In July, federal tax regulations were signed into law which brings important changes to charitable giving and tax deductions. Here’s what you need to know as you plan your year-end donations:
For Non-Itemizers
- Starting in 2026, if you don’t itemize your taxes, you can deduct cash gifts to eligible charities—up to $1,000 for single filers and $2,000 for married couples filing jointly.
- Only direct gifts to 501(c)(3) public charities qualify. Donations to donor advised funds or private foundations do not count for this deduction.
- If you’re a non-itemizer, it may be more beneficial to wait until January to make your year-end gifts this year, so you can take advantage of the new deduction.
For Itemizers
- Also starting in 2026, you can only deduct the portion of your donations that exceeds 0.5% of your adjusted gross income (AGI). For example, if your AGI is $250,000, only donations above $1,250 are deductible.
- Consider “bunching” several years’ worth of donations into a larger gift in 2025, before the new rule takes effect. This can help you maximize your deduction. Bunching can also be used in future years to avoid losing out on the first 0.5% of your deduction each year.
- If you want to bunch your gifts for tax reasons but still support your favorite charities annually, consider using a donor advised fund. You’ll get the deduction in the year you contribute to the fund, but can distribute grants to charities over time.
Other Smart Giving Strategies
- If you’re over 70½, a qualified charitable distribution (QCD) from your IRA directly to a charity can satisfy your required minimum distribution and reduce your taxable income.
- Donating appreciated stock is another tax-smart move: your charity gets the full value, you avoid capital gains tax, and if you itemize, you can deduct the fair market value of the shares.
Remember: Always consult your tax or financial advisor to determine what’s best for your situation.