Timely & Relevant: Important Year-End Information For Charitable Giving
The Tax Simplification and Family Relief Act (H.R. 1), signed into law this year, brings important changes to the treatment of charitable contributions. While the legislation touches many areas of tax policy, its provisions related to charitable giving are especially relevant for families, individuals, and business owners who wish to align their values with their financial strategies.
Reduced Deduction For Certain Contributions
Many changes to the charitable giving tax laws take place starting in 2026. As such there are valuable and important changes that you may want to incorporate into your gifting strategy prior to year end.
Beginning in 2026, new limitations will modestly reduce the tax benefits of charitable giving. These include:
- A new 0.5% of AGI floor, meaning the first portion of annual charitable contributions will not be deductible.
- For taxpayers in the top tax bracket, deductions will be valued at a 35% rate instead of 37%. This means the tax savings on your donations will be slightly lower.
For non-itemizers, a limited charitable deduction of up to $1,000 ($2,000 for joint filers) will become available if given directly to a charity and not to a donor advised fund.
Stretch Your Dollars With Qualified Charitable Distributions (QCDs)
Qualified Charitable Distributions (QCDs) continue to be a valuable giving strategy for individuals age 70½ and over, as they are not subject to the new limitations outlined above. A QCD allows you to make tax-free withdrawals from your IRA and give directly to a qualified charity. You avoid paying taxes on the distributed amount and the charity receives the full benefit, which is an excellent way to make your dollars go further.
Why 2025 Is A Key Year
Since these charitable giving rules do not take effect until January 1, 2026, the remainder part of this year represents a window to maximize the full deduction value under current law. Strategies such as accelerating or “bunching” future charitable gifts into 2025 may create meaningful additional tax savings. For example, families planning larger multi-year gifts may benefit from consolidating those contributions into 2025.
A donor-advised fund (DAF) can be a powerful tool for this approach—allowing you to make a single contribution in 2025 (and capture the deduction under current rules), while distributing funds to intended charities over several future years at your own pace.
Planning Opportunities Ahead
For individuals and families committed to philanthropy, these changes highlight the importance of timing and strategy. Coordinating charitable gifts with your broader wealth, tax, and estate planning can make a significant difference. With thoughtful timing in 2025, you can:
- Preserve the full deductibility of your 2025 giving.
- Leverage appreciated securities or retirement accounts for maximum impact.
- Incorporate charitable giving into your legacy and estate planning strategies.
The Tax Simplification and Family Relief Act signals both challenges and opportunities for charitable giving.
While deduction limits may reduce benefits in 2026 and beyond, proactive planning in 2025 can enhance both your generosity and your tax efficiency.
We welcome you to contact us to explore strategies that align your charitable giving with your financial goals and make the most of this unique planning window.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.