Episode summary
Maximizing Charitable Deductions Under OBBBA's New Rules, With Ben Henry-Moreland
Financial Advisor Success (Kitces)
· · 28 min · Hosts: Michael Kitces · Guests: Ben Henry-Moreland
Summary
The episode breaks down two 2026 charitable-giving changes under the 2025 One Big Beautiful Bill Act: a 0.5% of AGI floor on itemized charitable deductions and a separate 2/37ths reduction that effectively lowers the tax value of itemized deductions for taxpayers in the 37% bracket. Ben Henry-Moreland explains that the floor is small in absolute dollars for many households, but the impact rises with income because both the floor and the tax rate on the lost deduction increase as AGI rises.
Ben argues that the new rules do not necessarily discourage giving, but they do change the timing and structure of giving strategies. For clients who already itemize, charitable bunching becomes more attractive because it lets them absorb the AGI floor in fewer years. He also notes that non-itemizers now have a new cash-only deduction of up to $1,000 for single filers or $2,000 for married couples, which can reduce the need to bunch every donation into one year.
Qualified charitable distributions remain especially appealing for eligible clients age 70 and a half or older because they bypass the itemized-deduction limits entirely. Ben’s bottom line is that advisors should use the new rules to open planning conversations, not to force a wholesale change in charitable intent.
Key takeaways
- Ben Henry-Moreland says the 0.5% of AGI floor mainly matters more as income rises, because both the floor and the foregone tax benefit grow with AGI.
- For clients in the 37% bracket, the 2/37ths reduction means itemized deductions produce only a 35% tax benefit, not 37%, on the affected dollars.
- Charitable bunching becomes useful even for ongoing itemizers because it limits the 0.5% AGI floor to one year instead of several.
- The new non-itemizer deduction is cash-only and cannot be funded through a donor-advised fund, limiting how some households can use it.
- Ben Henry-Moreland says QCDs are still one of the strongest charitable tools because they are excluded from income and avoid the new deduction limits.
Notable quotes
“The actual impact of it is to incentivize people to contribute more when they are in higher tax brackets, have higher income”
“they need to reduce that amount by 0.5% of their adjusted gross income”
“for people in that 37% tax bracket, they only get a 35% tax benefit from the deductions that they take”
“it makes more sense now to bunch those charitable deductions together and only pay that that half% of AGI reduction once”
“the new half percent of AGI floor, particular for folks in the highest tax tax bracket who also have to deal with the 237's reduction, it tilts the math even more”
How the episode opens
The actual impact of it is to incentivize people to contribute more when they are in higher tax brackets, have higher income because that allows them to maximize the total effect of their charitable contributions. Hello and welcome back to the Financial Advisor Technician podcast. I'm your host, Adam Vanusen.
On today's episode, we're going to discuss specific measures within the 2025 One Big Beautiful Bill Act that relate to charitable giving and that go into effect in 2026. Because while clients typically are philanthropically minded when making charitable contributions, adviserss can be supportive by helping them take advantage of available tax planning opportunities as well, which could ultimately allow clients to donate more than they might have otherwise. With this in mind, understanding the new rules which include a.5% of AGI floor on deductible charitable contributions and a 237 reduction in itemized deductions for those with particularly high incomes.
These could help clients get the greatest tax benefit from their charitable contributions. To help us dig deeper into this topic, I'm joined today by my colleague Ben Henry Morland, a senior financial planning nerd here at kitsus.com to discuss the ins and outs of these new rules, how much impact they will have on different types of clients, and planning strategies financial adviserss can consider for their clients based on these new rules. So, welcome Ben and thanks for joining us again here on the Financial Advisor Technician podcast.
Hi Adam, it's great to be back. All right. So, to start, perhaps you could begin with the new uh 0.5% AGI floor on charitable contributions and what it means for individuals itemized deductions. — Absolutely. So, this is a new rule that's coming into effect this year in 2026 under the the one big beautiful bill act OB that passed uh last year.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- charitable deductions
- agi floor
- tax bracket deduction reduction
- donor-advised funds
- qualified charitable distributions
Watch the episode
Watch “Maximizing Charitable Deductions Under OBBBA's New Rules, With Ben Henry-Moreland” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Financial Advisor Success (Kitces), this episode and its artwork belong to Michael Kitces. Octagon is not affiliated with the show; this page is an independent summary.
