Philanthropy and Estate Planning in the Age of OBBBA
What financial advisors need to know about the One Big Beautiful Bill Act (OBBBA), donor-advised funds, and how Ren can help you put it into practice with clients.
What's in the Law?
$15M/30M
Per individual and couple — the new permanent federal estate and gift tax exemption, indexed for inflation, effective January 1, 2026.
60% of AGI
deductible for cash gifts to public charities, including DAFs (unchanged, now permanent)
30% of AGI
deductible for appreciated assets to public charities (unchanged)
$16K/$32K
2026 standard deduction (single / married filing jointly)
Why the Standard Deduction Still Matters
The standard deduction rose slightly under OBBBA, but it remains relatively high, meaning some clients may not cross the threshold to itemize. For clients on the margin or looking to optimize deductions, consider bunching several years of charitable gifts into the current year, or using a Ren-powered donor-advised fund to take one large deduction this year and grant over time.
Worked example: A married couple with $350,000 in AGI gives $20,000 to charity each year. In a normal giving year, that $20,000 falls well below the $32,200 standard deduction, so they take the standard deduction and receive no additional tax benefit from their charitable gifts.
By contributing three years of giving — $60,000 — to a donor-advised fund through a sponsoring charity in a single year, their charitable deduction clears the standard deduction threshold by nearly $28,000, after accounting for the 0.5% AGI floor ($1,750). At their marginal rate, that’s roughly $8,900 in additional tax savings from the timing of the contribution alone, and they continue granting to charities on their own schedule.
New Deduction Constraints for High-Income Clients
OBBBA preserved the charitable deduction but introduced two new provisions that change how high-income clients capture it.
The 0.5% AGI Floor
Donors can no longer deduct the first 0.5% of their adjusted gross income in the year they make charitable gifts. For a client with $500,000 in AGI, the first $2,500 of charitable giving is non-deductible in that contribution year. The floor applies before normal deduction limits take effect, but deductions that fall below it aren’t lost, they carry forward for up to five years. Bunching several years of giving into a single high-income year remains one of the most efficient ways to clear the floor and capture the full deduction.
The 35% Cap
For taxpayers in the 37% bracket, the value of charitable deductions is now capped at 35 cents per dollar donated, down from 37 cents under prior law. The deduction itself is unchanged; only the tax benefit it delivers at the top bracket is reduced. This applies to taxable income above $640,600 (single filers) or $768,700 (married filing jointly) for 2026. For clients whose income temporarily spikes into the top bracket — a business sale, a large bonus, a Roth conversion — a substantial charitable contribution that year may bring taxable income back below the 37% threshold, reducing or eliminating the cap’s impact on that gift.
What This Means for Giving Strategy
These two provisions don’t diminish the value of charitable planning, they reward structure. Clients who give episodically or reactively will feel the friction most. Clients who plan around high-income years, use a Ren-powered DAF to concentrate deductions, and carry forward strategically will find the tax efficiency largely preserved.
The bunching strategy isn’t just about clearing the standard deduction anymore; it’s about clearing the AGI floor, maximizing benefit before the cap applies, and doing both in the same contribution year.
Take the deduction now, decide later
“A DAF lets your client take the deduction now, even if you’re not ready to decide where to give.”
Estate benefits remain, even at the higher exemption
“Even with the higher estate exemption, removing future appreciation from the estate is still smart.”
Timing captures the most value
“With the AGI floor and 35% cap now in effect, clients who plan their giving around high-income years will capture the most value.”
Still a powerful tool
“A DAF remains a powerful tool to reduce tax burden and establish a legacy.”
Put OBBBA Planning into Action
In a high-income year where there’s a business exit, liquidity event, or compensation spike, consider contributing to a Ren-powered donor-advised fund. Take the deduction now, grant to charities on your own timeline.
