Charitable giving is about to get more expensive.
For individual taxpayers who give regularly, 2025 is a critical year-end. Beginning in 2026, a mix of expiring provisions, new limits, and revived deduction rules will materially affect the tax benefits of charitable giving.
The good news is that these rules are well defined. With thoughtful planning, donors can still give generously while protecting the tax benefits they intend to claim. The key is understanding how timing, income thresholds, and the type of assets donated interact under the new framework.
Why 2025 May Be the “Last Best” Year to Accelerate Gifts
For many taxpayers, charitable giving follows a predictable annual rhythm: donations are typically made late in the year, in similar annual amounts, and are usually funded with cash. That approach has worked well under the current rules, which allows itemizing taxpayers to deduct charitable contributions without a minimum threshold and subjects them only to standard adjusted gross income (AGI) percentage limits.
Starting in 2026, charitable deductions will be subject to new limits. Only contributions above a minimum amount will be deductible, and higher-income taxpayers will face further reductions to itemized deductions. Without careful planning, some charitable gifts may no longer deliver the expected tax benefit.
Against that backdrop, 2025 presents a unique opportunity. Taxpayers who expect to give regularly in future years may benefit from accelerating a portion of those gifts into 2025, when the full amount remains deductible under existing rules. Acceleration does not necessarily mean giving more over a lifetime. Instead, it may involve shifting the timing of gifts that would otherwise be made in 2026 or later.
For example, a donor who typically gives $20,000 each year might consider contributing $40,000 in 2025 and skipping or reducing gifts in 2026. In the right circumstances, that approach can preserve deductions that might otherwise be partially disallowed under the new rules.
Cash Gifts and AGI Limits: What Stays the Same and What Changes
One point of continuity is the treatment of cash gifts made to public charities. The 60% of AGI limitation for cash contributions has been made permanent. This means that, in any given year, a taxpayer can still deduct cash gifts up to 60% of their AGI, with excess amounts eligible for carryforward. However, starting in 2026, although the percentage limit remains in place, a minimum threshold will apply. This means that charitable contributions must exceed a minimum contribution amount before any portion of their charitable giving becomes deductible.
The New 0.5% Income Floor Starting in 2026
Beginning in 2026, individual taxpayers will only be allowed to deduct charitable contributions to the extent that those contributions exceed 0.5% of their income, creating a “floor” similar to those that apply to certain other itemized deductions.
Importantly, the floor amount itself does not automatically carry forward. In most cases, the portion of contributions that fall below the 0.5% threshold is permanently lost for tax purposes.
For example, a taxpayer with $200,000 of income will have a charitable floor of $1,000. Only charitable contributions above that amount will be deductible. A $900 donation would generate no charitable deduction at all. A $5,000 donation would result in a $4,000 deduction.
This change disproportionately affects moderate and consistent donors who give meaningful amounts each year but do not exceed other percentage limits. Understanding when the floor is lost and when it may be preserved is critical.
Carryforward Mechanics: When Deductions Are Lost and When They Are Saved
To understand how the new floor interacts with carryforward rules, consider two simplified examples.
Example 1: Floor Amount Lost
In 2026, Alice earns $200,000 and donates $10,000 in cash to public charities. Her 0.5% floor is $1,000.
- Total contributions: $10,000
- Less floor: $1,000
- Deductible amount: $9,000
Because Alice’s $10,000 gift does not exceed any AGI percentage limits, there is no carryforward. The $1,000 floor amount is permanently lost and cannot be deducted in a later year.
Example 2: Floor Amount Preserved Through Carryforward
Now assume Alice earns $200,000 but donates $140,000 in cash to public charities in 2026. Her charitable deduction is subject to both the new 0.5% income floor and the 60% of AGI limit for cash gifts.
- The 0.5% floor equals $1,000.
- The 60% AGI limit allows a maximum deduction of $120,000.
After applying the $1,000 floor, Alice may deduct $119,000 of her contributions in 2026. The remaining $21,000 carries forward to future years. This carryforward consists of $20,000 that exceeds the AGI percentage limit, plus the $1,000 floor amount that could not be deducted in the current year.
Because Alice’s total contributions exceed the AGI limit, the floor amount is not lost. Instead, it becomes part of her carryforward and may be deductible in a later year, subject to the applicable charitable deduction rules.
The distinction matters. Taxpayers who give large amounts relative to their income may be less affected by the floor than those whose giving is substantial but not high enough to exceed percentage limits.
