Recent tax law changes will reshape how charitable deductions work beginning in 2026. For many individuals, especially high-income earners and consistent givers, the most meaningful planning opportunities sit in 2025. For some, this year may represent the last chance to structure charitable gifts under rules they have relied on for years.
What’s Changing
Starting in 2026, itemized charitable deductions will be subject to a new income-based floor. Only contributions exceeding 0.5% of adjusted gross income will be deductible. In practical terms, someone with $1 million of income will no longer receive a tax benefit on the first $5,000 of charitable giving each year. For households that give steadily rather than in large, irregular amounts, this change quietly reduces the value of their generosity.
In addition, a new cap will limit the tax benefit of itemized deductions for individuals in the highest tax bracket. While the top individual rate remains 37%, charitable deductions will effectively generate savings at a maximum rate of 35%. The result is a smaller tax benefit for the same level of giving, particularly for those who have historically relied on charitable deductions as part of their broader tax strategy.
Some Clarity from Congress
At the same time, Congress introduced a limited above-the-line deduction for non-itemizers beginning in 2026. Individuals who do not itemize will be able to deduct up to $1,000 of cash contributions, or $2,000 for married couples filing jointly. While this provision may benefit some taxpayers, it does not apply to donor advised funds or private foundations and is unlikely to replace the planning value of itemized charitable strategies for higher-income households.
Immediate Impact
Because several of these limitations do not take effect until 2026, 2025 presents a meaningful planning window. In some cases, accelerating charitable contributions into this year may preserve deductions that would otherwise be reduced or lost under the new rules. For others, the opportunity lies less in timing and more in reassessing how giving is structured going forward.
One planning approach receiving increased attention is the use of donor advised funds. By contributing to a donor advised fund in 2025, donors may be able to claim a full deduction under current law while retaining flexibility over when and how funds are ultimately distributed to charitable organizations. This strategy can also support gifts of appreciated assets and provide a more intentional framework for long-term philanthropic planning. That said, donor advised funds are not the right solution for every situation and should be evaluated in the context of income patterns, liquidity needs, and charitable goals.
As always, charitable decisions should align with personal values, cash flow, and overall tax strategy. The upcoming changes add complexity, but they also create an opportunity to be more deliberate. We encourage clients to connect with their YHB advisor to discuss how these changes may affect their giving plans and whether action before year end could help preserve both impact and tax efficiency.
