Considering Charitable Contributions in 2025? What You Need to Know

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Considering Charitable Contributions in 2025? What You Need to Know

Why 2025 Is a Critical Year for Charitable Giving

Here’s the reality: if you give to charity and you want to maximize your tax benefits, 2025 might be the most important planning year you’ll have in a while. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, made sweeping changes to how charitable contributions are deducted on your tax return—and most of those changes don’t kick in until 2026.

That gives you a window right now to make some smart moves with your charitable giving before the new rules take effect. Whether you’re someone who writes a few checks to your favorite causes each year, or you’re a high earner who gives significant amounts, these changes will affect you. Let me walk you through what’s changing, what it means for you, and what you should consider doing before December 31, 2025.

The Big Changes Coming in 2026

The New 0.5% AGI Floor for Itemizers

Starting in 2026, if you itemize your deductions, you can only deduct charitable contributions that exceed 0.5% of your Adjusted Gross Income (AGI). Everything below that threshold? Not deductible.

Here’s what that looks like in real dollars:

  • **$200,000 AGI:** First $1,000 not deductible
  • **$300,000 AGI:** First $1,500 not deductible
  • **$800,000 AGI:** First $4,000 not deductible
  • **$3,000,000 AGI:** First $15,000 not deductible

Let me give you an example. Say you have $300,000 in AGI and you give $10,000 to charity in 2026. Under the new rules, the first $1,500 (0.5% × $300,000) won’t be deductible. You’ll only be able to deduct $8,500.

For most people, losing that first $1,000 or $1,500 isn’t devastating. But if you’re a high earner giving away tens of thousands, this floor starts to eat into your tax benefits in a meaningful way.

Top Bracket Limitation: Your 37% Deduction Becomes 35%

Here’s something that really affects high-income taxpayers. If you’re in the top federal tax bracket (37%), your charitable deductions in 2026 will only be worth 35 cents on the dollar instead of 37 cents.

Let’s say you’re in the top bracket and you donate $100,000 in 2025. That donation saves you $37,000 in federal taxes. If you wait and make that same donation in 2026, it only saves you $35,000. That’s a $2,000 difference.

Now scale that up. If you wanted to give away a million dollars, waiting until 2026 costs you $20,000 in lost tax benefits. That’s real money.

Listen, I know this doesn’t affect everyone. But if you’re someone who’s fortunate enough to be in that top bracket and you’re charitably inclined, this is something you need to pay attention to.

New Above-the-Line Deduction for Non-Itemizers (Starting 2026)

Here’s a piece of good news, especially if you take the standard deduction. Starting in 2026, you’ll be able to deduct charitable contributions even if you don’t itemize—up to $1,000 for single filers and $2,000 for married filing jointly.

**Important limitations:**

  • This only applies to **cash contributions**
  • You must give directly to a charity (not through a Donor Advised Fund)
  • You still get your full standard deduction on top of this

This is a big deal for a lot of people. Under current law (including 2025), if you take the standard deduction, you get zero tax benefit for your charitable giving. Starting in 2026, at least you’ll get something.

But here’s the catch: **this does not apply to 2025**. For the 2025 tax year, you must itemize your deductions to get any tax benefit from charitable giving.

The 60% Cash Contribution Limit Is Now Permanent

Under prior law, there was a temporary provision allowing you to deduct cash contributions up to 60% of your AGI (versus the old 50% limit). The OBBBA makes that 60% limit permanent. Non-cash contributions, like appreciated stock or real estate, are still limited to 30% of AGI.

This matters if you’re thinking about bunching several years’ worth of charitable giving into one year. You can give up to 60% of your AGI in cash or 30% in appreciated assets and still get a deduction in that year. Anything over those limits can be carried forward.

Corporate Charitable Contributions: New 1% Floor

If you own a corporation and make charitable contributions through your business, there’s now a 1% floor. Your corporation can only deduct contributions that exceed 1% of taxable income, and they still can’t exceed 10% of taxable income. This is a new limitation that didn’t exist before.

