Time Sensitive | New Tax Act = New Giving Rules

The 2025 Tax Act reshapes how individuals can deduct charitable gifts, introducing new thresholds, timing considerations, and deduction limits that meaningfully impact anyone who donates consistently or in meaningful amounts. While charitable giving remains a powerful tool for tax-efficient generosity, how and when you give will matter more than ever.

The New 0.5% Adjusted Gross Income (AGI) Threshold

Beginning in 2026, itemizers must exceed a minimum donation level before receiving any deduction:

• You must give at least 0.5% of your Adjusted Gross Income (AGI) before charitable deductions count.

If your AGI is $2M, the first $10,000 you give earns no deduction in 2026 and beyond.

 Why it matters

In 2025, every dollar still counts, making this year a strategic moment to maximize deductions before the new threshold arrives.

Strategy #1: Front-Load Gifts in 2025

Because the threshold doesn’t apply until 2026, donors concerned about the limit, particularly those who give modest amounts annually, should consider accelerating gifts into 2025.

Strategy #2: Bundle Gifts to Clear the Threshold

The new rules encourage making fewer, larger gifts rather than evenly spreading donations over many years.

A donor with $4M AGI gives $20K per year for five years (total $100K).

• Threshold each year: $20K → No deduction in any year.
  

The same donor instead gives $100K in a single year and nothing in others.

• Deduction allowed: $80K
• Timing alone created a meaningful tax benefit.

Key takeaway: If your annual giving hovers near the new threshold, combining gifts into one year can dramatically improve deductibility.

Strategy #3: Avoid Donating Large Lump Sums in a Windfall Year

The 0.5% threshold rises sharply during high-income years, like selling a business or receiving a large bonus.

Normal years: AGI $900K, threshold $4,500

Windfall year: AGI $60M, threshold $300,000

Giving an extra $250K in the windfall year yields little to no deduction. Giving the same lump sum the next year could generate nearly the entire deduction.

New Cap on Itemized Deductions for High Earners

Beginning in 2026, those in the top marginal bracket will no longer receive a 37% tax benefit from itemized deductions, including charitable gifts.

Instead, the value drops to the equivalent of the 35% bracket, slightly reducing the federal tax savings of large gifts.

Non-Itemizers Get a Small Boost

Taxpayers who do not itemize may deduct $1,000 (single) or $2,000 (married filing jointly) in cash gifts, offering limited but welcome relief.

60% AGI Limit on Cash Gifts to Public Charities Made Permanent

The long-standing rule (60% AGI limit) for cash contributions to public charities is now permanent. Good news for those who make large cash donations.

Bottom Line

The 2025 Tax Act does not diminish the power of charitable giving; it simply changes the playbook. Smart timing and strategic structuring can significantly increase tax efficiency.

Before year-end, let’s review:

• Whether you should front-load gifts in 2025
• If bundling contributions will increase deductions
• Whether this is the year not to give a large lump-sum gift
• How your AGI, itemization status, and philanthropic goals align under the new rules

The decisions you make now will determine how much tax benefit your generosity delivers in the years ahead. Simply click reply to this email to get the conversation started about your particular situation.