified Appraiser meeting stricter education and credentialing standards > Include a certification that the appraisal complies with Uniform Standards of Professional Appraisal Practice (USPAP)
• The IRS may impose penalties on appraisers and donors for significant valuation overstatements under newly strengthened enforcement rules.
3. Restrictions on Closely Held Business Interests
• The OBBBA restricts the deductibility of non-cash donations of S corporation shares, LLC interests, or partnership units unless:
> The recipient charity is not a disqualified person (e.g., DAFs and private foundations often do not qualify) > The asset is not encumbered with debt or subject to contractual restrictions on sale
• Such gifts must also be held by the charity for a minimum of three years, or the donor may face recapture of the tax benefit.
4. Expanded Disclosure for High-Value Property
• For donations exceeding $500,000, the appraisal already must be attached directly to the return, and the IRS now has the authority to request additional documentation before accepting the deduction. • A new compliance check process allows the IRS to flag questionable non-cash deductions before audit selection.
1. Anticipated Changes to IRS Form 8283:
The IRS is expected to revise Section B (for contributions over $5,000) to require additional disclosures, such as:
> Donor’s cost basis and acquisition date expanded > Method of valuation used by the appraiser (e.g., sales comparison, income approach) > Whether the donor had any relationship with the appraiser or donee organization > Greater detail on restrictions or limitations on the donated property (e.g., partnership interests or encumbered real estate)
2. Qualified Appraiser Attestation Changes
The OBBBA is expected to trigger updates requiring appraisers to:
> Certify compliance with USPAP (Uniform Standards of Professional Appraisal Practice) > Provide their professional credentials, education, and appraisal experience directly on the form > Sign an enhanced declaration acknowledging penalties for valuation overstatements
3. Stricter Reporting for Closely Held Interests and Illiquid Assets
The revised form may include new subsections or checkboxes specific to:
> S corp shares > LLC or partnership interests > Art, antiques, and collectibles > These categories have been targeted for additional scrutiny to prevent abuse
4. Increased Electronic Filing Requirements
The IRS is expected to mandate that certain high-value donations (e.g., >$500,000) include an attached digital copy of the appraisal and full Form 8283 as part of the e-filed return. This builds on the IRS’s prior practice and is aligned with the OBBBA’s enforcement tools for early detection.
Why This Matters:
According to the Tax Policy Center, the OBBBA empowers the IRS to apply greater pre-audit review of large non-cash deductions, which likely necessitates expanding Form 8283 as a compliance filter. The expanded form will serve as a front-line tool for the IRS to detect potentially inflated valuations or noncompliant contributions before selecting returns for audit.
Timeline:
As of July 2025, final regulatory guidance from the IRS on the updated Form 8283 has not yet been released, but revisions are anticipated by the 2025 tax year filing season (early 2026). Practitioners should begin preparing clients for more extensive documentation and appraiser engagement now.
At MAS LLC, The Green Mission Inc., and Probity Appraisal Group, we are already incorporating these provisions into our clients’ philanthropic tax planning strategies. Whether advising donors on high-impact giving or appraising non-cash property for charitable contributions, we anticipate that the OBBBA will shape giving behavior for years to come.
The One Big Beautiful Bill Act represents a major shift in how the tax code supports charitable giving. While some provisions simplify access to deductions, others add complexity through expanded compliance obligations. Overall, the changes offer increased flexibility and incentive for donors at every income level to participate meaningfully in charitable work. For nonprofits, these reforms bring opportunities to grow their donor bases and secure larger gifts, provided they adapt effectively to the evolving regulatory environment.
Sources:
1.CLA Connect – How the One Big Beautiful Bill Act Affects Nonprofits https://www.claconnect.com/en/resources/blogs/nonprofits/how-the-one-big-beautiful-bill-act-affects-nonprofits
2. The Signatry – What the One Big Beautiful Bill Act Means for Charitable Givers https://www.thesignatry.com/blog/what-the-one-big-beautiful-bill-act-means-for-charitable-givers/
3. MarketWatch – How Trump’s Big Bill Makes It Easier for All Americans to Get a Tax Break for Charitable Donations https://www.marketwatch.com/story/how-trumps-big-bill-makes-it-easier-for-all-americans-to-get-a-tax-break-for-charitable-donations-not-just-rich-people-d3bd0e8e
4. Tax Policy Center – The One Big Beautiful Bill Complicates Charitable Giving https://taxpolicycenter.org/taxvox/one-big-beautiful-bill-complicates-charitable-giving