Understanding Carryover Rules

Here’s something important: if you give more than you can deduct in one year, you don’t lose those deductions. They carry forward. But the rules can get a little tricky, especially with the new OBBBA changes.

How Carryovers Work

If your charitable contributions exceed the AGI limits in a given year, you can carry those excess contributions forward for up to **five years**. For qualified conservation contributions, you get **15 years** to use them.

Here’s what you need to know:

  • Contributions generally **retain their AGI percentage limitation** in the carryover year
  • **Current year contributions are deducted first**, then carryovers from the earliest year
  • If you have carryovers from multiple years, you use the oldest first

The Big Carryover Question for 2025 and 2026

Here’s something really important: **carryovers from contributions made before January 1, 2026, are NOT subject to the new 0.5% floor** when you use them in 2026 or later years. That’s huge.

So if you have excess charitable contributions from 2025 that you carry forward to 2026, you won’t lose deductions to that 0.5% floor. But new contributions made in 2026 and later will be subject to the floor.

What If You Take the Standard Deduction?

Even if you take the standard deduction in some years, your carryovers don’t just disappear. They remain available to use in future years when you do itemize. However, the carryover amount must be reduced by the amount that would have been deductible had you itemized in those standard deduction years.

It’s a little complicated, so if you’ve got carryovers and you’re switching between itemizing and taking the standard deduction, let’s talk through your specific situation.

Can You Deduct Charitable Contributions Without Itemizing?

This is a question I get all the time, and the answer depends on what year we’re talking about.

For 2025: No

For the 2025 tax year, there is **no above-the-line deduction** for charitable contributions. If you want to deduct your charitable giving, you must itemize your deductions on Schedule A.

The standard deduction for 2025 is $15,750 for single filers and $31,500 for married filing jointly. If your total itemized deductions (including charitable contributions, mortgage interest, state and local taxes, and medical expenses) don’t exceed those amounts, you’re better off taking the standard deduction. But that means you get no tax benefit for your charitable giving in 2025.

For 2026 and Beyond: Yes (But Limited)

Starting in 2026, you can deduct up to $1,000 (single) or $2,000 (married filing jointly) of cash charitable contributions without itemizing. This is a brand-new provision created by the OBBBA.

**Requirements for the above-the-line deduction:**

  • **Cash contributions only** (not appreciated stock, real estate, or other property)
  • Must be given **directly to a qualified charity** (not to a Donor Advised Fund)
  • You still get your full standard deduction on top of this

A Little History

There was a special exception for tax year 2021 only, where taxpayers who didn’t itemize could deduct up to $300 ($600 for married filing jointly) of cash charitable contributions. That was a pandemic relief provision, and it expired after 2021. The new OBBBA provision is similar but slightly more generous and permanent.

Strategic Considerations for 2025

So what should you do with all this information? Here’s where the planning comes in.

Why Accelerate Giving Into 2025?

If you’re a high-income taxpayer who gives significantly to charity, 2025 might be the year to front-load your giving. Here’s why:

1. **No 0.5% AGI floor in 2025** – Every dollar you give is deductible (up to AGI limits)

2. **Full 37% deduction for top bracket taxpayers** – You get the maximum tax benefit

3. **Avoid the new limitations** that take effect in 2026

Listen, I’m not saying everyone should rush out and give away five years’ worth of donations in December. But if you were already planning to give significant amounts over the next few years, concentrating those donations in 2025 could save you real money in taxes.

Using a Donor Advised Fund (DAF) to Bunch Contributions

Here’s a strategy that works really well for people who want to accelerate their giving but still want to spread out the actual donations to charities over several years: **bunching contributions into a Donor Advised Fund**.

