Donating to charitable organizations is not just an act of goodwill – it is one of the few ways that can actively control how much you voluntarily pay to the Internal Revenue Service (IRS). Making the right donations at the right time can reduce your taxable income, support causes you believe in, and create a sense of mission that is hard to quantify.
However, timing is crucial. With significant tax law changes set to take effect in 2026, 2025 may be your last opportunity to take advantage of the old, more lenient deduction rules. Waiting too long might mean missing out on valuable tax benefits.
We will explain these changes, how to plan for them, and the best donation strategies for this year. This will ensure that your generosity has the maximum impact on both you and the charitable organizations you support.
Generally, cash donations to qualified charitable organizations can be deducted from your Adjusted Gross Income (AGI), up to a maximum of 60%. Organizations like 501(c)(3), such as religious groups, educational institutions, or charities fall into this category.
Donating appreciated assets such as stocks or real estate that you’ve held for over a year can be even more advantageous. By deducting their fair market value, you can avoid paying capital gains tax that would be required if you sold the asset yourself.
This is a powerful combination. You not only get a deduction but also avoid another tax.
In July 2025, Congress passed the Omnibus Balancing Budgets and Benefiting Act (OBBB Act), rewriting several parts of the tax laws. Due to these changes, charitable deductions will be affected starting in 2026. Here is what you need to know:
– New deduction thresholds.
The amount you can deduct from your AGI will be limited to 0.5%. Smaller donations may no longer qualify.
– Deduction value caps.
If you are in a higher tax bracket, you can only deduct 35% of your income.
– The 60% AGI limit on cash donations will be made permanent.
This is good news. Why? Because the higher temporary cap introduced earlier is now permanently established.
– Online deductions for non-itemizers.
Starting in 2026, cash donations to eligible public charities can be deducted up to $1,000 (single) or $2,000 (married filing jointly) even if you take the standard deduction.
– Donor-Advised Funds (DAFs) and private foundations are excluded.
The new online deduction does not apply to donations to DAFs or private foundations.
In short, 2025 is the last year to take advantage of today’s lower, higher value deduction rules.
Fortunately, there is still time to plan. By taking some smart strategies, you can make your charitable funds go further this year and set a solid foundation for yourself after the new laws come into effect in 2026.
If you are planning to donate in 2026 or later, you may want to accelerate your donations to 2025. High-income individuals can maximize deductions by moving up one or two planned donations to this year.
For example, if you expect higher income in 2025 (such as bonuses, selling a business, or significant investment returns), this approach can be particularly advantageous.
In a bunching strategy, multiple years of charitable giving are combined into one tax year. In the “bunched” year, you itemize deductions, allowing for a larger deduction. In the subsequent “non-bunching years,” you may benefit more from taking the standard deduction instead of itemizing lower donation amounts.
For instance, donating $15,000 in 2025 may push you above the 0.5% AGI threshold, allowing you to claim a larger deduction. As a result, you may not need to itemize in 2026 and 2027.
When it comes to charitable donations, cash is not always the best option. Appreciated stocks, bonds, and real estate can be directly donated to charitable organizations.
By doing so, you can claim a deduction based on their fair market value and avoid paying capital gains tax. Charities can sell these assets tax-free, maximizing their value.
DAFs allow you to make charitable donations now, take the deduction this year, and decide later which charities to support.
With its flexibility, DAF is a highly effective tool for advance giving. Those who want time to decide on their donation direction can fund their accounts in 2025 (locking in the deduction) and distribute grants in the coming years.
In 2025, individuals aged 70 and a half or older with IRAs can donate up to $108,000 directly to eligible charitable organizations through Qualified Charitable Distributions (QCDs).
QCDs count towards your Required Minimum Distribution (RMD) but do not increase your taxable income. In other words, you can meet withdrawal requirements and support a cause without triggering a tax bill.
