Real, or make believe? Dispelling OBBBA myths
Written by:
Clark Collier, CAP (R), Director of Giving Strategies
For most professional advisors, the fourth quarter is an important time to check in with clients on their year-end goals. December 31 is fast approaching! What should you be addressing with your clients right now during this important window for charitable planning?
Before you dive deep into any particular planning strategy, it might be useful to proactively address major areas of confusion for your clients. At the CICF Collaborative (which includes Central Indiana Community Foundation, Hamilton County Community Foundation, IMPACT Central Indiana, the Indianapolis Foundation, and Women’s Fund of Central Indiana), we help advisors deepen their support for charitably minded clients. Here, we’ll dispel three big myths that are swirling around about charitable giving under the new laws.
Myth: The OBBBA changed the rules for QCDs
Reality: The rules did not change, and changes to other rules actually make QCDs better
We’ve fielded a lot of questions about Qualified Charitable Distributions and how these vehicles are affected by the OBBBA. Good news: nothing changed within the QCD rules themselves. That said, new tax provisions—such as an expanded itemized deduction for seniors and improved state and local tax deductions—could indirectly make QCDs even more advantageous for older IRA owners by reducing their taxable income and helping avoid higher Medicare premiums.
Myth: The new “floor” for charitable deductions taking effect in 2026 applies only to corporate giving
Reality: The OBBBA includes both a “floor” and a “cap” for charitable deductions beginning in 2026
The OBBBA introduced new limits on charitable deductions for both corporations and individuals. We appreciate how this article describes the ways in which the OBBBA introduces new limits on charitable deductions—for example, donors who itemize must now exceed a floor of 0.5% of adjusted gross income before any deduction applies, and high-income filers will see their marginal deduction rate for donations drop from 37% to 35%. Separately, the OBBBA sets a new floor for corporate charitable tax deductions at 1% of taxable income, meaning corporations can only deduct charitable gifts above that threshold. Under prior law, corporations could deduct charitable contributions up to a cap (generally 10% of taxable income)—which is still in place after the OBBBA—without any minimum floor.
Myth: The new “above-the-line” deduction for non-itemizers is going to make things so much easier.
Reality: This new rule is more complicated than it looks.
Under the OBBBA, starting in 2026, taxpayers who do not itemize deductions can take an “above-the-line” deduction for cash gifts to charities—$1,000 for individuals or $2,000 for married couples. Sounds great, yes? Not quite. Gifts to donor-advised funds and private foundations do not count. Neither do gifts of noncash assets, such as appreciated stock. Both limitations may very well be in conflict with the advice you usually give your clients about the benefits of appreciated stock gifts over gifts of cash, and the benefits of organizing giving through a donor-advised fund at the community foundation. Still, the new deduction for non-itemizers is still a perk, especially for younger people who may not yet itemize their deductions and would like to step up their community involvement through charitable giving.
As always, when you and your clients encounter legal changes that don’t completely make sense to you, please reach out. We are happy to point you in the direction of helpful technical articles, as well as offer tools and services to meet your clients’ charitable giving needs even during this time of shifting laws and general uncertainty.
About the CICF Collaborative
CICF Collaborative is a partnership of philanthropic organizations working together to strengthen communities across the region. Each entity within the CICF Collaborative (including the cornerstone entities, Central Indiana Community Foundation, Hamilton County Community Foundation, IMPACT Central Indiana, the Indianapolis Foundation, and Women’s Fund of Central Indiana) brings deep knowledge, strong relationships, and its own individual, focused mission. The CICF Collaborative unites the entities by providing shared services, allowing the entities to operate more efficiently and effectively. By leveraging what we each do best, we’re able to better serve our communities and create more lasting impact, together. Learn more »
About the Author
Clark Collier is CICF’s director of giving strategies, working with individuals, families, and their advisors to structure meaningful and impactful philanthropy. As a Chartered Advisor in Philanthropy (R), Clark provides gift planning support and counsel to the CICF Collaborative and nonprofit organizations throughout the region. He previously served as a philanthropic advisor for CICF and in development roles for both local and global organizations.