President Donald Trump’s recent tax legislation enacts trillions in tax breaks that favor wealthy Americans. However, starting in 2026, some taxpayers will experience reduced deductions for charitable gifts. For those who itemize, two important changes take effect:
- A deduction “floor” that applies only once donations exceed 0.5% of adjusted gross income (AGI).
- A cap on benefits for filers in the highest 37% income tax bracket.
Because of these changes, donors who itemize need to plan ahead in 2025 while the current more generous deductions are still available.
Certified financial planner Edward Jastrem advises donors to be proactive. One effective approach is “bunching” multiple years’ worth of donations into 2025 using a donor-advised fund. This allows an upfront tax deduction and lets donors use the fund like a checkbook for future gifts.
New Deduction Rules for Non-Itemizers
Starting in 2026, the law also introduces a charitable deduction for non-itemizers with limits on cash donations: $1,000 for singles and $2,000 for married couples filing jointly. If donations in 2025 aren’t urgent, donors may benefit from waiting until 2026 to claim this deduction.
Justin Miller, partner and wealth planning expert at Evercore, explains the impact with an example. For someone earning $1 million in the 37% tax bracket, a $100,000 donation in 2025 could save $37,000 in taxes. Under the 2026 rules, the same gift may save only about $33,250 because of the deduction floor and cap.
Miller points out that even a few thousand dollars in tax savings matter and encourages donors to make contributions in 2025 to avoid this loss. Using donor-advised funds to “front load” several years of giving is also a recommended strategy.
Author’s Opinion
These changes encourage donors to be more intentional and strategic with their giving. Without planning, waiting until 2026 means smaller tax benefits, especially for those in higher tax brackets. By timing donations and using donor-advised funds, donors can preserve their deductions and tax savings. This shift supports smarter philanthropy rather than last-minute contributions.
Featured image credit: Marco Verch via CCNull
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