The One Big Beautiful Bill Act is transforming the deductibility of charitable contributions for high-income taxpayers, introducing a series of new limits and incentives that will take effect in 2026, reshaping how and when it makes sense to give.
For clients with philanthropic goals, timing and strategy have never mattered more. While the remainder of 2025 offers a valuable opportunity to maximize tax benefits, it’s also an ideal time to familiarize oneself with upcoming changes and craft effective giving strategies for years to come.
Why Timing is Essential
Clients exploring major charitable gifts should consider giving ahead of the new year before two new tax rules take effect, which will impact the value of annual charitable deductions for high earners.
Namely, only gifts that exceed 0.5% of a donor’s adjusted gross income will qualify for a deduction in 2026. With this new floor introduced, gifts below the 0.5% threshold could miss out on deductions in future years.
Additionally, the value of total itemized deductions will be capped at a 35% tax benefit, introducing a new limit on deductible tax benefits for taxpayers in the highest tax bracket. This cap applies after other rules are factored in, including the new 0.5% AGI floor and the existing AGI-based limits, which are 60% for cash contributions and 30% or 20% for non-cash gifts. These further reduce the after-tax value of charitable gifts for high-income individuals and families, putting additional importance on timing, structuring and vehicle selection.
Key Strategies for 2025: Maximizing Current Opportunities
Bunch Charitable Gifts Before 2026. If donors have the flexibility, one of the most effective near-term moves is to front-load or “bunch” multiple years’ worth of donations into 2025, which provides opportunities to maximize deductions while current rates still apply. By accelerating gifts, individuals can take advantage of today’s higher deduction value, up to the current top marginal rate of 37%, before the 0.5% floor and 35% cap take effect.
How does this look? Consider a family with an annual AGI of roughly $3.3 million, who plans to contribute $1 million to charity. If they spread donations evenly over five years starting in 2026, the new limits would reduce their deductions. By giving the full amount in 2025, they can deduct the entire gift under current law, saving nearly $50,000 in taxes (based on contributions that would otherwise begin in 2026).
Use Donor-Advised Funds for Flexibility. Donors might also consider aligning a bunching strategy with a donor-advised fund to enhance giving flexibility. DAFs allow their account holders to make large tax-deductible gifts in one year and draw upon that contribution to recommend grants to charities over time. In sum, this allows donors to select grant recipients and determine grant amounts in the future without time constraints.
DAFs also simplify recordkeeping for charitable contributions, offer the potential for tax-free growth of contributions and provide opportunities to involve family members in philanthropic decisions.
Donate Appreciated Assets. In lieu of cash gifts, contributing long-term appreciated stock is another tax-efficient method to extend philanthropic reach, especially when combined with a DAF or bunching approach. This allows donors to avoid embedded capital gains taxes on stock held for more than a year while receiving a deduction equal to the asset’s fair market value, subject to AGI limits.
2026 and Beyond: Forward-Looking Strategies to Give Efficiently
While many clients’ attention is on acting before year-end, it doesn’t mean planning should stop there. Equally important, clients should familiarize themselves with key changes ahead – and how to navigate them accordingly.
Make the Most of Qualified Charitable Distributions. For individuals age 70½ or older, qualified charitable distributions from IRAs remain a compelling tool, especially in the new environment when the maximum annual QCD amount will increase from $108,000 in 2025 to $115,000 in 2026.
In addition to reducing AGI directly and bypassing the need to itemize, QCDs mitigate the effect of the 0.5% floor and overall limitation of itemized deductions for high-income taxpayers. By lowering AGI, they may also preserve deductibility of state and local taxes by avoiding the income phaseout ranges. What’s more, QCDs satisfy required minimum distributions, allowing donors to meet annual withdrawal requirements while supporting charitable causes (note that QCDs must go directly to a qualified public charity and can’t be made to DAFs).
Making QCDs early in 2026 can lower AGI and satisfy RMDs, which can improve the tax environment for subsequent planning steps, such as Roth conversions later in the year. By using QCDs to reduce taxable income first, donors may be able to convert additional IRA assets to a Roth account while remaining within their preferred marginal tax bracket.
Explore New Incentives. Even with tighter limits, several new changes taking effect under the OBBBA unlock additional opportunities for strategic planning.
Effective next year, a charitable deduction of up to $1,000 for single filers and $2,000 for married couples filing jointly, will become available to nonitemizers for cash gifts to qualified public charities (excluding DAFs, supporting organizations, and private foundations). Additionally, improved coordination rules will make it easier to combine cash and non-cash gifts in the same year without conflicting AGI limits.
Longer-term, a new federal tax credit of up to $1,700 per taxpayer will become available in 2027 for contributions to state-approved K–12 scholarship programs, providing an additional avenue for clients drawn to educational causes to give back.
Planning Today to Give Effectively for Years to Come
New tax rules introduced by the OBBBA provide significant windows of opportunity to give efficiently before year-end and in 2026 and beyond.
While there’s no one-size-fits-all approach to charitable giving, acting early and with intention is critical. With a series of changes on the horizon, now’s an important time to sit down with clients to craft giving strategies that align their philanthropic interests and legacy goals with tax efficiency.
