Why 2026 Tax Changes May Make 2025 Your Most Strategic Year for Giving
Significant federal tax changes are scheduled to take effect in 2026 — and for many donors, these changes will make charitable deductions less valuable in future years. As a result, 2025 presents a unique opportunity to maximize the impact and tax efficiency of your giving. Here’s what to know:
A New Deduction “Floor” Means Fewer Dollars Will Count Toward a Tax Deduction
Beginning in 2026, taxpayers who itemize will only be able to deduct charitable gifts above 0.5% of their adjusted gross income (AGI). For example, if your AGI is $200,000:
- 0.5% = $1,000
- The first $1,000 you give to charity in 2026 will not be deductible
- Only the amounts above $1,000 will reduce your taxable income
In 2025, you can generally deduct every dollar of a qualified charitable donation — even small or mid-sized gifts. Next year, that changes. If you typically give several smaller gifts throughout the year, you may find that 2025 is the last year you receive the full deduction for them. Many donors are choosing to “bunch” or accelerate their regular giving into 2025 to preserve that full deductibility.
High-Income Donors Will See Reduced Tax Savings on Charitable Gifts
Starting in 2026, the tax benefit of itemized deductions for top-bracket taxpayers will be capped at 35%, instead of matching the highest tax bracket (currently 37%). How it plays out:
If you make a $20,000 charitable gift:
- In 2025: a 37% taxpayer saves $7,400 in taxes
- In 2026: that same taxpayer would save $7,000
The donation stays the same — but the deduction becomes less valuable. Why this matters? Many high-income donors are choosing to make planned or larger gifts — including contributions to donor-advised funds — before the cap takes effect.
The Big Picture: 2025 Is a Critical Window
These changes do not eliminate charitable deductions. But they do make them less favorable for:
- Donors who itemize and make small-to-moderate gifts
- High-income households making significant contributions
Whenever future deductions become less generous, financially savvy donors often pull forward the gifts they were planning to make anyway. That means 2025 may be the optimal time to:
- Consolidate (“bunch”) multiple years of giving
- Complete multi-year pledges ahead of schedule
- Make major gifts or contributions to donor-advised funds
- Support the causes you care about with the greatest tax efficiency
Your Generosity Matters — Now More Than Ever
These tax changes may shape the timing of your philanthropy, but they don’t change the impact of your giving. By acting in 2025, you can support the mission you care about while making the most of a uniquely favorable moment.