To illustrate how these strategies work, let’s look at a few simplified examples:
Example 1: High-income earner planning to itemize deductions
– AGI: $400,000
– Planned donation: $30,000
As the donor’s AGI is below 60%, he is likely able to deduct the full amount. However, the 2026 rules will restrict deductions to 0.5% of AGI ($2,000) and cap it at 35%.
Result? Donating in 2025 could yield much larger tax benefits.
Example 2: Moderate-income earner who usually does not itemize
– AGI: $80,000
– Donation: $1,200
If not itemizing, you will not receive a deduction in 2025, but in 2026, you can claim an online deduction of up to $1,000. For smaller donors, waiting for the new rules to take effect might actually be more suitable.
Example 3: Retiree with IRA and RMD
– Age: 72
– RMD: $25,000
With a QCD, you can direct $25,000 from the IRA to an eligible charitable organization and exclude that income from taxable income. For retirees, this is one of the most efficient donation tools.
Even with well-planned donations, improper paperwork can lead to loss of tax value. Be sure to pay attention to the following:
– Verify the charity.
You can use the IRS’s tax-exempt organization search tool to confirm its 501(c)(3) status.
– Keep receipts.
If you donate $250 or more, you must obtain written confirmation from the charity, stating whether you received any goods or services in return.
– Obtain appraisal for substantial non-cash donations.
When donating assets worth over $5,000, you need a qualified appraisal.
– Mind carryover rules.
Typically, if your charitable deduction exceeds the AGI threshold, you can carry it forward for five years.
– Coordinate deductions.
If you itemize deductions or take the standard deduction, your donations may be affected by other deductions like state and local taxes, mortgage interest, etc.
– Beware of scams.
Do not trust entities promising immediate tax reduction with unclear missions. Many scams exist. Always prioritize transparency, clear mission, and IRS recognition.
The following tips can help you plan charitable donations throughout the year rather than scrambling in December:
– Early 2025:
Calculate your income and tax bracket. Determine how much to donate in advance based on your giving goals.
– Spring:
Ensure your planned donations exceed the 0.5% AGI threshold (if itemizing). Begin transferring appreciated assets if necessary.
– Summer:
Don’t forget to review your investments and consider establishing a Donor-Advised Fund.
– Fall:
Finalize your bunching strategy or plan large donations with QCD.
– December:
Before year-end, carefully review receipts, written confirmations, and charity verifications.
Organizing your planning now can help you avoid many troubles in the future (and potentially thousands of dollars in losses).
Donors may miss opportunities or experience financial inefficiencies due to misunderstandings. We can avoid these situations by clarifying the following myths:
“I don’t itemize deductions, so donations don’t benefit me.”
While true in 2025, it won’t be the case soon. The amount that can be deducted without itemizing will increase to $1,000 ($2,000 for joint filers) in 2026.
“I’ll sell appreciated stocks and donate cash.”
This is a costly mistake. By donating stocks directly, you can avoid capital gains tax and still claim a deduction.
“Rules never really change.”
Tax laws are constantly evolving. With the 2026 updates, many families will be able to take advantage of new thresholds, limits, and thresholds that alter how deductions are calculated.
“Charitable giving is just about tax deductions.”
Tax incentives are the icing – not the cake itself. Ultimately, the real return comes from supporting causes you care about in a smarter, more strategic way.
If you’ve been considering donating, now is the time. By year-end, deduction rules are stricter, and new restrictions are in place.
Through early giving, donor-advised funds, donating appreciated assets, and utilizing QCDs from IRAs, you can maximize the impact of your donations while reducing your tax burden.
If not acted upon, strategies are just thoughts, so we need to complete the following by December 31st:
– Consult your tax advisor to test donation levels, income scenarios, and deduction scenarios.
– Choose a strategy based on your situation, such as bunching, QCD, asset donations, and DAFs.
– Don’t wait until December to make significant donations. The later, the harder it gets to execute.
– Keep records, including confirmation letters, appraisals, and charity verifications.
– Make this planning part of your annual checklist: your financial, tax, and donation environment will evolve.
Charitable donations should not be last-minute decisions. By planning ahead, you can make 2025 a year that is both efficient and meaningful.