Although many donors to charities dip into their own pockets to support their favorite causes, charitable gift-giving isn’t restricted to individuals. A small, incorporated business, such as one of your clients, might also make contributions that are rewarded with generous tax benefits. However, like the first-time floor for charitable deductions of individuals, the new One Big Beautiful Bill Act (OBBBA) creates a new tax hurdle for corporate business owners, beginning in 2026.
[This is part of a Special Series on the tax changes made by the One Big Beautiful Bill Act, which was enacted in July 2025. It includes a wide range of changes to individual and corporate taxes, deductions, credits, forms and other topics, that affect tax filing starting this year into the future.]
Keeping this in mind, business clients operating as C corporations should “bunch” charitable donations in the tax year where they get the most tax bang for their bucks, just like individual clients and owners of pass-through business entities. Factor this into year-end tax planning tactics.
For starters, the same basic rules that apply to deductions for monetary charitable donations by individuals generally apply to corporate contributions. Deductions are allowed only if donations are made to qualified charitable organizations and must be supported by records required under the prevailing regulations.
The other main rules for deducting monetary charitable donations are relatively simple.
As opposed to individuals who can’t currently deduct more than 60% of their adjusted gross income (AGI) for the year, deductions for C corporations are limited to 10% of taxable income. In most cases, any excess may be carried over for up to five years.
But things become as little trickier under the OBBBA. Comparable to the charitable floor of 0.5% of AGI for individual donors, the new law imposes—for the first time ever—a floor of 1% of taxable income for C corporations. In other words, only the excess above the 1% threshold is deductible. So, if a small C corporation earned $1 million and donated $15,000 in 2025, it could deduct $5,000 (15,000 – $10,000). This significant change takes effect in 2026.
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What about the 10% deduction ceiling on taxable income of corporations? That isn’t going away. Thus, the two thresholds will work in tandem with each other.
As a result, if a corporation makes a monetary contribution falling between the 10% ceiling and the 1% floor, the amount “in between” is deductible. Any nondeductible amount above the 10% ceiling may still be carried over for five years. Conversely, any amount falling below the 1% floor can’t be carried over. It’s gone for good.
Note that C corporations may be entitled to other charitable tax breaks for certain donations. For example, a corporation may claim an enhanced deduction for donations of inventory to a public charity if the items are specifically used for the care of the “ill, need, or infants.”
Finally, remember that the new law provision doesn’t kick in until next year. Thus, clients may be able to maximize their tax benefits by donating amounts before January 1. Meet with your charitable-minded clients to determine the nest approach for their situation.
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