Tax Consequences to Consider in your Charitable Giving
If you are inspired to invest in our world-changing mission, there may be tax advantages in doing so before the end of 2025 as tax laws are changing for 2026.
Tax Information Disclaimer: This information is provided for general educational purposes only and is not legal or tax advice. Tax rules change and your situation may vary. Please consult a qualified tax professional regarding the deductibility of your contribution.
Starting in 2026:
● Taxpayers who don’t itemize will be able to take a simple charitable deduction of $1,000 for single filers or $2,000 for married couples filing jointly, but only for direct cash gifts to charities. Gifts to donor-advised funds (DAFs) won’t count!
● Itemizers will only be able to deduct charitable gifts above 0.5% of your adjusted gross income (AGI).
● Taxpayers in the top tax bracket will have a maximum deduction benefit of 35% per dollar donated, a reduction from the prior maximum benefit of 37% per dollar donated.
For itemizers, a few actions to consider before the end of 2025 are:
● Bunching gifts. You may want to accelerate or “bunch” charitable contributions in 2025 to put off being subject to the 0.5% of AGI floor and the aforementioned 35% cap. For example, if you would ordinarily contribute $1000 each year to a charity, consider making multiple years’ worth of contributions this year to maximize the potential tax benefit (e.g., contribute $3000 in 2025 rather than $1000 in each of 2025, 2026, and 2027).
● Arrange for gradual gifts. If accelerating contributions makes sense for you, but you prefer the charity to receive gifts over multiple years, you can contribute to a donor-advised fund (DAF) in 2025, claim the deduction now under current rules, and recommend donations over time in future years.
● Gifting appreciated stock. Anyone accelerating charitable giving this year could also consider contributing appreciated stock or other long-term capital assets, which may allow a full fair-market-value deduction while also avoiding capital gains tax.
For non-itemizers, it may make sense to wait until January 2026 to make certain contributions that you would otherwise make at year end, because 2026 will be the first year that non-itemizers are eligible for a charitable deduction.
For corporations, consider bunching gifts or contributing to a DAF before the end of 2025, to the extent cash flow permits.
This independent article gives more details here.
Disclaimer: The information on this page is provided for general informational purposes only and is not intended to provide, and should not be relied on as, legal, tax, or accounting advice. Laws and regulations may change, and their application can vary based on specific facts and circumstances. You should consult your own professional advisor regarding your individual tax situation and the deductibility of any charitable contribution. HGW does not provide tax advice.