Charitable Giving Under the OBBBA: Strategic Planning for US UK Taxpayers

Written by Andrea Solana, CFP™

Charitable giving remains an important part of lifetime gifting strategies and estate planning. Many individuals choose to give because they want to support meaningful causes or establish a lasting legacy, but charitable giving can also create an opportunity to enhance overall tax efficiency when the gift is structured appropriately. This is especially relevant for dual US/UK taxpayers whose tax position spans both jurisdictions.

Tax relief can often be achieved in both the US and the UK when donations are made to a dual qualified charity. Where an intended charity does not hold this status, individuals can usually access a similar tax outcome by making their donation through a dual qualified donor advised fund.

The One Big Beautiful Bill Act (OBBBA), which passed in 2025, introduced several adjustments to the US federal income tax rules for charitable contributions. These changes apply from tax year 2026 and may be particularly important for individuals who continue to have income taxable in the United States. Understanding the new rules will help ensure that charitable gifts remain structured in a way that maximises their benefit.

The OBBBA introduces three main changes.

• Relief for Non-Itemisers: The first change allows individuals who do not itemise deductions to claim an annual charitable deduction of between $1,000 and $2,000, depending on filing status. This applies only to donations made directly to US 501(c)(3) charities, so contributions to donor advised funds or private foundations do not qualify. This means individuals taking the standard deduction can still benefit from a modest level of US tax relief.
• Reduced Benefit for High Earners: The second change affects individuals in the highest US tax bracket who itemise deductions. Their charitable deductions are now capped so that the tax saving is limited to $0.35 for every $1 donated, rather than $0.37. Cash gifts can still be deducted up to 60% of adjusted gross income, while donations of appreciated securities generally remain limited to 30%. Any unused deductions can typically be carried forward for up to 5 years.
• Introduction of an AGI Floor: The third change introduces a new adjusted gross income floor. Taxpayers who itemise will only receive a deduction for charitable contributions that exceed 0.5% of their adjusted gross income. For example, someone earning $150,000 will not receive a deduction for the first $750 they donate. This may encourage individuals to combine charitable gifts within a single tax year and consider incorporating non‑cash donations into their planning.

Cross‑border considerations remain central to the planning process. Although UK tax relief can be more straightforward and often more favourable, many individuals still have some income that remains primarily taxable in the US. As a result, it is important to ensure that donations are structured in a way that attracts relief in both systems. Using dual qualified charities or donor advised funds remains one of the most effective ways to preserve access to relief across borders.

The changes introduced by the OBBBA may influence the most efficient charitable giving strategy for some US/UK taxpayers. By reviewing these developments with tax and wealth advisers and ensuring that gifts are structured with both jurisdictions in mind, individuals can continue to support the causes that matter to them while also maximising the available tax benefits. Effective planning allows charitable intentions and tax efficiency to work together.

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 Risk Warnings:

• Any impact from the actual or speculative tax changes contained in this document will depend on the individual circumstances of each client and may be subject to change in the future.
• Information about potential tax benefits is based on our understanding of current tax law and practice and may be subject to change. The levels and bases of, and reliefs from, taxation is subject to change.  The tax treatment depends on the individual circumstances of each individual and may be subject to change in the future.

MASECO LLP is authorised and regulated by the Financial Conduct Authority for the conduct of investment business in the UK and is registered with the US Securities and Exchange Commission as a Registered Investment Advisor.