The season of giving is upon us. While many use December as an opportunity to assess their tax situation and conduct their charitable contributions for the year, the 2025 tax year has some interesting nuances that may result in taxpayers doing some additional work to decide how much to donate. This article discusses the tax rules for charitable giving before the One Big Beautiful Bill Act of 2025, how this tax legislation changed tax rules surrounding charitable contributions, and how these changes affect how taxpayers will want to give to charitable organizations in 2025 and beyond. Importantly, this legislation created a benefits divergence depending on whether taxpayers are high-income or low-income, meaning that taxpayers will need to carefully assess their tax situation to determine whether it is better to give in December or defer to next year.
2025 Charitable Contributions Tax Rules
In 2025, taxpayers can deduct charitable contributions as an itemized deduction. This meant that not all taxpayers can deduct these contributions. Instead, the tax benefits belong to those who have itemized deductions of more than $15,750 ($31,500, if filing as married filing jointly).
As an example, consider a single taxpayer who donated $10,000 cash to Habitat for Humanity and has no other itemized deductions. The taxpayer has the option to deduct the $10,000 donated or elect to deduct $15,750 as the standard deduction. The taxpayer is under no obligation to take the smaller deduction, and, in most cases, he or she will deduct the larger standard deduction.
Examples of other itemized deductions include large medical expenses, state and local income taxes paid, mortgage interest, and gambling losses. For most taxpayers, during this period, charitable contributions alone are not substantial enough to itemize, and, if they were, the incremental benefits would be minimal. For instance, if a taxpayer has only $16,000 of charitable contributions and no other itemized deductions, only the portion exceeding the standard deduction ($250 in this situation) will provide additional tax benefits. .
In addition to these rules, cash charitable contributions to qualified charities are limited to 60% of adjusted gross income. Any deductions beyond this limit can be carried forward for 5 years. Non-cash gifts – such as stocks or other long-term capital gain property—are limited to 30% of adjusted gross income. Despite this high ceiling for how much a taxpayer can deduct for charitable contributions, many taxpayers received little to no tax benefits since donating more than $15,750 is a high enough hurdle to diminish the tax benefits that would otherwise be received.
The One Big Beautiful Bill Act of 2025 substantially changes charitable contribution donations. However, unlike many of the provisions of the legislation, these changes are delayed a year and go into effect in 2026. As outlined by Vanguard Charitable, this means that the prior tax rules continue to govern charitable giving for the rest of 2025.
2026 (And Beyond) Charitable Contributions Tax Rules
The One Big Beautiful Bill Act of 2025 yields two key changes starting in 2026, as outlined by The Tax Foundation. First, non-itemizing taxpayers can deduct $1,000 ($2,000 if filing as married filing jointly) of cash charitable contributions. This means that even if a taxpayer does not itemize their deductions, they can deduct up to $1,000 ($2,000 if married filing jointly) of cash charitable contributions, allowing for some benefit even if the taxpayer does not itemize.
Second, the deductibility for itemizers significantly declines. This happens across two key channels. First, charitable contributions are only available as itemized deductions when the donation exceeds 0.5% of the taxpayer’s adjusted gross income. For instance, if a taxpayer has adjusted gross income of $1,000,000 and he or she donates $20,000 to a qualified charitable organization, the taxpayer’s donation would be limited to $15,000. This is because the first $5,000 (0.5% of $1 million adjusted gross income) cannot be deducted. Instead, the taxpayers can deduct the excess. Second, there is a cap on the benefit received for high-income taxpayers. As $1 of charitable contribution yields a 37% tax benefit for high-income taxpayers, starting in 2026, it will only produce a 35% tax benefit.
Beyond these key changes, the majority of the other rules governing charitable contributions remain unchanged. However, importantly, the deduction for state and local income taxes paid increased substantially, as I discussed in a Forbes contributor article, meaning that more taxpayers will be itemizing their taxes starting in 2025 than before.
How Taxpayers Can Prepare For The Change To Charitable Contributions Rules
As the legislative changes to charitable contributions under the One Big Beautiful Bill Act of 2025 do not go into effect until the 2026 tax year, taxpayers have an opportunity to plan for these changes.
In prior years, when the tax rates substantially changed, taxpayers would either want to accelerate or delay their charitable contribution deductions to receive the benefits when the tax rate was higher. The changes from 2025 to 2026 differ in that taxpayers do not have a uniform direction as to how they should respond.
For lower-income taxpayers who are not itemizing their taxes, they should postpone charitable contributions until 2026. Doing so allows the taxpayers to receive benefits for deducting contributions as an above-the-line (i.e., not itemized) deduction. Also, if the taxpayers donate more than the $1,000 limit, their excess deductions will not face as large a 0.5% basement. For instance, a taxpayer making $100,000 only needs to donate $500 to be above the new 2026 charitable contribution floor.
On the flip side, higher-income taxpayers who are itemizing their taxes will be far better off accelerating their donations to 2025. Not only will these taxpayers have to donate more than 0.5% of their adjusted gross income to receive any charitable contribution deductions starting in 2026, but their deductions will be capped at 35% tax benefits. Given these incentives, it is little surprise that we have seen numerous mega-donations to charitable organizations like universities in 2025, as I previously discussed in a Forbes contributor article. While the evidence is not causal, the timing of these donations is uncanny. Simply put, if a high-income taxpayer was planning to make a sizable donation to a charitable organization, 2025 will provide substantially larger tax benefits than 2026.
Even though taxpayers often see December as the time to structure their year end tax planning, December of 2025 presents a novel period where there is a substantial divergence in how a higher vs. lower-income taxpayer might attack the useful tax planning tool of charitable contributions. Given that the One Big Beautiful Bill Act of 2025 made tax benefits for charitable contributions better for lower-income taxpayers and worse for high-income taxpayers, those seeking to make charitable contributions soon will need to carefully balance out their pros and cons of their own financial situation when deciding whether to make these contributions in December versus waiting until 2026.