The One Big Beautiful Bill delivers several long-sought-after changes to the tax code, particularly for those involved in affordable housing development, community revitalization, and philanthropic planning.
Here’s a summary of the key enhancements — now permanent — and what they mean for taxpayers, nonprofits, developers, and corporate donors starting in 2026.
Permanent Expansion of the Low-Income Housing Tax Credit (LIHTC)
The bill permanently increases the state-level housing credit ceiling, restoring the 12.5% boost that had previously expired in 2021. This means:
More credits available to states to allocate toward LIHTC projects.
Greater funding opportunities for developers of affordable housing.
Additionally, the bill modifies the "50% test" for projects financed by tax-exempt bonds:
A project can now qualify for LIHTC if only 25% of its basis is financed with tax-exempt bonds — provided those bonds fund at least 5% of total project basis and are issued after 2025.
This adjustment will make many more projects eligible and unlock new financing structures.
Effective Date: Buildings placed in service after December 31, 2025.
Permanent Extension of the New Markets Tax Credit (NMTC)
The popular NMTC program — which incentivizes investment in economically distressed communities — is now permanent.
Key provisions:
$5 billion annual allocation will continue indefinitely beyond 2025.
Unused credits can be carried forward for up to 5 years (with pre-2026 amounts treated as occurring in 2025).
This is a significant win for community development financial institutions (CDFIs), investors, and project sponsors relying on NMTC financing to fund community facilities, job creation, and commercial revitalization.
Expanded Charitable Deduction for Non-Itemizers
The temporary “above-the-line” charitable deduction is now permanently restored and expanded:
$1,000 for single filers
$2,000 for married couples filing jointly
This deduction is available even if you take the standard deduction — a significant incentive for everyday donors to continue giving.
New 0.5% Floor for Individual Charitable Deductions
For all individual taxpayers (whether itemizing or not), charitable contributions must now exceed 0.5% of AGI to be deductible.
This floor applies to all donations, including cash, property, and appreciated assets.
Contributions below the 0.5% threshold are not deductible but can be carried forward if the 10/20/30/60% ceilings were otherwise exceeded.
This provision is designed to weed out minimal deductions and ensure the deduction primarily benefits significant charitable giving.
New 1% Floor for Corporate Charitable Deductions
Corporate donors also face a new rule:
Contributions must exceed 1% of taxable income to qualify for a deduction.
The overall cap remains at 10% of taxable income.
Unused contributions can be carried forward for 5 years (on a FIFO basis), but only if the 10% cap was exceeded.
This may slightly discourage small-dollar charitable giving by C-corps, but encourages more structured and sizable giving programs.
Permanent Increase in Cover-Over for Distilled Spirits
The excise tax “cover-over” (rebate to Puerto Rico and the U.S. Virgin Islands for rum production) is locked in at $13.25 per proof gallon, removing uncertainty caused by past temporary extensions.
These permanent extensions and modifications deliver long-term clarity for key sectors:
Housing developers gain access to more stable credit allocations.
Community investors have assurance the NMTC is here to stay.
Nonprofits and donors benefit from simplified charitable deduction rules — with clear floors and expanded limits.
Corporations will need to be more strategic in their giving to maximize tax efficiency.
If you're a developer, investor, nonprofit, or major donor, now is the time to revisit your tax strategy for 2026 and beyond.