The tax and spending megabill this summer made many changes that will affect taxpayers planning to donate to charities in 2025 and beyond.

Some changes will have a positive impact, in encouraging non-itemizing taxpayers to contribute to charities. Others will reduce the overall value of an itemizing client’s charitable donations from a tax perspective — particularly for those with income taxed at the highest 37% income tax rate.

Entering the holiday giving season, advisors should take steps to ensure that taxpayers understand the new options and limitations — and are planning to maximize the overall tax value of their charitable giving. The strategies that best suit any given client will depend on the overall financial picture and charitable goals.

Changes for 2026 and Beyond

After the 2017 tax overhaul suspended all miscellaneous itemized deductions and increased the standard deduction, fewer taxpayers itemized deductions — and, relatedly, fewer were able to take advantage of the deduction for charitable contributions. Beginning with the 2026 tax year, the 2025 legislation created a $1,000 above-the-line charitable deduction for cash contributions made by taxpayers who do not itemize. This deduction cap increases to $2,000 for joint returns.

For itemizers, the megabill created new limitations on the tax value of charitable donations. Beginning in 2026, taxpayers who itemize will be entitled to deduct charitable contributions only to the extent that they exceed 0.5% of the taxpayer’s AGI (any disallowed portion may be carried forward if the taxpayer has other charitable contribution carryforwards for the tax year). Smaller gifts, then, may no longer generate a deduction unless they clear the 0.5% threshold.

The recent legislation also created a ceiling on the value of charitable deductions for clients in the highest tax bracket. Starting in 2026, a limit reduces the itemized deductions — including the deduction for charitable donations — by 2/37 of the lesser of the taxpayer’s (1) total itemized deductions or (2) amount of taxable income that is taxed at the highest 37% rate.

For 2026, the 37% rate will start at $640,600 for individual filers and $768,700 for joint filers.

Essentially, these changes will mean that itemizing taxpayers in the highest income tax brackets will see a decrease in their charitable deductions.

Planning Strategies to Account for Changes

Several planning options are available to help clients maximize the tax value of their charitable giving. Taxpayers who plan to itemize should take all possible steps to reduce their income below the 37% bracket to avoid the new limit that applies to all itemized deductions. As such, maximizing contributions to all available retirement and health savings accounts is even more valuable than usual starting in 2026.

For taxpayers who do not itemize, a bunching strategy may be useful. Combining charitable donations into a single year became advisable after the 2017 tax overhaul eliminated or restricted many popular itemized deductions and reduced the number of taxpayers who itemize. Taxpayers who do not itemize and plan to give to charity may wish to wait until early in 2026 — making their donations for 2025 and 2026 in the 2026 tax year to take advantage of the $1,000 deduction for non-itemizers.

Higher-income taxpayers who plan to make significant gifts may consider donor-advised funds to make ongoing gifts to charity while reaping the tax benefits in the year that the DAF is funded. For example, a taxpayer who funds a DAF in 2025 will avoid the new limitations that become effective in 2026 even as the DAF can give to charities of the donor’s choosing in 2026 and beyond.

Qualified charitable distributions can also be valuable for taxpayers who are at least 70.5 years old. Under the rules governing QCDs, clients can donate up to $108,000 in individual retirement account funds directly to qualifying charities. This donation is not included in the taxpayer’s income and, if conditions are satisfied, counts toward the taxpayer’s annual required minimum distribution. The cap is per person, so married taxpayers can direct up to $216,000 to charity in 2025 if each spouse has an IRA. QCDs, however, must be made before clients take their annual RMD.

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