The One Big Beautiful Bill Act (OBBBA) that was passed in July 2025, made several significant changes to the charitable giving rules. Well, not really changes to giving, but changes to the tax deductions available for giving to charity. This has changed our giving plan for the next few years, and if giving is important to you (and I hope it is), it will likely change your plan, too. Let’s go over the new rules so you can decide.
Note that these rules all change in 2026. The 2025 tax year operates under the old rules.
The Non-Itemized Charitable Deduction
Some people call this an above-the-line deduction, but it technically isn’t. However, it is not an itemized deduction that shows up on Schedule A. Basically, you can deduct a $1,000 ($2,000 married) gift to charity and still take the standard deduction of $15,750 single/$31,500 MFJ [2025 — visit our annual numbers page to get the most up-to-date figures]. Note that this deduction is only for cash (not appreciated shares) donations directly to a charity, not via a Donor Advised Fund (DAF).
More information here:
Charity — How to Give, Why to Give, and the Tax Benefits You Can Receive
New 0.5% of AGI Threshold
For the itemizers like us, there is a new threshold to know about. It is set at 0.5% of Adjusted Gross Income (AGI). If your AGI is $300,000, the first 0.5% * $300,000 = $1,500 you give to charity, at least after that initial $1,000-$2,000, is not deductible. That doesn’t seem too bad, but what if you make $3 million? Now, the first $15,000 isn’t deductible. That’s real money.
Top Bracket Giver Limitation
This one is an even bigger issue for high earners who are big givers. If you are in the top tax bracket (37% federal) in 2025, you can deduct your charitable contributions at 37%. In 2026, however, those in the topic bracket (still 37% federal) can only deduct their charitable contributions at 35%. So, if you earn $800,000 and give $100,000 of it away to charity, you don’t get a $37,000 deduction. You get a $35,000 deduction. Doesn’t seem bonkers, right? Just makes our tax code a little bit more progressive, at least for givers, especially when combined with that $1,000/$2,000 deduction that will typically help low earners.
But what if you wanted to give away a million dollars? Now your deduction is $20,000 smaller. That’s real money.
More information here:
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What Can You Do About These Changes?
Admittedly, the changes are relatively minor, but high earners who are givers should at least consider accelerating their giving for future years into 2025 if possible. A DAF makes this easy since you can separate the deduction from the actual giving to the real charity. You could put three or four years’ worth of charitable giving into the DAF this year and get a little better deduction than what would be available if you spread those donations out over the next few years.
That will have the effect of dramatically lowering your 2025 tax bill and significantly increasing that bill in 2026-2028, though, so plan for that by putting more aside to pay quarterly estimated payments or increasing your withholding rate if employed.
What Are We Doing About These Changes?
As usual, we’re trying to kill two or three or maybe even four birds with one stone. Katie and I are high earners, and we give a lot of money away primarily because we think it’s important to support charity. We do try to get as much tax benefit as possible out of that giving, though.
Long-term readers know we tax-loss harvest (TLH) in our taxable account and then flush out the capital gains via charitable giving. We give appreciated shares, via a DAF, instead of cash. Our chosen charities not only get the cash they need, but they also don’t know who we are unless we tell them. That keeps our mailbox “charity porn free” and simplifies our record-keeping.
However, we have some legacy investments in our taxable account: VIOV and VSS. For these asset classes, we’d now rather own AVUV/DFSV and AVDV/DISV. Well, guess what? We can get multiple benefits all at the same time by accelerating our giving.
- VIOV and VSS come out of our estate tax reducing trust (a Spousal Lifetime Access Trust or SLAT) into the personal account (paying down the promissory note the SLAT owes us)
- VIOV and VSS go to the DAF in 2025 (the dollar equivalent of 3-4 years of giving for us)
- We use cash to buy AVUV and AVDV (which we then could TLH to DFSV/DISV)
- We take that deduction in 2025 when it is worth 37% (instead of 35%) to us with no 0.5% floor, and then
- We dole out cash from the DAF to charities over the next few years, as is our usual habit.
That’s a lot of dead birds with only one stone. Financial literacy has its benefits. You can’t win the game until you know the rules.
More information here:
Staying the Course Despite the Trump Tariffs
Student Loan Repayment and PSLF in the Trump Era
How Much Can You Deduct in a Year?
If you want to accelerate your giving, there are a few considerations. The main one is that you can only deduct 60% of your AGI if you give cash, 30% if you give something besides cash (like these appreciated shares). Those deductions can be carried forward for up to five years, but the new rules are likely to apply to those carried-over deductions after 2025. So, we’re not going to accelerate giving for more than just the next few years. Plus, who knows what the rules will be with a new administration and two new Congresses four years from now? They might be even better than this year.
The charitable giving deduction rules changed slightly this year. That might cause you to change your giving plan significantly. Don’t wait until the very end of the year to do it, though. This can take days or even weeks, and delays are common. We started this process in October, just to be sure we can pull it all off by the end of the year.
If you need help with tax preparation or you’re looking for tips on the best tax strategies, hire a WCI-vetted professional to help you figure it out.
What do you think? Will you be accelerating any of your giving due to these rule changes? Why or why not?
