With less than one month left of tax year 2025, tax planning is in full swing. As part of the One Big Beautiful Bill (OBBBA), beginning in 2026, charitable deduction rules will significantly change for taxpayers. Taxpayers should focus on strategies that maximize their overall, multi-year tax benefit from charitable giving – not only their 2025 deduction alone.

Current Rules Through Tax Year 2025

Individuals who itemize may deduct charitable contributions up to:

• 60% of AGI for cash gifts to public charities (including Donor Advised Funds (DAFs))
• 30% of AGI for contributions of capital gain property to public charities (including most DAFs)
• 20% or 30% of AGI for contributions to private foundations, depending on property type and foundation

Any excess contributions may be carried forward for five years.

Taxpayers using the standard deduction receive no federal deduction for charitable contributions under current law.

Rules Beginning in 2026 Under OBBBA

For 2026 and beyond, OBBBA introduces three major changes for individuals:

• For non-itemizers: a new above-the-line charitable deduction for cash donations to public charities (up to $1,000 for single filers, $2,000 for joint filers).
• For itemizers: charitable deductions will only be allowed to the extent the total exceeds a new 0.5% AGI floor (e.g., with $1,000,000 AGI, the first $5,000 of donations are non-deductible).
• For high-income itemizers: Those in the 37% tax bracket ($640,600 single, $768,700 MFJ for 2026) will also face a new formula which reduces the value of their total itemized deductions by 2/37^th of the lesser of either a) total itemized deductions, or b) the amount of AGI which exceeds the 37% bracket threshold.

Planning Opportunities for 2025

• Consider front-loading charitable gifts before year-end

If you expect to itemize in 2025 but not in 2026, or expect reduced value from itemized deductions due to the new rules, consolidating multiple years of donations into 2025 may yield a larger overall tax benefit by avoiding the impending floor and ceiling rules.  There are other factors to consider when deciding whether a 2025 vs. 2026 charitable contribution yields the best results, such as effective tax rate or income changes.

• Other Strategies to Consider
  1. Donate to a Donor Advised Fund (DAF): Make a contribution to a DAF to take the tax deduction in 2025 and avoid the 2026 limitations; then, recommend charitable recipients over future years.
     2025. Example: Taxpayer D contributes $500,000 to a DAF in 2025. She may deduct up to the full $500,000 on her 2025 tax return, though she may direct the DAF to donate the funds to nonprofits in a future year.
  2. Use Qualified Charitable Distributions (QCDs): For those age 70 ½ or older on 12/31/2025, direct up to $111,000 from IRAs to charities. This may be a strategy to implement in 2026 because it bypasses the AGI-based limits and floors that will be in place.
     1. Important Note: Keep track of these contributions and communicate them to your tax advisor as the fiduciary does not disclose the portion of your IRA distribution that is a QCD on any tax forms.
  3. Donate Appreciated Stock: For long-term stock, you can deduct the fair market value and avoid capital gains altogether.

Because of the limitations in place starting in 2026, being strategic with your charitable gifts can significantly change their tax benefit to you. The methods described above, when intentionally utilized alongside other tax planning strategies, can help ensure you’re getting as much tax benefit from your charitable donations as possible. Contact your Snyder Cohn advisor to discuss your potential charitable donation options.