An aerial view of University of Illinois’ Memorial Stadium in Champaign, IL.
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The University of Illinois athletic department has received a $100 million donation from its famed alumnus, Larry Gies, as reported by CBS Sports. This gift follows another massive donation made to the University of Kansas from David Booth, which, as reported by ESPN, is to the tune of $300 million. Both donors are receiving tremendous legacy benefits. In fact, both schools have now named their football stadiums after their donor. Besides the name recognition of being philanthropic hero to their university, one may ponder why these two schools have suddenly received such large infusions of donations. The answer might lie in the One Big Beautiful Bill Act and the upcoming 2026 changes to tax deductions for donations to universities. This article discusses how the One Big Beautiful Bill Act changed charitable contribution tax deductions and why 2025 might be the right year for wealthy alums to make a sizable charitable contribution.
The Tax Treatment For Charitable Contributions In 2025
Section 170 of the Internal Revenue Code allows individual taxpayers to deduct their donations to a qualified charitable organization as a miscellaneous itemized deduction. For the years 2025 and earlier, this means that those donating to charity can deduct the expense and lower their tax liability as long as their deductions are larger than the standard deduction (2025 figures: $15,750 for single taxpayers; $31,500 for married filing jointly taxpayers).
However, there are limits to the deductions. The deduction cannot exceed 60% of the taxpayer’s adjusted gross income. This means if the taxpayer makes $2,000,000 in a year, they cannot make a $2,000,000 charitable contribution and deduct all of it in that year. Instead, the taxpayer can deduct $1,200,000 that year and carry forward the unused portion for up to 5 years. This limit is problematic for those with wealth but low income in a particular year. Furthermore, the limit might create issues where it can be difficult to foresee realizing the available tax deductions over the five-year window.
The One Big Beautiful Bill And Its Impact On The University of Illinois And The University of Kansas
The One Big Beautiful Bill Act changed the tax treatment for individual charitable contributions. As I discussed in a Forbes article, beginning in 2026, only charitable contributions over 0.5% of adjusted gross income can be deductible. Using the $2,000,000 adjusted gross income figure, the first $10,000 of charitable contributions donated cannot be deducted. The taxpayer is still subject to a 60% adjusted gross income cap. Thus, the taxpayer effectively loses $10,000 of tax deductions since they cannot deduct more than 60% (even though the first 0.5% can not be deducted).
Potentially even more impactful for megadonors like Gies and Booth is that the tax benefits are capped at 35% for taxpayers with adjusted gross income over $1 million, according to Fidelity Charitable. What this means is the taxpayers can still donate to charitable organizations up to 60% of their adjusted gross income. However, rather than getting a tax benefit of $0.37 for every dollar donated, they only get $0.35 of tax benefits. While the size of the donations will not necessarily be impacted, the corresponding tax benefits the donors receive from contributing the same amount, which has the potential to lead to smaller future donations.
To help illustrate this reduction in benefits, using $2,000,000 as the adjusted gross income, if the taxpayer donates $1,200,000 in 2025, the taxpayer can deduct all $1,200,000. Given the taxpayer is in the top tax bracket, they will have $444,000 in tax savings ($1.2M * 37%). However, starting in 2026, only $1,190,000 can be deducted due to the 0.5% adjusted gross income floor. Also, this tax benefit will be limited to 35% due to the new tax law. The result is that the taxpayer will only receive tax savings of $416,500 ($1,190,000 * 35%).
In the cases of Gies and Booth, these limitations are significant and material. For instance, assume both donors have $500,000,000 in adjusted gross income. In 2025, Gies and Booth would each be able to deduct their entire charitable contribution, resulting in tax savings of $37,000,000 and $111,000,000, respectively. However, in 2026, the new floor immediately reduces their charitable contributions by $2,500,000. Furthermore, the 35% tax rate limitation results in Gies realizing $34,125,000 in tax benefits and Booth realizing $104,125,000 in tax benefits. Thus, both donors making their contributions in 2025 yielded multimillion-dollar tax benefits relative to the same donation in 2026.
The charitable contribution rules under the One Big Beautiful Bill Act applies universally to all qualified charitable organizations. However, with the advent of paying collegiate athletes now allowed following the House v. NCAA decision (as I reported in Forbes) and the constant state of flux with federal funding, universities are in a state of financial uncertainty. Despite this instability, universities like the University of Illinois and the University of Kansas appear to have taken advantage of upcoming tax law changes to secure very large gifts from key donors. As we head into the end of 2025, other universities might wish to follow suit and attempt to acquire large gifts of their own before the tax law changes for donations to universities yield smaller benefits for their donors.