Upcoming Tax Law Changes: What You Should Know

Adapted from The Tax Foundation

Congress recently passed long-term tax legislation that will affect charitable giving — but these new rules do not take effect until 2026, meaning 2025 is a strategic year for giving under the current system.

What’s Changing

1. New deduction “floor” for itemizers.
   Beginning in 2026, if you itemize deductions, you will only be able to claim a charitable deduction for gifts that exceed 0.5% of your adjusted gross income (AGI).
   Example: If your AGI is $100,000, then the first $500 of donations won’t count toward your deduction.
2. Above-the-line deduction returns for non-itemizers.
   For tax years beginning in 2026, taxpayers who do not itemize will be able to deduct up to $1,000 (individuals) or $2,000 (married filing jointly) in cash gifts made to public charities.
   Note: Gifts to donor-advised funds and private foundations are generally excluded from this deduction.
3. Cap on deduction benefit for high-income donors.
   Also starting in 2026, if you’re in the top tax bracket, the tax benefit you receive from your charitable deduction will be limited: even if your marginal rate is higher, your deduction will only reduce your tax by up to 35% of the amount given.

What This Means for 2025

Because the current, more generous rules remain in effect for one more year, 2025 presents a meaningful opportunity for donors like you:

• This could be a “peak giving year.” Many donors may choose to give in 2025 to maximize the current benefits before the floor and cap take effect.
• Consider bundling multiple years of giving (sometimes called “bunching”) or contributing to a donor-advised fund (DAF) before December 31, 2025. That way you get the deduction under the current rules, but can distribute over future years.
• Gifts of appreciated stock remain one of the most tax-efficient ways to support your favorite charitable organizations—especially when combined with 2025 timing.
• If you’re planning a major or multi-year gift, acting in 2025 can lock in the more favorable tax environment.

Why Strategy Matters

The new rules won’t change how much people care or who they support—but they may shift when and how people give. For example:

• Donors who prefer the simplicity of a standard deduction may now receive a modest above-the-line charitable deduction starting 2026 — but even so, the growth of the standard deduction means fewer people itemize, which changes the dynamics of giving.
• High-income donors will face slightly reduced marginal tax benefits for their giving, which may influence their philanthropic timing or use of vehicles like DAFs.
• Nonprofits may see a shift in donor behavior (e.g., more giving in 2025, or a different mix of gifts) rather than a drop in generosity.

Bottom Line

2025 is an excellent year to review your charitable giving strategy and consider accelerating or structuring gifts with an eye toward maximizing tax-efficiency under the current rules. If you’re thinking about a large gift, multi-year commitment, or want to leverage appreciated assets, this could be an ideal moment.

As always, please consult your tax advisor or financial planner to determine what’s best for your unique situation.