Make the most of your charitable contributions in 2025

EDIT: This article originally published on Feb 4, 2025, and has been updated to reflect the latest developments in U.S. tax reform.

As we approach the end of 2025, charitable giving is often top of mind for individuals looking to implement philanthropic tax strategies. New tax reform passed on July 4, 2025, gives individuals more incentive to carefully consider their giving this year.

Charitable giving can play a meaningful role in tax planning, allowing individuals and families to reduce taxable income, address estate tax concerns, and create a lasting legacy. Thoughtful planning helps align donations with financial goals while maximizing their impact.

Planning now for the 2025 tax year-end, as well as looking ahead to 2026, allows for better coordination with advisors, strategic selection of charitable recipients, and full utilization of available tax benefits before deadlines approach.

Tax Considerations for 2025

The Tax Cuts and Jobs Act (TCJA) of 2017 introduced several provisions originally set to expire at the end of 2025. However, the signing of the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, extended or modified key elements, including:

• Estate and Gift Tax Exemption – Previously set to decrease after 2025, the exemption was just under $14 million per person for 2025. The OBBBA increases the exemption to $15 million per person starting in 2026.
• Charitable Contribution Limits – The OBBBA preserves the current deduction limit for cash donations to public charities at 60% of adjusted gross income (AGI), which was originally set to decrease to 50% in 2026.

Given these updates, individuals should revisit their estate and charitable giving plans to align with the new thresholds and take full advantage of available estate and income tax planning opportunities.

New Deduction Rules Coming in 2026

Starting in 2026, two new limitations will apply to charitable gift deductions:

·         0.5% MAGI Floor – Only charitable donations exceeding 0.5% of Modified Adjusted Gross Income (MAGI) will be deductible. For example, if your MAGI is $1,000,000, the first $5,000 of donations will not qualify for a deduction.

·         35% Cap on Tax Benefit – The maximum tax benefit rate for top-bracket (37%) taxpayers will be capped at 35%.

These changes make 2025 a critical year for strategic giving. Accelerating donations before the new rules take effect can help maximize tax benefits.

For further information, please see our related article: What the One Big Beautiful Bill Means for High-Net-Worth Individuals.

Tax-Advantaged Giving Strategies

Below are a few approaches that can help customers structure charitable giving to enhance philanthropic efforts while maximizing tax benefits.

• Donating Appreciated Securities – Instead of giving cash, this straightforward and effective tax-saving strategy can allow donors to claim a deduction based on the market value of the securities and avoid paying capital gains taxes. The charity can then sell the securities and keep the full proceeds. For further information, please see our related article: Trends in Charitable Giving: Tax Advantages of Stock and Cash Donations.
• Gifts of Full or Partial Interest in Property – This approach may help reduce taxable income and capital gains exposure. Note that these gifts require careful planning, so consulting a tax advisor before donating an interest in property is recommended.
• Donor-Advised Funds (DAFs) – A flexible and tax-efficient way to give, DAFs allow donors to contribute cash, stocks, or other assets while receiving an immediate tax deduction. The funds are managed by a sponsoring organization and can be distributed to charities over time while growing tax-free.
• Qualified Charitable Distributions (QCDs) – Individuals aged 70½ or older can donate directly from a traditional Individual Retirement Account (IRA) to a qualified charity, up to a certain limit, without increasing taxable income. This strategy also satisfies required minimum distributions (RMDs) while supporting charitable goals.
• Deferred Donations Through Charitable Remainder Trusts – These trusts allow donors to retain some benefit from donated assets while deferring the transfer to the charity. Donors can take an immediate tax deduction for the present value of the donation to reduce capital gains taxes. These trusts require detailed planning and consultation with tax and legal advisors.

Charitable Giving Pitfalls to Avoid

To maximize the impact of charitable donations, it’s important to avoid mistakes that could reduce their effectiveness.

• Failing to Research Charities – Donors should ensure the organizations they support are financially sound and aligned with their philanthropic goals. Without proper research, funds may not be used as intended.
• Overlooking Tax Implications – Contributing assets without considering tax effects may result in missed deductions or unexpected liabilities. Proper planning helps donors take full advantage of available tax benefits.
• Overcommitting Financially – While generosity is admirable, donors should balance giving with long-term financial stability to avoid potential financial strain.
• Ignoring Economic Factors – Market volatility and interest rate fluctuations can affect the value of donated assets and the overall giving capacity. Understanding these conditions helps donors time contributions more effectively.

By carefully planning, consulting with advisors, and selecting the right charitable vehicles, donors can make the most of their giving while avoiding unnecessary risks.

We Can Help

The strategies listed above are just a few of the tax-efficient options available to achieve philanthropic goals. Many can be customized to fit a family’s financial situation and giving preferences. Our advisors can also coordinate giving with estate planning, helping individuals preserve wealth for future generations while supporting meaningful causes.

Contact our team at Elliott Davis today to explore these strategies or discuss additional options tailored to your needs.

The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.