If my AGI is $500,000 with no NOL carryovers and $10,000 in charitable contributions, how much of my charitable deduction is disallowed when itemizing under the new 0.5% floor of Section 170(b)(1) as enacted by the OBBBA in 2025?
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For tax years beginning after December 31, 2025, the One Big Beautiful Bill Act (OBBBA) imposes a new “floor” on the deductibility of charitable contributions for individuals who itemize. Specifically, under the amended Section 170(b)(1)(I), only the amount of total charitable contributions that exceeds 0.5% of your adjusted gross income (AGI) is deductible. The first 0.5% of AGI in charitable contributions is disallowed as a deduction.
Let’s apply this to your facts:
- AGI: $500,000
- Charitable contributions: $10,000
- No net operating loss (NOL) carryovers
Step 1: Calculate the 0.5% floor
0.5% of $500,000 = 0.005 × $500,000 = $2,500
Step 2: Determine the disallowed amount
The first $2,500 of your charitable contributions is disallowed. Only the amount above this floor is deductible.
Step 3: Calculate the allowed deduction
$10,000 (total contributions) – $2,500 (floor) = $7,500 (deductible amount)
Step 4: Disallowed deduction
$2,500 of your $10,000 in charitable contributions is disallowed under the new floor.
Summary:
- Disallowed charitable deduction: $2,500
- Allowed charitable deduction: $7,500
Additional Notes:
- If you had charitable contribution carryforwards from prior years, the disallowed amount could increase your carryforward, but with no carryforwards, the disallowed portion is permanently lost.
- This floor applies before applying the usual AGI percentage limits (e.g., 60%, 50%, 30%, 20%) and in the order specified by the statute.
Conclusion: With an AGI of $500,000 and $10,000 in charitable contributions, $2,500 of your deduction is disallowed due to the 0.5% floor under Section 170(b)(1)(I) as amended by the OBBBA.
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