New rules on charitable contribution deductions under the One Big Beautiful Bill take effect in 2026 but could impact your 2025 tax planning.

Impacts for different corporations:

For C Corporations,

the new law allows deduction for charitable contributions only to the extent that they exceed 1% of taxable income, up to 10%, with a 5-year carry forward. Previously, there was no floor. In practice, if a bank’s donations in one year equals less than 1% of its income, none of those contributions would be deductible under the new rules.

For example, if taxable income is $1,000,000 and you donate $100,000, then only $90,000 of the donations are deductible and you lose the $10,000 deduction.

The complexity increases if you exceed the 10% cap. Using the same example, if taxable income is $1,000,000 and you donate $150,000 to charity, you are allowed to deduct $100,000 and then $50,000 is carried forward to 2026, where it will again be subject to the 1% floor and 10% cap.

For S Corporations and their owners, for individuals and trusts,

starting in 2026, there will be a 0.5% AGI floor when deducting charitable donations. For example, if AGI is $500,000, then only donations exceeding $2,500 will be deductible. Also, for those in the top marginal 37% tax bracket, itemized deductions will be deducted at a lower 35% tax rate beginning in 2025. In this case, donations will be further discounted.

As a positive note for owners that are not itemizing, beginning in 2026, there will be an above-the line charitable deduction of $1,000/taxpayer (only contributions exceeding 0.5% of AGI are deductible). These donations must be to public charities (donor-advised funds or private foundations will not qualify).

Following are tax planning opportunities that you should consider now:

  • To get the full tax benefit, make donations in 2025 that you may have been considering for 2026.
  • Consider “bundling” charitable contribution into certain years. Making donations in a high-profit year would allow bigger deductions.
  • Make sure you have charitable donations correctly classified on your general ledger. There may be items which are best classified as marketing, advertising, or business development to allow for full deduction.

Please reach out to your Pinion tax advisor if you have any questions or how to navigate charitable donations and tax planning.