With year-end fast approaching, the time to talk to your advisor about your charitable goals and tax-efficient planning is now…especially when you consider the new provisions in the One Big Beautiful Bill Act (OBBBA) with many going into effect in 2026. As our Chief Legal Officer Jeffrey Haskell shared with Wealth Management.com, there are key tax changes that have practical implications for the charitable sector.
The recently enacted OBBBA revises certain key rules governing charitable deductions, some of which specifically impact high-income individuals, beginning January 1, 2026:
- A new “floor” will apply for charitable deductions. The OBBBA introduces a 0.5% adjusted gross income (AGI) floor for charitable contributions. Only the portion of contributions above 0.5% of a taxpayer’s AGI will be deductible.
- The tax benefit of charitable donations (and other itemized deductions) is limited. For those in the top 37% tax bracket, there will be a roughly 5.4% reduction to the lesser of (a) total itemized deductions, OR (b) the amount by which taxable income exceeds the lower end of the 37% rate bracket.
Because these changes take effect in 2026, the window of opportunity is fast closing for taxpayers who itemize their deductions to make gifts without these reductions. For example, as demonstrated below, a donor with an annual AGI of $1 million who wants to donate $100,000 to charity can receive more than $10,000 in additional charitable deductions by making the gift in 2025, before the new restrictions kick in.
Assumptions: Adjusted gross income of $1,000,000 (0.5% floor of $5,000); charitable gift of $100,000 (no other itemized deductions).
| Impact of AGI Floor | Impact of 5.4% Haircut | Total Impact of OBBBA | |
| 2025 | $100,000 (no impact) | $100,000 (no impact) | No impact |
| 2026 | $100,000 – $5,000 (0.5% floor) = $95,000 | $95,000 – $5,135 (2/37 haircut) = $89,865 | Reduction of charitable deduction by $10,135 |
Other Ways To Maximize Year-End Giving
No matter how you choose to give, you can help your charitable donations go further this holiday season. Here are some tips to help you maximize your good deeds during the giving season.
1. Find a Good Match
Many charities and even employers have annual fundraising campaigns during the holidays featuring matching contributions – sometimes as much as 3:1. Find those opportunities and take advantage of them to double or even triple the impact of your dollars. If you’ve got the money available, you could even start a matching fund yourself, supplying the funds to seed a future fundraising effort.
2. Family Matters
As relatives gather for the holidays, it’s the perfect time to get your kids and grandkids involved in family giving. Have fun with it. Create a budget – real, or hypothetical – and engage everyone in identifying specific causes for which to advocate. The entire family can then consider the recommendations and decide how to split up the money.
3. Ease Uncle Sam’s Bite
The tax man will still want his piece of the action, holiday time or not. With some careful planning, however, you can coordinate your charitable contributions with your overall tax and investment strategies and make your money even more productive. Remember, the more you manage to keep through tax deductions, the more you will have available for charity.
4. Don’t Rely On Impulse Alone
Good feelings can come in a rush when you spread a little holiday compassion. But that sense of satisfaction can be magnified by formalizing your giving strategies and developing long-term philanthropic goals. Private foundations and donor-advised funds are both charitable vehicles through which funds can be earmarked for specific causes while potentially yielding significant tax savings.
5. Know Your Minimums
We would all like to think our charitable spirit knows no bounds. Recognizing how much you need to give, however, is an important consideration. For example, private foundations are required to annually distribute at least 5% of the previous year’s average net assets for qualifying uses. The last thing you want to do during the holidays is to see your charitable contributions go toward paying penalties instead. No one benefits from that.
6. Time is of the Essence
The gift of time can be precious, and few things help brighten the spirit of giving more than direct, hands-on service in helping others. Tutoring children at a homeless shelter, or stocking shelves at a food pantry not only meets important needs but provides a tangible reminder of just how much your help can mean, especially this time of year. A smile of thanks might be the greatest reward of all.
Using these tips thoughtfully will help expand the reach of your year-end giving and make that holiday spirit shine even brighter.
Have questions about your year-end giving?
We can help! Schedule a call with us or reach us at 800-839-0054. Together, let’s #begiving.