Here’s how it works:

1. You contribute 3-4 years’ worth of charitable giving to a DAF in 2025

2. You take the full deduction in 2025 (subject to AGI limits)

3. Over the next several years, you recommend grants from the DAF to your favorite charities

4. You’ve separated the tax deduction from the actual charitable giving

**Example:** Let’s say you normally give $20,000 per year to charity. Instead of giving $20,000 in each of the next four years (2025-2028), you could:

  • Give $80,000 to a DAF in 2025
  • Deduct the full $80,000 in 2025 at 37% (if you’re in the top bracket) with no floor
  • Recommend $20,000 per year in grants from the DAF to charities in 2026, 2027, and 2028

The charities still get the same amount. You still control when they get the money. But you’ve maximized your tax benefit by taking the deduction under the more favorable 2025 rules.

Know Your AGI Limits

If you’re going to bunch contributions, remember the AGI limits:

  • **60% of AGI** for cash contributions
  • **30% of AGI** for contributions of appreciated securities or other non-cash property

Anything over those limits can be carried forward for up to five years. And remember, those carryovers from 2025 won’t be subject to the 0.5% floor when you use them in later years.

Don’t Wait Until December

Here’s something important: if you’re thinking about making large charitable contributions before year-end, don’t wait until the last minute. Transferring appreciated securities, setting up a DAF, or making large gifts can take days or even weeks to process. Start planning now so you don’t miss the December 31 deadline.

Other Important Changes to Know About

SALT Deduction Increase

The OBBBA temporarily increases the state and local tax (SALT) deduction cap to **$40,000** (up from $10,000) for 2025, with small annual increases through 2029. This affects your overall itemization strategy because higher SALT deductions make it more likely you’ll exceed the standard deduction threshold.

New Tax Credit Starting in 2027

Beginning in 2027, there’s a new **non-refundable tax credit of up to $1,700** for contributions to scholarship-granting organizations that provide elementary and secondary education scholarships. This is in addition to any deduction you might claim. It’s something to keep in mind if you support educational causes.

What Should You Do Before Year-End?

Let me give you some action steps:

1. **Review your 2025 charitable giving plan.** How much were you planning to give this year? How much in future years?

2. **Run the numbers.** Calculate whether the 0.5% AGI floor will affect you in 2026 and beyond. If you’re giving more than that threshold anyway, the floor might not be a big deal. But if you’re on the edge, it matters.

3. **Consider bunching strategies.** If you’re a high earner in the top tax bracket, think about whether it makes sense to accelerate multiple years of giving into 2025.

4. **Look at Donor Advised Funds.** If you want to bunch your contributions but still spread out the actual grants to charities, a DAF is a great tool.

5. **Don’t procrastinate.** If you decide to move forward with any of these strategies, start the process now. The closer we get to December 31, the more likely you’ll run into processing delays.

6. **Talk to a professional.** Everyone’s situation is different. Your income, your charitable goals, your overall tax picture—all of that matters. I’m happy to walk through your specific numbers and help you figure out the best approach.

Give me a call at **303-881-9762**, and let’s talk through your charitable giving strategy for 2025 and beyond. These rules are changing whether we like it or not, but with a little planning, we can make sure you’re getting the maximum tax benefit for the generosity you’re already showing.

Bottom Line

The OBBBA changes the landscape for charitable giving starting in 2026. For high-income taxpayers, the combination of the 0.5% AGI floor and the reduction in the top bracket deduction rate means less tax benefit for charitable contributions. But for those who take the standard deduction, the new above-the-line deduction is a welcome change—even if it’s modest.

The key is this: **2025 is your last chance to give under the old, more favorable rules.** If you were planning to make significant charitable contributions over the next few years, concentrating them in 2025 could save you thousands of dollars in taxes.

But you need to act soon. December 31, 2025, will be here before you know it.

Let’s make sure you’re positioned to maximize both your charitable impact and your tax savings. Call me, and we’ll figure out the right strategy for your situation.

*This document contains general information and should not be relied upon as the only source of tax advice. For guidance specific to your situation, please consult with a tax professional.*

**Document prepared by:** 

Ralph Pinney, EA 

LP Tax & Bookkeeping Pros LLC 

Greenville, TX 75401 

303-881-9762

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