The Season of Giving: Year-End Charitable Strategies Before New Rules Take Effect

Understanding Charitable Giving Before New Tax Rules

As the year draws to a close and we enter the season of giving, it’s a natural time to reflect on supporting the causes you care about. Since July, when new tax codes were signed into law, a common topic in our client conversations has been how to approach charitable giving in light of the rule changes taking effect next year.

Key Charitable Tax Changes Coming in 2026

The One Big Beautiful Bill Act (OBBBA), signed into law this past July, introduces three important changes to charitable giving tax benefits that take effect in 2026:

0.5% AGI Floor for Itemizers: If you itemize your tax return, charitable deductions will only count for amounts exceeding 0.5% of your adjusted gross income (AGI). For example, if you have $200,000 in AGI, you must give more than $1,000 before receiving any tax benefit. Only amounts above this threshold will be deductible.

35% Cap for High Earners: Those in the 37% tax bracket will see their charitable deductions capped at a 35% tax benefit instead of the full 37%, effectively reducing the tax incentive for higher-income givers.

$1,000 Deduction for Non-Itemizers: Standard deduction filers will be able to deduct up to $1,000 (single) or $2,000 (married filing jointly) in charitable cash contributions. While this provides some benefit, it’s limited to those not already itemizing.

For a more detailed analysis of these changes, you can read our full article on the new charitable giving rules here.

Why Year-End Giving Still Matters in 2025

These changes create a valuable planning window in 2025. By making charitable gifts before year-end, you can claim deductions under the current, more favorable rules and avoid the new limitations taking effect in 2026. For clients who typically give annually, this may be an opportune time to consider bunching multiple years’ worth of giving into 2025.

Strategic Charitable Tools for Tax Optimization

We’ve been discussing two particularly powerful strategies with clients since the new law passed, both of which can help you navigate these upcoming changes:

Donor-Advised Funds (DAFs): Bunching Your Giving Ahead of the AGI FloorA Donor-Advised Fund allows you to bunch multiple years’ worth of charitable gifts into 2025, claim the full deduction now under current favorable rules (with no AGI floor), and then distribute funds to your chosen charities over multiple years. For example, instead of giving $10,000 annually for three years and potentially receiving reduced or no tax benefit starting in 2026, you could contribute $30,000 to a DAF in 2025 and distribute $10,000 annually to your favorite charities over the next several years.

Additionally, DAFs are particularly powerful when funded with appreciated securities rather than cash. This is because you avoid capital gains taxes while receiving a deduction for the full market value of the stock. This makes DAFs an especially strong technique for those with large low-basis stock positions.

Qualified Charitable Distributions (QCDs): Bypass Itemization EntirelyFor those age 70½ or older with traditional IRAs, QCDs offer a different solution to the changing tax landscape. They allow charitable giving on a pre-tax basis and avoid the need for tax itemization altogether.

A QCD is a direct transfer from your IRA to a qualified charity (up to $108,000 per person in 2025). Because the distribution is completely excluded from your taxable income, you don’t need to worry about AGI floors, itemization thresholds, or any of the new charitable deduction limitations taking effect in 2026.

Why QCDs are particularly valuable:

No Itemization Required: You receive the tax benefit whether you itemize or take the standard deduction, making QCDs effective regardless of the charitable giving rule changes.

Satisfies RMDs: For those subject to Required Minimum Distributions, QCDs can satisfy all or part of your RMD requirement while keeping the distribution out of your taxable income entirely.

Additional Tax Benefits: By excluding the distribution from income, you may stay in a lower tax bracket and potentially reduce Medicare premiums and Social Security taxation.

Making Charitable Giving Count for Your Financial Plan

This season of giving is an ideal time to reflect on how you can support the causes you care about while being mindful of your financial goals and tax situation. Whether you typically give $1,000 or $100,000 annually, the rule changes taking effect in 2026 may impact the tax benefits you receive. Our conversations with clients aren’t about changing charitable values or reducing generosity. Rather, they’re about structuring gifts strategically so that more of your money reaches the causes you support and less goes to taxes.

If you’ve been thinking about your year-end charitable giving and would like to discuss whether strategies like DAFs or QCDs might be appropriate for your situation, please reach out. We’re here to help you navigate these changes and ensure your generosity creates maximum impact for both the causes you support and your overall financial plan.