Four considerations for year-end charitable giving

This year, Americans will give more than $500 billion to charity, according to the National Philanthropic Trust. While meeting philanthropic goals is important for donors, these gifts may also provide valuable tax benefits. That’s why year-end planning for charitable giving is so critical. Additionally, tax law changes introduced by the One Big Beautiful Bill Act may impact decisions around charitable giving this year. It’s crucial to act now to secure valuable tax benefits since donations must be completed by the end of the year to claim a tax deduction against 2025 income.

Changes to charitable deductions beginning in 2026

The new law introduces a couple of provisions, one that is positive for taxpayers and another that will limit the tax benefit of charitable deductions for some.

First, beginning in 2026, taxpayers claiming the standard deduction will be able to deduct up to $1,000 ($2,000 for couples) of charitable contributions on their return. To qualify, contributions must be made in cash to a qualified charity (no donor advised funds or foundations). Also, beginning in 2026, taxpayers itemizing deductions will not benefit tax-wise from making a charitable contribution until the amount of the donation exceeds 0.5% of their adjusted gross income (AGI). For those potentially subject to this new limit in 2026, does in make sense to accelerate charitable giving into 2025 instead?

 

Source: H.R.1 – 119^th Congress (2025-2006): One Big Beautiful Bill Act. July 4, 2025. Both provisions effective beginning for tax years after 2025.

Here are some key questions to consider when reviewing charitable giving plans

1. Are you planning to itemize deductions on your 2025 tax return?

If so, making charitable gifts before the end of the year can further reduce taxable income. For 2025, taxpayers need to itemize deductions on their tax return to deduct charitable contributions. An important step is to project income for 2025 to determine your likely marginal tax bracket. This is a key data point because it provides clarity on how much tax savings may be realized from making a charitable contribution before the end of the year. For those claiming the standard deduction this year, charitable giving will not provide a federal tax benefit. For details on 2025 tax brackets see our piece, “2025 tax rates, schedules and contribution limits.”

2. What is the size of the charitable gift under consideration?

A significant charitable contribution may allow a taxpayer to itemize deductions. For 2025, the standard deduction for single filers is $15,750, and $31,500 for married couples filing a joint tax return (those age 65 or older, or blind, are eligible for a slightly larger standard deduction). Taxpayers would claim the standard deduction unless the total of their (below the line) tax deductions exceed the standard deduction.

Lastly, some taxpayers may benefit from “lumping” several years’ worth of charitable gifts into one tax year to itemize deductions on their tax return. For example, double up on charitable gifts for 2025 and then claim the standard deduction in 2026. In some cases, this can result in higher tax savings than spreading out charitable gifts equally over this year and the next year. Again, the introduction of the new 0.5% “floor” on deducting charitable contributions beginning next year may prompt some taxpayers to give more in 2025. A donor advised fund (DAF) may be a viable option to lump charitable donations in one year for tax purposes, while delaying decisions on directing distributions from the DAF to specific charities over time.

3. Are you over the age of 70½ and NOT planning on itemizing deductions?

If you are not itemizing deductions and are interested in giving to a charity, a qualified charitable distribution (QCD) from an IRA would generally make sense since it allows the distribution of tax-deferred IRA funds at a 0% tax rate. This is a more tax-efficient option than writing a check to a charity since taxpayers claiming the standard deduction on their tax return do not receive a federal tax benefit from giving to a charity. Additionally, some retirees may not rely on required IRA distributions to meet their current income needs. Using a QCD to direct the distribution to a charity instead avoids reporting the income from the withdrawal on the tax return, while satisfying charitable intentions at the same time. For more information on QCDs see our piece “Donating IRA assets to charity.”

4. Do you own appreciated securities or mutual funds?

For many taxpayers, gifting appreciated assets to a charity can make sense. While there are stricter limits on the amount of tax deduction that can be claimed vs. giving cash directly to a charity, gifting highly appreciated assets can be a strategy to limit capital gains exposure.

Choosing the right strategy is key

Given the range of funding alternatives, strategies and different rules for charitable giving, it’s important for those who are philanthropically minded to understand their options. A well-crafted approach can help optimize benefits for the nonprofit organization that is receiving the gift, while providing valuable tax benefits to the donor.

Depending on the type of property being donated and the recipient charity, limits on the tax deduction will vary. For more details see “Understanding charitable giving strategies” and consult with a qualified tax professional for guidance.

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