The massive piece of legislation known as the “One Big Beautiful Bill” comes with many changes to tax policy. While you may be aware Trump’s 2017 tax cuts are extended, you may not know about the impact on deductions and donations.
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Here are some things to know before you adjust your plans, according to some financial experts.
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Impact on Charitable Giving
As noted by CNBC, the new deductions are designed to encourage everyday people to give more. The bill’s deduction for those who don’t itemize “has the potential to re-motivate charitable giving among a significant number of households,” per the Akron Community Foundation.
However, one of the important takeaways from the new law is that it has an exemption rule for the wealthy and limits for high earners. According to CNBC, the law could disincentivize charitable giving for high earners, as it limited deductions for those in the top tax bracket.
“Business and real estate deductions are dependent on the type of expenses,” said Schuyler M. Moore, partner at Greenberg Glusker. “For donations, they are no longer deductible for the first amount up to 0.5% of the taxpayer’s income.”
“Plus, those in the 37% bracket are now limited to a 35% deduction value cap, reducing the overall benefit of giving. Bottom line — the tax advantages are still there, but you’ll need a more intentional, high-leverage strategy to access them,” said Christopher Stroup, founder and president of Silicon Beach Financial.
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Impacts on Deductions
According to Stroup, itemizing may no longer make sense in many cases. “It makes the increased standard deduction permanent and introduces new below-the-line deductions, making itemizing less common,” Stroup said.
The standard deduction under the new law is $15,750 for single filers and $31,500 for those filing jointly, per the Tax Foundation. “The more generous standard deduction improves tax simplicity by reducing the number of taxpayers who benefit from itemizing over taking the standard deduction,” it said.
Opportunity for Planning
According to Stroup, this law rewards proactive planning.
“For high-income earners and charitably inclined households, tools like donor-advised funds, qualified charitable distributions and even revisiting gift and estate strategies — with the new $15 million exclusion — are essential,” Stroup said. “With itemized deduction limits, adjusted gross income floors and phaseouts reshaping the landscape, a one-size-fits-all approach no longer works as coordination between your tax and financial plan is now critical.”
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This article originally appeared on GOBankingRates.com: Here’s What Trump’s New Tax Law Means for Your Deductions and Donations
