Changes To The Standard Deduction In 2025

For those who are charitably inclined, it is important to take into consideration the increased dollar amounts for the standard deduction in 2025.

The standard deduction is a specific dollar amount that reduces the amount of income on which you're taxed. It is an indexed amount that is adjusted each year to inflation. That means that as inflation increases, so does the amount exempt from income taxes. Did you know that approximately only 10% of tax payers itemize? Or another way said, approximately 90% of taxpayers are not receiving the tax benefit on their charitable giving.

Below is a summary of the standard deduction chart for 2024 and 2025:

Seniors age 65 and over and those who are blind may claim additional standard deduction amounts. We encourage you to speak with your financial advisor about your specific situation and consult with your tax advisor, as there are many factors to consider with the standard deduction.

Furthermore, we want to help you give more strategically to stretch your dollars as you plan for 2025:

Donor Advised Funds

Using a donor advised fund (DAF) can make it easier to itemize your charitable deductions. A DAF can also be an excellent generosity-maximizing tool.

Taxpayers who donate significant amounts to charities each year and still find themselves slightly below the standard deduction threshold may want to consider bunching itemized deductions. Many of our clients use a giving strategy called, "charitable bunching" to maximize their tax deductions and maximize what they are able to give.

"Charitable Bunching"

The concept of "charitable bunching" means contributing more than one year’s worth of charitable contributions in a single tax year to help minimize your tax burden in the long-run and maximize what you can give to charities.

You are eligible for a tax deduction in the year that you make a donation into a DAF even if the funds are not distributed out from the DAF in the same year.

Bunching tax deductions—charitable gifts and/or other deductions—is one great way to expand your generosity. It can provide you with more flexibility and opportunity to give.

If you are interested in learning more about how we can serve your charitable giving and other financial planning needs, please contact us at 302.234.5655 or contactus@covenantwealthstrategies.com to learn more.

Disclosures:

Content in this material is for general information only and is not intended to provide specific financial, tax, or legal advice for any individual. And it may not be used for the purpose of avoiding any federal tax penalties. Please consult financial, legal or tax professionals for specific information regarding your individual situation.

Source:

*https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2025