Major Tax Changes Are Coming in 2026 — Why 2025 Is the Year to Act
Starting in 2026, several key charitable-giving tax rules will shift under new federal legislation. For high-income households, these changes could reduce the tax benefits of charitable deductions, meaning the timing of your giving has never mattered more.
Here’s what you need to know, and why 2025 presents a unique planning window to maximize both your generosity and your tax efficiency.
What’s Changing in 2026
1. A New “Floor” on Charitable Deductions
Beginning in 2026, charitable contributions can only be deducted to the extent they exceed 0.5% of your adjusted gross income (AGI).
Example:
If your AGI is $1,000,000, the first $5,000 of charitable giving will not count toward your itemized deductions.
This shifts the calculus for donors who rely on annual giving to reduce taxable income.
2. Standard Deduction vs. Itemizing: A Bigger Gap to Clear
If you take the standard deduction, currently $31,500 for married couples, you’ll need to exceed that amount with itemized deductions to receive any tax benefit from charitable giving.
With SALT deductions capped at $10,000 and many taxpayers no longer carrying mortgage interest, the gap can be large.
In some cases, you might need $20,000+ in charitable gifts before your taxes are meaningfully reduced.
3. A Cap on the Value of Itemized Deductions
Even if your gifts qualify, the tax value of your itemized deductions will be limited.
Starting in 2026, the tax benefit is capped at 35 cents on the dollar, even for those in the 37% federal bracket.
Translation:
High earners will get a smaller tax break for the same charitable contributions.
Why 2025 Is a Critical Planning Year
For many donors—especially those who itemize and give consistently—2025 is a final opportunity to use today’s more favorable rules before the new limits kick in.
Here are strategies to consider:
Frontload Your Giving With a Donor-Advised Fund (DAF)
A DAF allows you to take a full charitable deduction today while distributing grants to charities over time. By “bunching” several years’ worth of giving into 2025, you can:
Avoid the new 0.5% AGI floor
Lock in today’s more favorable deduction rules
Maintain flexibility on when and how you support nonprofits
Example:
If you typically give $50,000 per year, contributing $250,000 to a DAF in 2025 could generate an estimated $115,000 in combined federal tax savings under current rules.
Use Appreciated Stock for Maximum Efficiency
Funding your DAF—or making direct gifts—with appreciated securities offers two benefits:
You deduct the full fair-market value
You avoid realizing capital gains tax
For high earners with concentrated or long-held positions, this is often one of the most tax-efficient ways to give.
Consider Qualified Charitable Distributions (QCDs)
If you’re age 70½ or older, QCDs allow you to donate up to $105,000 directly from your IRA each year.
Benefits include:
The gift can satisfy required minimum distributions
You avoid adding the distribution to taxable income
You don’t need to itemize to receive the tax advantage
This strategy may become even more valuable starting in 2026.
Planning Ahead: What This Means for You
These changes do not eliminate the advantages of charitable giving, but they do reshape the landscape, especially for high-income earners.
The difference between giving in 2025 versus 2026 could mean tens of thousands of dollars in lost deductions for some households.
If you:
Make significant annual charitable contributions
Expect a high-income year in 2025
Have appreciated investments
Or are considering a large, one-time gift
…then now is the time to evaluate your strategy.
Make 2025 a Year of Meaningful Impact
Smart planning can help ensure your generosity continues to benefit the causes you care about—and fits seamlessly into your long-term financial plan.
If you’d like to explore whether bunching, DAF funding, or other strategies make sense for you, we’re happy to walk through the numbers and connect you with a financial or tax expert who specializes in charitable planning.
2025 offers a unique opportunity. Let’s make the most of it.