The One Big Beautiful Bill (OBBB), signed into law on July 4, 2025, introduces sweeping changes to the federal tax code—including several provisions that directly affect how Self-emplyed and small business owners handle charitable giving. Whether you itemize deductions or take the standard deduction, these updates could reshape your tax planning strategy starting with the 2026 tax year.
Under previous law, only taxpayers who itemized deductions could claim a tax benefit for charitable contributions. That left out the majority of filers, especially Self-emplyed who often take the standard deduction. The Big Beautiful Bill changes that.
Beginning in 2026, all taxpayers—regardless of whether they itemize—can deduct up to $1,000 in qualified cash donations to charity. Married couples filing jointly can deduct up to $2,000. This above-the-line deduction reduces your adjusted gross income (AGI), which can lower your overall tax liability. However, donations to donor-advised funds and private foundations are excluded from this benefit, so it’s important to verify that your chosen charity qualifies.
For Self-emplyed who do itemize, the rules have shifted as well. Starting in 2026, you’ll only be able to deduct charitable contributions that exceed 0.5% of your AGI. For example, if your AGI is $200,000, only donations above $1,000 will be deductible. This threshold may limit the benefit for moderate givers, but it still allows for meaningful deductions if you plan your giving strategically.
Additionally, the maximum tax benefit for itemized charitable deductions is now capped at 35%, even for those in higher tax brackets. That means if you’re in the 37% bracket and donate $1,000, your deduction will be limited to $350 instead of $370. High-income Self-emplyed considering large gifts may want to accelerate those donations into 2025 to take advantage of the current rules before the cap takes effect.
These changes reflect a broader effort to encourage charitable giving across income levels while curbing excessive tax breaks for the wealthiest donors. For Self-emplyed, this opens the door to more inclusive tax benefits and makes it easier to support causes you care about—without needing to itemize.
To make the most of these new rules, consider reviewing your charitable giving strategy now. If you typically take the standard deduction, plan to track your donations carefully so you can claim the new above-the-line deduction. If you itemize, evaluate how the 0.5% AGI floor and 35% cap may affect your giving in 2026 and beyond.
As always, make sure your donations go to qualified public charities and keep proper documentation. Receipts, donation confirmations, and bank records will be essential for claiming deductions under the new framework.
If you’re unsure how these changes affect your Self-emplyed business or want help structuring your charitable contributions for maximum tax benefit, reach out to a trusted tax advisor. Planning ahead now can help you give generously and wisely.
