Tax-Smart Ways to Give to Charity Before Year-End

Charitable giving has always been about generosity. But how, when, and how much you give matters. With several changes to federal charitable tax rules currently scheduled to take effect in 2026, donors have a narrowing window to take advantage of some of today’s favorable provisions. For many individuals and families, thoughtful year-end planning before December 31, 2025, may help preserve certain tax benefits that could be harder to access in the years ahead.

Upcoming Charitable Tax Changes

Several provisions slated to take effect in 2026 could alter the charitable giving landscape. While charitable giving will continue to be encouraged, the mechanics of how deductions are calculated will become more restrictive for certain taxpayers.

A New “Deduction Floor” for Itemizers

• For taxpayers who itemize, charitable contributions will only become deductible once total giving exceeds 0.5% of adjusted gross income (AGI). This introduces a “floor” that did not previously exist, reducing the tax benefit of smaller or more incremental gifts.

Reduced Deduction Value for High-Income Donors

• High-income taxpayers may receive less tax benefit for each dollar donated to charity. Even though they remain in the highest tax bracket, the value of itemized deductions (including charitable gifts) could be more limited. As a result, charitable contributions may reduce taxes by less than they do under current rules.

Changes Affecting Retirement-Based Giving

• Broader changes to charitable tax rules could reinforce the importance of coordinating IRA-based giving strategies, including qualified charitable distributions (QCDs), with overall tax planning.

Why to Give by December 31

For many donors, the last stretch of 2025 represents a planning inflection point. In some cases, making gifts before year-end may allow individuals to:

• Capture charitable deductions under current rules, before new limits apply
• Accelerate planned contributions into a higher-benefit tax year
• Reduce taxable income in a year with unusually high earnings
• Create greater flexibility for future giving through advanced funding strategies

Put simply, donors who wait until 2026 may find that identical gifts generate less favorable tax results.

Effective Ways to Structure Year-End Charitable Gifts

While there is no “right” way to give, certain strategies can be effective in a changing tax environment:

• Cash contributions: Direct cash gifts to qualified charities remain simple and effective, especially in a year of higher income or itemized deductions.
• Gifts of appreciated securities: Donating long-term stocks or mutual funds can allow donors to avoid capital gains taxes while receiving a charitable deduction for the asset’s fair market value, subject to IRS rules.
• Donor-Advised Funds (DAFs): DAFs allow donors to make a charitable contribution now to a current-year deduction while retaining the flexibility to recommend grants to charities over time. This can be useful for “bunching” multiple years of giving into one tax year.
• Qualified Charitable Distributions (QCDs): Individuals age 70½ or older may be able to transfer funds directly from an IRA to charity, generally satisfying required minimum distributions while excluding the amount from taxable income.
• Art & Illiquid Assets: Donating appreciated artwork, collectibles, private equity, or real estate can provide tax advantages if IRS requirements are met. Assets must generally be held for more than one year, donated to a qualified charity, and supported by a qualified appraisal for gifts exceeding $5,000.

Careful documentation and close coordination with advisors are both critical.

Specific Planning Considerations for High-Net-Worth Donors

For higher-income individuals and families, the upcoming changes may have an outsized impact. Planning opportunities may include:

• Accelerating significant gifts before deduction limits tighten
• Using donor-advised funds or charitable trusts to lock in current rules
• Coordinating charitable strategies with estate and legacy planning
• Evaluating private foundations or other advanced vehicles where appropriate

Because these strategies can be highly complex, they are best evaluated as part of a broader financial plan.

Next Steps: Turning Intent into Action

As tax rules evolve, charitable giving remains a way to express values and help create lasting impact. Before year-end, consider:

• Reviewing your planned charitable gifts for this tax year and beyond
• Estimating the tax impact of giving now versus waiting
• Coordinating with your tax and financial advisors
• Ensuring all gifts are properly documented

Acting before December 31, 2025, can help you support the causes you care about while making the most of today’s charitable giving rules. Please contact us with any questions. We are here to help!

References:

• IRS Publication 526 (2024), Charitable Contributions
• IRS Publication 590-B (2024), Distributions from Individual Retirement Arrangements (IRAs)
• Charitable Donations: The Basics of Giving
• Giving smarter: Donating appreciated securities