Why Asset Mix Matters More Than Ever
The type of property donated has always mattered for charitable planning, but the new rules amplify those differences. Cash gifts are subject to higher AGI limits than gifts of appreciated assets such as publicly traded stock, which are generally limited to 30% of AGI.
These differing limits interact with the new floor and ordering rules in ways that can change outcomes.
For example, a taxpayer who donates appreciated stock equal to 30% of AGI may generate carryforwards more easily than a taxpayer who donates the same economic value in cash. That carryforward can help preserve deductions that would otherwise be lost to the floor.
Conversely, a donor who gives only cash and stays comfortably below the 60% limit may lose the floor amount each year starting in 2026.
Year-end decisions about what to give can therefore be as important as decisions about how much to give. In some cases, contributing appreciated assets rather than cash may improve both tax efficiency and long-term planning flexibility.
High-Income Itemizers and the Return of the Itemized Deduction Haircut
High-income taxpayers face another challenge beginning in 2026 with the return of the overall limitation on itemized deductions under Internal Revenue Code (IRC) Section 68. This rule reduces the total amount of itemized deductions available to taxpayers in the highest income brackets.
For purposes of the itemized deduction limitation under IRC §68, a high-income taxpayer is one whose adjusted gross income (AGI) exceeds the statutory threshold for that year.
For these taxpayers, itemized deductions, including charitable contributions, can be reduced by up to approximately 5.4%. Importantly, the portion of charitable deductions disallowed under this rule is generally not eligible for carryforward.
In practical terms, this means that even after navigating the 0.5% floor and AGI limits, high-income donors may still permanently lose a portion of their charitable deduction.
By way of illustration, assume a high-income taxpayer otherwise qualifies for $100,000 of itemized deductions, including charitable contributions. Under the IRC §68 limitation, those deductions are reduced by approximately 5.4%.
Calculation:
$100,000 × 5.4% = $5,400
$100,000 − $5,400 = $94,600
The $5,400 of itemized deductions are permanently disallowed, leaving $94,600 deductible. Unlike other charitable deduction limitations, the disallowed $5,400 generally cannot be carried forward, meaning that even fully substantiated charitable contributions may lose a portion of their tax benefit for high-income taxpayers.
Section 68 makes pre-2026 planning particularly important for taxpayers who expect to remain in the top tax brackets and who routinely itemize deductions.
Standard Deduction Taxpayers and the Return of the Above-the-Line Charitable Deduction
Not all taxpayers itemize, and for those who claim the standard deduction, charitable planning looks different. Beginning in 2026, an above-the-line charitable deduction returns for non-itemizers.
Under this provision, taxpayers who do not itemize may deduct up to $2,000 of charitable contributions on a joint return, or $1,000 for all other filers. This deduction reduces income directly and is available regardless of whether total itemized deductions exceed the standard deduction.
However, there are important limitations. Contributions must be made in cash to qualifying public charities. Donations to donor-advised funds are not eligible. While the dollar amounts are modest, the deduction provides a meaningful incentive for smaller donors who otherwise receive no tax benefit for their giving.
For non-itemizers, year-end planning may involve ensuring that qualifying cash gifts are made directly to eligible charities and that expectations around deductibility are realistic.
Bringing It Together: A Year-End Planning Example
Consider David and Rebecca, a married couple filing jointly with $300,000 of AGI. They typically donate $15,000 in cash each year and itemize deductions.
Scenario A: No Planning, 2026 Rules Apply
- Income: $300,000
- Charitable gifts: $15,000
- 0.5% floor: $1,500
- Deductible amount: $13,500
They lose $1,500 of deductions permanently. If the rules limiting itemized deductions apply, they may lose an additional portion of their charitable deduction.
Scenario B: Accelerated Giving in 2025
Instead, David and Rebecca donate $30,000 in 2025 and skip charitable gifts in 2026.
- 2025 deduction: full $30,000 (subject only to existing AGI limits)
- 2026 deduction: $0, but no floor loss
By accelerating gifts, they preserve deductions that would otherwise be partially lost under the new regime, without increasing their overall level of generosity.
A Positive Path Forward for Charitable Giving
The rules are becoming more complicated, but charitable giving itself has not lost its value. What has changed is the need to plan more carefully.
For donors who understand how timing, income thresholds, and asset selection interact, there are still meaningful opportunities to give generously and efficiently. With proper planning, donors can move forward knowing their charitable goals and tax strategies remain aligned—and that their generosity continues to make a difference.
This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.
