Why Charitable Giving in 2025 Beats 2026 — New Tax Rule You Should Know

As we head toward the end of the year and reflect on our giving, many of us are finalizing charitable donations. Whether it's part of your year-end tradition or a way to support the causes you care about, it's an important part of financial planning. However, if you make significant charitable contributions, it’s worth considering 2025 as the best year to give, thanks to some upcoming tax law changes in 2026 that could impact your deductions.

Here’s what you need to know before making your donations.

What’s Changing in 2026?

Starting January 1, 2026, new rules will be in place that could reduce the tax benefit you receive from charitable contributions. Specifically, a new 0.5% floor for itemized deductions will make it more difficult for taxpayers — particularly high earners — to receive a full deduction for their charitable giving.

For taxpayers with significant income, this could mean that the first portion of their charitable contributions will no longer be deductible. This can significantly impact your year-end planning if you typically make large gifts to charity.

What Does This Mean for You?

1.) Larger Gifts in 2025 Could Provide More Tax Benefits

If you typically make large charitable gifts, it could be beneficial to accelerate your donations into 2025. Why? Because starting in 2026, the first portion of your charitable gifts will no longer be deductible due to the 0.5% AGI floor. If you’re thinking about significant charitable contributions, 2025 is your best opportunity to make the most of the tax benefits available to you.

2.) High-Income Taxpayers Will Be Most Affected

If you have a high income, these changes are likely to impact you the most. For example, if your adjusted gross income (AGI) is $1,000,000, the first $5,000 of your charitable contributions will no longer count toward your deduction. Essentially, this portion of your giving will have the same tax impact as if you hadn’t given at all.

3.) Reviewing Your Charitable Giving Strategy Can Maximize Your Benefits

The changes to charitable deduction rules are a reminder to take a closer look at your charitable giving strategy. If you regularly give significant amounts, it may be a good time to review your year-end giving strategy with your tax team. Accelerating your gifts before the new rules kick in could help you maximize the deductions available to you.

Key Details: What’s Actually Changing

Here’s a deeper look at the specific tax changes starting in 2026:

• New 0.5% AGI Floor for Itemizers. The first 0.5% of your AGI in charitable contributions will no longer be deductible. For instance, if your income is $1,000,000, the first $5,000 of your charitable gifts will not count as a deduction.
• New Universal Above-the-Line Deduction. Taxpayers can claim up to $1,000 (single) or $2,000 (married filing jointly) in cash contributions to public charities, even if they don’t itemize. However, this does not apply to donations made to Donor-Advised Funds (DAFs) or private foundations.
• Reduced Tax Benefit for Top-Bracket Taxpayers. If you're in the highest tax bracket, the benefit you receive from charitable giving will be capped at 35%, down from the current 37%. This change means that the maximum tax benefit for charitable donations will be slightly less for high earners.
• Potential Impact on Carryforward Rules. The way charitable contributions are carried forward from previous years may change, altering how deductions are applied in future years.

What Should You Do Now?

If you’re planning charitable gifts, or if you regularly make large donations, now is a good time to connect with your tax team. Accelerating donations into 2025 could be an effective strategy to take full advantage of the current charitable deduction rules before the new changes take effect.

At MGA, we’re here to help you navigate these upcoming changes and make sure your charitable giving strategy is optimized for the best possible tax benefits.

Have questions? Reach out to us.