As 2025 begins to wind down, high-income taxpayers and charitably inclined families should be aware of upcoming changes that will affect the value of charitable contribution deductions beginning in 2026.
The One Big Beautiful Bill Act (OBBBA) signed into law in July introduces two new limitations that will make charitable giving slightly less tax-advantaged in future years.
Below is a brief analysis of the new rules and a strategy to preserve the maximum benefit by acting before the end of 2025.
What’s Changing for Charitable Deductions in 2026
- New 0.5% AGI Floor – Starting in 2026, the first 0.5% of your income given to charity will no longer be deductible. Currently (in 2025) there is no such floor, so every dollar you donate (up to normal IRS limits) is deductible. This change means that starting next year, some of your annual giving will effectively get no tax break before you hit the annual threshold.
- Reduced Value for Top Bracket Donors – In 2026, if you’re in the 37% tax bracket, charitable deductions (and other itemized deductions) will only offset tax at a 35% rate. This means the tax savings on your donations will be slightly lower. While this 2% difference seems like a small haircut on the value of each deductible dollar you give, over large donations that reduction adds up.
- New Limitation for Non-Itemizers – For taxpayers who take the standard deduction, a new limited charitable gift deduction will take effect in 2026 (up to $1,000 for single filers and $2,000 for joint filers).
For many donors, these new rules mean charitable giving will yield fewer benefits in 2026 and beyond. Fortunately, none of these changes affect 2025 donations, which creates a great tax planning opportunity for this year.
Why Consider Bunching Charitable Donations in 2025
Because these changes don’t take effect until January 1, 2026, this year presents a final window to capture the full deduction value under current rules. Many individuals are considering accelerating or “bunching” donations they planned for future years into 2025 to maximize the tax benefit.
Here’s an example of how this works:
A married couple intends to donate a total of $50,000 to charity over the next two years.
If they split the donation into $25,000 in 2025 and $25,000 in 2026, next year’s donation would first lose $5,000 to the new AGI floor (assuming a $1M AGI, 0.5% of that is $5,000 not deductible). This would leave $20,000 deductible at the 35% rate – about $7,000 saved in 2026. Combined with approximately $9,250 saved on the $25,000 given in 2025, they would achieve $16,250 in total tax savings over the two years.
If instead the couple gives the entire $50,000 now in 2025, they could reduce their 2025 taxes by roughly $18,500 (at a 37% benefit).
By bunching the full $50,000 into 2025, this couple can save roughly $2,250 more in taxes compared to spreading their donation between 2025 and 2026. The higher your planned donations, the more this timing strategy can benefit you.
A Donor-Advised Fund Can Help Maximize 2025 Giving
If you’re concerned about donating a large amount at once, consider using a Donor-Advised Fund (DAF) to bunch your contributions. A DAF allows you to front-load charitable donations in one year and get the tax deduction now while granting the money to charities over multiple future years at your discretion.
Essentially, you contribute cash or assets to a DAF in 2025 and take the full deduction this year, then the DAF can distribute funds to your chosen charities in 2026 and beyond. This way, you fulfill your charitable commitments for several years but capitalize on the 2025 tax rules.
Plan Ahead with These Next Steps
There are flexible tools that can help you make larger gifts in 2025 while still supporting charities on your preferred timeline. The right approach depends on your income, gifting goals, and the type of assets you want to give.
However, time is of the essence and it’s important not to wait until year-end to evaluate your options. Here are some important next steps:
- Decide How Much to Give by 12/31/2025: Review your charitable giving plans and consider accelerating any donations you intended for 2026 (and beyond) into this year. The more you can donate in 2025, the more you can leverage the full deduction before the new rules kick in.
- Evaluate a Donor-Advised Fund: If you think a DAF could align with your charitable giving plans, contact a brokerage or charitable foundation to get started. Initiate transfers of cash or appreciated assets to the DAF well before year-end to ensure the deduction counts for 2025. This will allow you to claim the deduction now and still give to charities on your own timetable.
- Plan for 2026 and Beyond: The new rules might cause you to consider adjusting your future approach to charitable giving. It could be beneficial to concentrate donations in certain years (to clear the 0.5% floor by a good margin) rather than giving the same smaller amount every single year. If you bunch in 2025, you may choose to skip or reduce donations in 2026.
The Takeaway: Act Now to Make the Most of Your Charitable Contributions
If charitable giving is an important part of your financial plan, now is the time to evaluate whether shifting gifts into 2025 could make sense for you. The rules change in 2026, and proactive planning this year may create meaningful additional tax savings.
Every situation is unique, and the impact will vary depending on your circumstances. Contact your Kreischer Miller relationship professional or any member of our Tax Strategies team for assistance with reviewing your charitable giving options and modeling the benefits.