Understanding the new tax rules for Muslim donors this year and beyond
The One Big Beautiful Bill Act (OBBB), signed into law on July 4, 2025, brings significant changes to how charitable giving is treated under federal tax law. Whether you give zakat, sadaqah, or support Muslim-led nonprofits through a donor advised fund, these new rules may affect your philanthropic planning.
Here’s what you need to know.
New Opportunities for Non-Itemizers
Starting in 2026, taxpayers who take the standard deduction will be able to claim an above-the-line charitable deduction for cash donations—up to $1,000 for individuals or $2,000 for married couples filing jointly.
This is significant: since the 2017 Tax Cuts and Jobs Act raised the standard deduction, roughly 90% of households no longer itemize, meaning most Americans haven’t been able to claim charitable giving on their taxes. The new provision changes that.
However, there are important limitations. The deduction is not indexed for inflation, and certain gifts—including contributions to donor-advised funds and private foundations—do not qualify. A similar provision during the COVID-19 pandemic allowed a $300 deduction, and approximately 90 million taxpayers claimed it.
Changes for High-Income Donors
If you’re in the top tax bracket, two changes are particularly relevant.
First, starting in 2026, the tax benefit of itemized charitable deductions will be capped at 35%, even for those in the 37% marginal bracket. In practical terms, a $10,000 donation would yield a $3,500 deduction rather than $3,700.
Second, there’s a new floor on deductions: itemizers can only claim charitable contributions that exceed 0.5% of their adjusted gross income. For a household with $300,000 AGI, only donations above $1,500 would be deductible.
What this means for you: If you’re planning a significant gift, consider accelerating it to 2025 to maximize your deduction under current rates. A bunching strategy—consolidating multiple years of giving into a single year—may be more valuable under the new rules.
Extended Provisions That Support Giving
Several provisions from the 2017 tax law have been made permanent or extended:
Income tax brackets remain at current levels (10%, 12%, 22%, 24%, 32%, 35%, and 37%).
The standard deduction increases by $1,000 for single filers and $2,000 for married couples, bringing totals to $15,750 and $31,500 respectively for 2025.
AGI limits for cash contributions remain at 60% for donations to 501(c)(3) public charities.
Estate and gift tax exemptions increase to $15 million for 2026, meaning over 99% of estates will not face federal estate taxes. This makes lifetime charitable giving even more important for those seeking tax benefits from their philanthropy.
The SALT Deduction Increase
The state and local tax (SALT) deduction cap rises from $10,000 to $40,000 for 2025, with 1% annual increases through 2029. This increased deduction phases out for incomes above $500,000.
If this change results in more taxpayers itemizing, it could allow more donors to deduct their charitable contributions. However, many will likely continue taking the standard deduction.
Considerations for Your Giving Strategy
The 2025 tax year presents a potentially strategic window for charitable giving. Here’s what to consider:
Timing matters. With deduction caps and floors taking effect in 2026, accelerating contributions to 2025 may yield greater tax savings. A donor-advised fund can help you take the deduction now while distributing grants to charities over time.
Mix cash and non-cash gifts. The new legislation introduces different treatment for various gift types, so a diversified approach may maximize both impact and tax efficiency.
Consult a professional. These rules are complex, and a tax advisor can help tailor a plan that aligns with both your financial situation and your values.
What This Means for AMCF Donors
At AMCF, we help donors maximize the impact of their giving through our donor-advised fund. Whether you’re making your annual zakat contribution, supporting Muslim-led nonprofits, or establishing a legacy of giving for your family, understanding these tax changes can help you give more strategically.
If you have questions about how these changes affect your giving, contact our team or explore our Giving Account options.
Source: This article draws on analysis from Fidelity Charitable.
This content is for informational purposes only and does not constitute tax or legal advice. Please consult with a qualified tax professional regarding your specific situation.