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Big, Beautiful Changes To Giving
Advisors say that their clients should give now before the new tax law restricts charitable deductions next year. By Ben Mattlin
CPAS AND ADVISORS ARE WARNING CLIENTS TO maximize their charitable deductions before year’ s end. That’ s because the massive tax and budget legislation known as the One Big Beautiful Bill Act, which President Trump signed on July 4, reduces certain tax breaks for donations starting next year.
The rollout of the new regulations is complicated, however, so clients should exercise caution.
It’ s not all bad news, though. For instance, starting in 2026, charitable donors who do not itemize deductions on Schedule A can deduct up to $ 2,000 if they are joint filers, or $ 1,000 if they’ re single filers. Those might not seem like very large amounts, but no amount of charitable deduction can be taken by non-itemizers today— so some experts are calling this measure a“ meaningful win.”
“ It’ s exciting that we [ will ] have an above-the-line charitable deduction,” says Paul Caspersen, director of the Center for Philanthropy and Social Impact at the American College of Financial Services in Gainesville, Fla.
For younger donors, he says, or those with modest incomes, this new rule provides“ a real incentive to start building philanthropic habits.”
There are several limitations to keep in mind, though. The gifts must be in cash, not property or stock. They must be made to an accredited charity and cannot be made through a donor-advised fund.
Still, for most clients who make only small cash gifts to charities, advisors say it might be prudent to save up for next year so they can take the deduction.“ If we’ re speaking purely from a tax planning perspective, taxpayers who typically give smaller amounts with cash and don’ t itemize may want to consider deferring some of their charitable giving until next year, when they will be eligible for the above-the-line charitable deduction,” says Holly Swan at Allspring Global Investments in Boston.
But for those who typically make larger gifts and do itemize( according to the Urban Institute, roughly 10 % of American households itemize deductions), next year will bring new caps and floors to their charitable deductions— which donors might want to avoid.
Here are the details:
Starting in 2026, only itemized charitable contributions that exceed 0.5 % of a taxpayer’ s modified adjusted gross income( or MAGI) can be deducted. Donations below that threshold cannot be taken as deductions at all.( For corporate donors, the floor is 1 % of income.)
For example, if clients with $ 100,000 in MAGI donate $ 10,000 to charity this year, they can deduct the
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