Upcoming changes to charitable tax deductions: What you need to know

The One Big Beautiful Bill Act, signed into law in July 2025, will change the rules for charitable tax deductions starting January 1, 2026. These changes may reduce tax savings many households currently enjoy. As a result, 2025 could be your last chance to maximize your charitable deductions under the current rules.

Why review your charitable giving plans now?

Beginning in 2026, two new rules will apply to charitable deductions for those who itemize their deductions:

• Minimum Contribution Requirement : You will only be able to deduct charitable gifts that exceed 0.5% of your adjusted gross income (AGI). Charitable donations below this threshold will no longer be deductible for the current year.
• Deduction Cap : If you are in the highest tax bracket of 37%, the value of your charitable deduction will be capped at 35% rather than your actual tax rate of 37%.

Example :

• If Henry, a single filer earning $750,000, donates $3,000 of cash to charity in 2025, he can deduct the full amount as part of his itemized deductions, saving approximately $1,110 in taxes.
• If Henry instead waits until 2026, the same donation will not qualify for an itemized deduction because it would be below the new 0.5% AGI threshold and the unused deduction will not be carried forward to future years. However, note that under the new rules if Henry does not itemize in 2026, then he would be eligible for a $1,000 above-the-line deduction for this charitable gift (in addition to his standard deduction).

Tax savings lost in 2026: $1,100

For larger gifts, the itemized deduction may not be eliminated completely in 2026, but there is still a significant impact to the deduction as a result of the 0.5% floor and the 35% cap. If in our example above, Henry made a charitable gift of $150,000 of cash instead:

• In 2025, Henry would save approximately $55,500 in taxes.

• In 2026, his tax savings would drop to approximately $51,187.

Tax savings lost in 2026: $4,313

What should you consider before January 1, 2026?

The good news is that you still have time to act before these new limitations take effect. As we approach the end of the year, you may want to consider the following:

• Accelerate your giving : If you typically make charitable gifts over many years and you itemize your deductions, consider bunching your charitable contributions in 2025 rather than spreading them out over future years in order to take full advantage of the current charitable deduction rules.
  • Donor-advised funds : If you’re unsure which charities you want to support in 2025 with those accelerated gifts, a donor-advised fund lets you secure the deduction now and choose recipients later.
  • Appreciated assets : One effective option for making large charitable gifts is using appreciated assets to fund that gift. This allows you to avoid capital gains tax because the charitable gift does not trigger capital gain and the charitable recipient can later sell the asset without paying capital gains tax.
• Plan ahead for year-end : Planning your charitable gifts and making the actual transfers can take time, so do not wait until the very end of the year to finalize your gifts. Also, be sure to ask your relevant financial institutions what their deadlines are for effectuating any charitable gifts by December 31.
• Don’t forget Qualified Charitable Distributions (QCDs) : While QCDs from IRAs aren’t impacted by the new tax law changes, year-end is a good time to consider the use of QCDs to satisfy all or part of your required minimum distribution and achieve your charitable goals.

As you contemplate your year-end charitable giving, it is important that you talk with your qualified tax and legal advisors about the impact of these new rules on your income tax situation as well as your overall wealth planning goals.

For more information on charitable giving, including QCDs, visit our  Effective Philanthropy  resource page or reach out to your Relationship Manager.