On July 4, President Trump signed into law H.R. 1, which included several provisions that will have an impact on charitable giving. The changes go into effect in the tax years beginning after December 31, 2025.
As Your Trusted Philanthropic Advisor, we at The Columbus Foundation want to provide you with this summary of legislative changes that relate to charitable giving.
Changes to Charitable Deduction for Itemizers
Section 70111 caps the tax benefit at $0.35 for each dollar of itemized deductions rather than the full $0.37 per dollar previously received by taxpayers in the top tax bracket.
Section 70425 makes permanent the Tax Cuts and Jobs Act’s (TCJA’s) increased contribution limit of 60 percent of adjusted gross income (AGI) for cash gifts made to qualified charities for taxpayers who elect to itemize.
Section 70425 creates a 0.5 percent floor on charitable contributions for itemizers, meaning individuals who itemize would only earn a charitable deduction for giving in excess of 0.5 percent of their AGI. For example, someone with $1,000,000 in AGI wouldn’t get a tax break on the first $5,000 of donations.
With these changes, we anticipate that more individuals will take advantage of “bunching,” a tax strategy that involves consolidating several years’ of giving into a select year to overcome the 0.5 percent AGI floor and itemizing deductions in the “bunching” year to receive a higher tax benefit. By bunching giving into a Donor Advised Fund, then suggesting grants out of that fund gradually over time, donors continue to provide stable support to charities while benefiting from extra tax savings. This is a time-tested charitable strategy that has been popular with individuals and couples who are on the cusp between itemizing and taking the standard deduction since the TCJA passed in 2017.
We also expect to see more donors gifting non-cash appreciated assets like stocks or real estate to take advantage not only of the charitable deduction but also the avoidance of paying capital gain taxes on the appreciation.
New Charitable Deduction for Non-Itemizers
Section 70424 creates a permanent deduction for taxpayers who do not itemize. This deduction is capped at $1,000 for single filers or $2,000 for joint filers. Some types of donations are ineligible for the deduction, including donations to Donor Advised Funds or private non-operating foundations.
Changes to Charitable Deduction for Corporations
Section 70426 creates a 1 percent floor on giving by C corporations, meaning such corporations would have to contribute at least 1 percent of their taxable income in order to qualify for a charitable tax deduction. The provision does not change the 10 percent ceiling. The provision also allows for up to a five-year carryforward of contributions in excess of the 10 percent ceiling.
With this change, we anticipate that more companies will take advantage of “bunching” charitable donations either into a Donor Advised Fund or into their corporate foundations to receive tax benefits in the year of the gift but still have a vehicle that allows them to continue their annual support to charities.
Estate and Gift Tax
The estate and gift tax exemption will be $15 million in 2026, indexed for inflation each year thereafter, permitting a total $30 million exemption available to married individuals in 2026.
This increase continues the pattern of the last several years, with the exemption moving ever higher each year. The effect is that donors may leave more to individuals—and not charity—and incur no gift or estate tax. However, our experience is that donors continue to leave legacy gifts for charitable purposes under their estate plans, despite these changes. This is because many donors are driven by their values—specifically, their charitable desires—when planning their legacies.
You can access the full bill here.
If you have any questions about these changes or how they might impact your clients’ charitable strategies, don’t hesitate to contact us as a resource.
About The Columbus Foundation
The Columbus Foundation serves thousands of individuals, families, and businesses that have created unique funds and planned gifts to make a difference in the lives of others through the most effective philanthropy possible. The Columbus Foundation is Your Trusted Philanthropic Advisor and is one of the top 10 largest community foundations in the country.