Upcoming Tax Law Changes: How They Will Impact Your Charitable Contributions
As 2026 approaches, significant changes in tax regulations will alter the way individual donors can deduct charitable contributions when itemizing deductions on their personal income tax returns. These new rules will shape philanthropic strategies for many taxpayers.
- To claim a charitable deduction, your annual donations must exceed 0.5% of your Adjusted Gross Income (AGI). For instance, with an AGI of $100,000, you must donate more than $500 annually for your charitable contributions to be deductible.
- A 35% cap on the value of itemized deductions, including charitable contributions, will be implemented. This means individuals in the 37% tax bracket will not receive a full dollar-for-dollar deduction for their charitable gifts.
- The new law introduces a universal charitable deduction of $1,000 for individual taxpayers and $2,000 for married couples filing jointly, available even if you do not itemize. This deduction will be permanently accessible to those taking the standard deduction, facilitating tax benefits for all donors.
- The 2017 Tax Cuts and Jobs Act allowed itemizers to deduct cash donations up to 60% of AGI. This provision is now permanent under the new legislation.
With these imminent changes, reviewing your philanthropic strategy is crucial. The recently passed tax legislation might impact the financial planning strategies crafted with your advisors.
Key Considerations for Your Charitable Planning
Focus on 2025 for Itemized Deductions
If you itemize deductions, 2025 is a pivotal year. The OBBBA increases the standard deduction in 2025, and starting in 2026, itemized charitable deductions will be subject to a “floor” and a cap. Utilizing a strategy known as “bunching” could help maximize your itemized deductions by establishing or significantly contributing to a donor-advised fund at the Foundation in 2025. In subsequent years, you can support your preferred local or national charities through this fund. Donating appreciated stock is especially advantageous, as it allows avoidance of capital gains tax while securing a deduction for the full market value of the shares.
Maintain Proven Strategies
Despite the changes, some fundamentals remain unchanged. Appreciated stock continues to be a more tax-efficient charitable gift than cash. Furthermore, IRAs remain a robust tool for charitable planning. Naming a fund at the Foundation as the beneficiary of an IRA can help avoid both estate and income taxes, which might otherwise heavily impact your heirs.
Opportunities for Those 70 ½ and Older
For individuals aged 70 ½ or older, the Qualified Charitable Distribution (QCD) presents an excellent opportunity to transfer up to $108,000 (the 2025 per-taxpayer limit) income-tax-free to qualified charities, including certain Foundation funds.
For further information or assistance, you can contact Monika Collins at mcollins@delcofoundation.org. The Foundation team is ready to assist with your planning conversations and provide the necessary support.
For an in-depth look at other provisions of the new tax law related to charitable giving, consider this comprehensive article and its resources from Stelter: New Tax Law: What’s Staying, What’s Changing and What It Means for You.
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