What’s Changing and Why It Matters
The One Big Beautiful Bill (OBBB) introduces significant changes to the tax treatment of charitable contributions, effective January 1, 2026. These updates will reduce the value of deductions for both individuals and businesses, especially those with higher incomes.
As a construction or real estate business owner, these changes may affect you in two primary ways:
- If your company is a pass-through entity (such as an S corporation, partnership, or sole proprietorship), charitable giving is typically deducted on your personal return. New individual level limits will apply to you.
- If your company is a C corporation, new rules will restrict how much of your corporate charitable giving is deductible.
The 2025 tax year represents a final opportunity to take full advantage of the current, more favorable charitable giving rules. This alert outlines the upcoming changes and how you can plan ahead to preserve your deductions.
3 Key Changes Effective in 2026
New Adjusted Gross Income (AGI) Floor for Individuals
Only charitable donations above 0.5% of your AGI will be deductible.
- Example: If your AGI is $400,000, the first $2,000 of charitable contributions will not be deductible.
Deduction Cap for High-Income Earners
The tax benefit from charitable giving will be capped at 35%, regardless of your tax bracket.
- Example: A $10,000 donation will result in a $3,500 tax benefit instead of $3,700.
These limitations apply at the individual level. If you own a pass-through construction or real estate business and make charitable donations personally (even if funded by business income), the new rules will apply to you.
Corporate Giving Floor – Applies to C Corporations
C corporations may only deduct charitable contributions that exceed 1% of taxable income.
- Example: A C corporation with $5 million in taxable income must donate more than $50,000 before any charitable deduction is allowed.
2 Recommended Actions for 2025
2025 is the last opportunity to take full advantage of the current deduction rules. Consider the following strategies:
Bunch Your Donations
Rather than spreading donations over several years, consider combining multiple years of giving into 2025 to maximize your deduction.
- Example: If you typically donate $15,000 annually, consider contributing $45,000 in 2025 to secure the full deduction before new limits apply.
Use a Donor-Advised Fund (DAF)
Make a large contribution to a DAF in 2025 and distribute funds to charities over time, capturing the full deduction this year.
Note: AGI-based deduction limits remain in effect for 2025:
- Cash donations are deductible up to 60% of AGI.
- Donations of appreciated stock or property are limited to 30% of AGI.
Be sure to factor these thresholds into your planning, especially for significant, one-time gifts.
How Your Construction or Real Estate Business Can Capitalize on the 2025 Charitable Giving Window
The upcoming OBBB changes will notably reduce the tax benefits of charitable giving for high-income individuals and C corporations beginning in 2026. With proactive planning, 2025 presents the final opportunity to benefit from the more generous deduction rules.
Whether donating personally or through your construction or real estate company, now is the time to act. Bunching contributions, leveraging donor-advised funds, and collaborating with your Kreischer Miller relationship professional can help secure valuable deductions before the rules change.
For guidance on charitable giving strategies tailored to your situation, please contact us.