High net worth donors face a new reality this year. As of Jan. 1, the One Big Beautiful Bill Act (OBBBA) has changed the rules for charitable tax breaks, making it harder for wealthy clients to reduce their bills through small or mid-sized gifts.
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Under the new law, clients must deal with two major restrictions: a 0.5% adjusted gross income (AGI) “floor” and a limit on the total tax savings allowed for those in the highest bracket. These changes mean that for many clients, a significant portion of their charitable giving will no longer provide any tax relief.
For example, a client earning $2 million must now give more than $10,000 before they see a single cent in federal tax savings. Even then, the value of those savings has dropped. While these taxpayers may pay a 37% marginal rate, their charitable deductions are now capped at a 35% benefit.
To help financial advisors manage these new rules for the 2026 tax year, David Perez, CEO of Tax Maverick and Tax Plan Experts in San Benito, Texas, provided insights into OBBBA’s impact, why grouping donations has become a key strategy and the expanding role of donor-advised funds (DAFs).
The interview below has been edited for clarity and length.
Charitable planning under the new rules
Financial Planning: To start off, can you walk me through everything that this policy change involves?
David Perez: At a high level, it’s just making some changes to the way that an individual could donate money to a charitable cause. Traditionally, most of these high net worth individuals, if they’re working with an advisor, are doing it through either a donor-advised fund or a foundation that they have founded. But a lot of people are going to get impacted from those smaller donations, those they do to maybe a church or to a local community organization — food pantries, school districts, universities or alma maters.
And if we have high net worth individuals, they may not want to commit hundreds of thousands of dollars, but they may come in and say, ‘Oh, I’ll give you $5,000 or $2,500.” Those are the types of donations that are probably going to have the most impact in these changes to the tax code, because they’re not as easy to track. And since there’s a new floor, that 0.5% floor of their AGI, that kind of sucks. Because some people who have been donating for years may not necessarily even get the benefit right now. That’s the real big change.
FP: Can you clarify how the 0.5% floor works? Is it only the money above the floor that counts, or does reaching the floor unlock the rest of the deduction?
DP: The floor amount is excluded completely. For example, if you make $1,000,000, your floor is $5,000. And so you have to make more than $5,000 in charitable contributions in order for it to even be meaningful for taxes.
FP: For high net worth clients who are feeling this the most, what strategies should advisors be implementing or suggesting right now?
DP: Since there’s this new floor, a lot of the smaller contributions that you may have been doing, you may not want to do directly. You might want to set up a donor-advised fund, and then make those contributions. And instead of doing $5,000 here, $10,000 there, if you are going to contribute a large sum of money over, let’s say, the next five years, then just contribute it in year one into a donor-advised fund, and then you already meet the threshold limit.
Then you can make those contributions to whatever charities you want, but do it through your donor-advised fund, not directly from you. And this makes it easier for your advisor to track and for your accountant to be able to see those contributions and say, ‘Hey, you met the threshold.’ So, a donor-advised fund is probably what every advisor should be recommending to their clients right now.
FP: Can you expand on why donor-advised funds are a better structure for charitable donations compared to direct donations?
DP: A donor-advised fund acts in the same context as a general donation. The only difference is that when you put money into a donor-advised fund, you have the ability to donate it at any time. So, for example, let’s say I’m very philanthropic, and I want to give away $100,000 this year, but I’m not quite sure who I want to give it to. Well, I open a donor-advised fund, I fund the money in there and then from there I do the philanthropic giving. It’s very similar to being an individual. It’s just very trackable. It’s measurable.
Financial advisors love this because that donor-advised fund, it becomes AUM for them. It’s an AUM play for them as well. So while that money sits in that account, they’re earning AUM on that money.
So it’s easy to track. It helps the advisors help their clients make better decisions. It helps the CPA reconcile at the end of the year. It just makes it a little bit better for high net worth people to manage with a better, trackable method.
FP: The AUM angle is interesting there.
DP: Yeah, so if you put a quarter of a million dollars in there, and you don’t use it all year, it’s AUM, and the advisor is going to get the 1%, or whatever their negotiated rate is. The reason that they want to do it right now, as an example, in the first quarter, is because the client probably won’t make the decision to disperse any of that money until the fourth quarter, anyway, or throughout the year.
So it’d be very smart for an advisor to go to his clients and say, “Hey, this year there are changes to the tax code by way of contributions to charity. And I see in the past, you’ve done some philanthropic things. Why don’t we set up a donor-advised fund today, fund it with whatever you anticipate doing, and I would want to fund it pretty significantly. And the reason I would say that is because there’s this threshold of 0.5%, and most people are not going to meet that with just one charitable gift. So, why don’t we fund it with gifts that you’ll do over the next three years, and we’ll get the deduction this year, which is great for your tax benefit. And if anything is in excess, we could take it to the following years, but at least now, this year, we’ll track it all in one place. You can still give to your church, you can still give to this charity, you can still do all these things. We’re just doing it now.”
FP: So if a client has three years where they want to contribute a certain amount every year, they could put money for all three years into this fund and take that as one deduction in a single year?
DP: Yes, they’re going to take it all this year. We’re just saying do it in advance, because you’ll meet the threshold of the 0.5% this year, as opposed to having to meet it every year. So, for example, let’s say that I have $2 million that I want to give, and now there’s a $10,000 threshold that I have to meet. That’s my floor. And let’s say I’m only giving $15,000 every year, so I’m only getting a $5,000 deduction, really.
But if I’m going to do $15,000 every year, why don’t I do it for the next three years, which means $45,000, then I only have the $10,000 floor for this year. So I actually get more bang for my buck, because I get the difference between the $45,000 and the $10,000, which is $35,000.
Compare that to donating every year, where I’m only going to get $15,000 if I were to do it the traditional way that I’ve been doing it. So I get $35,000 versus only $15,000, because that’s what most people are doing. They’re going to barely meet the threshold or just go over just a little bit. If they’re going to do it anyway, they might as well just do it now.
