Charitable giving has long served dual purposes for many investors: supporting causes they care about while receiving valuable tax benefits. However, the One Big Beautiful Bill Act has fundamentally altered the charitable giving landscape, with significant changes taking effect in 2026. Understanding these changes and acting strategically in 2025 can help you preserve maximum tax benefits while maintaining or even increasing your philanthropic impact.
The New Charitable Giving Landscape: What’s Changing in 2026
Beginning with the 2026 tax year, two major changes will affect how taxpayers benefit from charitable giving. First, itemizers will face a new 0.5% adjusted gross income floor on charitable deductions. This means that only charitable contributions exceeding 0.5% of your AGI will be deductible. For a taxpayer with $200,000 in AGI, the first $1,000 of charitable contributions will not be deductible.
Second, and potentially more impactful for high-income taxpayers, is a new 35% cap on the value of itemized deductions. Regardless of your marginal tax rate, itemized deductions—including charitable contributions—will only reduce your tax liability by a maximum of 35%. For taxpayers in the 37% federal bracket, this effectively reduces the tax benefit of charitable giving by more than 5%.
These changes don’t make charitable giving less valuable, but they do change the calculus for tax planning. A $50,000 charitable contribution from someone in the 37% bracket would save $18,500 in federal taxes under current 2025 rules, but only $17,500 under the 2026 rules—a difference of $1,000. When scaled across multiple years and combined with state taxes, the impact becomes significant.
However, there’s positive news as well: the legislation permanently extended the 60% of AGI limit for cash contributions to public charities and introduced a new universal charitable deduction of $1,000 for single filers and $2,000 for married couples filing jointly, even for those taking the standard deduction. This universal deduction, effective in 2026, makes charitable giving more accessible to all taxpayers, though it notably excludes contributions to donor-advised funds, supporting organizations, and private foundations.
The Power of Bunching: Accelerating Contributions into 2025
Given the less favorable rules taking effect in 2026, bunching charitable contributions into 2025 has become an especially powerful strategy. Bunching involves consolidating multiple years’ worth of planned charitable contributions into a single tax year to maximize the itemized deduction benefit, then taking the standard deduction in subsequent years.
Here’s how it works in practice: Suppose you typically contribute $20,000 annually to charity. Under the new rules, you might consider contributing $60,000 to a donor-advised fund in 2025, which allows you to claim the full deduction in 2025 at current rates without the 0.5% AGI floor, then take the standard deduction in 2026 and 2027 while still making your intended $20,000 annual grants to charities.
For 2025, the standard deduction is $15,750 for single filers and $31,500 for married couples filing jointly. If your total itemized deductions (including charitable contributions) don’t significantly exceed these amounts, bunching becomes particularly valuable.
Donating Appreciated Assets: The Most Tax-Efficient Strategy
For investors holding appreciated securities, donating these assets directly to charity or to a donor-advised fund represents one of the most tax-efficient giving strategies available. When you donate long-term appreciated assets (held for more than one year) to a public charity or donor-advised fund, you receive two significant tax benefits: you can deduct the full fair market value of the assets (up to 30% of your AGI), and you avoid paying capital gains taxes on the appreciation.
This strategy works with various appreciated assets beyond publicly traded stock, including mutual fund shares, real estate, closely held business interests, and cryptocurrency. For assets requiring appraisals (generally non-publicly traded assets with claimed values exceeding $5,000), proper documentation becomes critical. You’ll need a qualified appraisal and must file Form 8283 with your tax return.
Qualified Charitable Distributions: A Strategy for Retirees
For investors age 70½ or older, qualified charitable distributions (QCDs) from IRAs offer unique advantages that make them particularly attractive in the new tax environment. In 2025, you can direct up to $108,000 directly from your IRA to qualified operating charities (not to donor-advised funds or private foundations). QCDs are excluded from your taxable income entirely—they’re not reported as income and then deducted, they simply never hit your tax return. This creates several benefits: the distribution counts toward your required minimum distribution without increasing your adjusted gross income, potentially keeping you in a lower tax bracket, reducing your Medicare Part B and Part D premiums, minimizing the taxation of Social Security benefits, and avoiding the impact of the Alternative Minimum Tax.
Special Considerations for High-Net-Worth Donors
High-net-worth individuals engaged in significant philanthropic activity should carefully consider their charitable giving structure in light of the new rules. Private foundations, donor-advised funds, and charitable trusts each offer different advantages and limitations under the new law.
Documenting Your Charitable Contributions
Proper documentation is essential for claiming charitable deductions. For any contribution of $250 or more, you need a written acknowledgment from the charity stating the amount contributed and whether you received any goods or services in return. For contributions of $500 or more in non-cash property, you must complete Form 8283. For contributions of non-cash property valued at more than $5,000, you generally need a qualified appraisal. Keep thorough records of all charitable contributions throughout the year.
