As the end of 2025 approaches, I’d like to highlight the following:
- 3 new rules from the “Big Beautiful Bill” affecting charitable contributions starting for 2026
- 4 powerful tax strategies that can maximize the tax impact of charitable giving
3 New Rules
1. New Charitable Deduction for People that Don’t Itemize
Beginning in 2026, taxpayers that don’t itemize deductions will be able to deduct charitable gifts up to $1,000 for singles and $2,000 for married folks that file jointly. There is no such extra benefit for non-itemizers in 2025.
2. New 0.5% Floor for People that Do Itemize
For folks that do itemize deductions, charitable contributions will be reduced by 0.5% of the taxpayer’s income for that year. (i.e. a taxpayer makes $150K in income and therefore $750 worth of charitable contributions are now no longer deductible)
3. Deduction Rate Ceiling for High Income Earners
The highest federal individual income tax rate is currently 37%. So for taxpayers that fall into the top bracket and take a charitable deduction, each dollar donated essentially saves $0.37 for each $1 given. However, the new rule is that the most possible a taxpayer is allowed to save through an itemized charitable deduction is $0.35 for each $1 given.
4 Powerful Tax Strategies
1. Bunching Donations
Taxpayers can group multiple years’ worth of donations into one year and withhold donations during the off years. This could potentially allow the taxpayer to take advantage of itemizing deductions one year and then take the standard deduction in the off years, potentially yielding much bigger overall tax savings.
2. Donor Advised Funds
Taxpayers can open donor advised funds, which are accounts that allow charitable tax deductions for contributions to them. Then later, the donor can direct gifts out of the donor advised fund. This is perfect for folks that bunch donations, so as to beable to choose when organizations receive the gifts, while allowing the taxpayer to reap the tax deduction in an earlier year.
3. Donating Appreciated Assets
Donating appreciated assets such as stocks (must be held for at least a year), allows taxpayers that itemize deductions to take a charitable deduction for the full value of the investment donated. No capital gains tax is due AND the taxpayer receives the charitable tax deduction. If someone holds both cash and appreciated stocks, it is more beneficial to donate the stocks, since the donor can simply re-buy themselves the stock at the higher price point, essentially resetting the cost basis of the stock held and decreasing future capital gains taxes. Donor Advised Funds allow for the easy transfer of securities, which can then be sold within the DAF . Then the resulting cash can be donated to the target organizations.
4. Qualified Charitable Distributions (QCD)
Retirees that are required to withdraw IRA funds each year can donate directly out of the IRA funds. These donations are called Qualified Charitable Distributions and whatever is donated as a QCD becomes no longer taxable. This can be helpful if the taxpayer doesn’t itemize deductions generally.
Summary
Planning charitable giving intentionally and with the guidance of a CPA can massively move the needle on tax savings simply by tweaking the timing and methodology of the gifts. Hopefully this can serve as a kickstart to maximizing the tax savings impact of your giving!
Thanks,
Paul Walter, CPA
The Donor’s CPA LLC
Text 803-829-6123 for a free Tax Savings Second Look