Philanthropy is undergoing a major shift in 2026 as a result of the One Big Beautiful Bill Act. The legislation is introducing new charitable deduction floors and caps, which will change the face of charitable giving, particularly for high-net-worth donors.
In this article, we’ll examine these impending changes, the 2025 planning window, and how Harness can maximize both the tax efficiency and charitable impact of your donations.
Key takeaways
- The new 0.5% AGI floor and 35% deduction cap will significantly reduce charitable tax advantages for high-income donors starting in 2026.
- 2025 offers the final chance to secure full deductions at 37% and make use of the temporary $40,000 SALT cap increase.
- Donor-advised funds provide ways to accelerate 2025 contributions while maintaining flexibility and growing assets tax-free.
- Strategic selection of assets—especially appreciated stocks and alternative assets—is a key strategy, as donating them before 2026 will secure enhanced tax benefits.
Table of Contents
- The current charitable deduction framework
- Key charitable deduction changes coming in 2026
- Why 2025 is your key planning year
- Accelerating and bunching charitable donations
- Using donor-advised funds before the deadline
- Optimizing asset selection for maximum impact
- Planning for post-2026 charitable giving
- How Harness can help
The current charitable deduction framework
Donors who itemize deductions currently benefit from a highly flexible, tax-efficient charitable giving deduction strategy. Those in the highest tax bracket can deduct contributions at their full 37% marginal rate, creating powerful incentives for philanthropy among high-income earners.
The current framework also offers substantial latitude for different types of charitable gifts. Cash donations to public charities, including increasingly popular donor-advised funds, benefit from an expansive 60% Adjusted Gross Income (AGI) limitation. For donors considering gifts of appreciated assets, a separate 30% AGI limitation applies, providing ample room for tax-efficient giving through securities or other appreciated property.
What happens when a particularly generous donor exceeds these AGI limitations? The tax code provides a safety net through a five-year carry-forward provision. This allows philanthropists to preserve tax benefits even when making major gifts that exceed annual AGI limits, effectively spreading the tax advantage across multiple years.
Key charitable deduction changes coming in 2026
Starting January 1, 2026, itemizers will face their first major hurdle—a 0.5% AGI floor on charitable deductions—which will effectively put an to every donated dollar generating tax savings. Only contributions exceeding this threshold will qualify for deduction, fundamentally changing the calculus of charitable giving.
In perhaps the most striking shift, donors in the 37% tax bracket will find their charitable deductions are effectively capped at 35%. Each dollar donated will generate less tax benefit, creating a reduction in the tax efficiency of charitable giving for high-income earners.
The legislation isn’t all restrictions, however. OBBBA introduces a permanent universal charitable deduction for non-itemizers—$1,000 for individuals and $2,000 for married couples filing jointly. There is a caveat, though: this deduction explicitly excludes gifts to donor-advised funds, supporting organizations, and private foundations.
Some elements of the current system survive and even gain permanence. The 60% AGI limitation for cash donations to public charities becomes a permanent fixture, preserving the capacity for large-scale donations. For 2025 only, the SALT deduction cap sees a major increase from $10,000 to $40,000, creating a unique planning opportunity for donors in high-tax states.
Why 2025 is your key planning year
For those in the highest tax bracket, the combined impact of the 2026 changes may prove particularly stark. Between the deduction floor, value cap, and altered after-tax cost calculations, the tax advantage of charitable giving could decrease by 15-20%. The challenge becomes even more pronounced for donors with substantial investment income, as the new rules apply to total AGI rather than just earned income.
The window through to December 31, 2025, is therefore a key time for high-income donors. It’s the final opportunity to claim charitable deductions at their full value against the 37% tax rate—a benefit that will disappear on Jan 1, 2026
In a rare alignment of incentives, the temporary increase of the SALT cap to $40,000 for 2025 creates a significant double opportunity. Donors in high-tax states find themselves in a position where both charitable deductions and SALT deductions offer enhanced benefits—but only for this limited time.
Donors need to act fast and carefully choose which assets to give. Early planning allows you to use your most tax-advantaged property (like stock, for example) to meet multiple financial goals before the new, less favorable tax rules begin.
The financial implications of acting now versus waiting are substantial. Proactive tax planning in 2025 could generate tens of thousands of dollars in additional tax savings compared to identical giving under the new rules. This stark difference makes what’s left of 2025 a decisive time for charitable giving.
Accelerating and bunching charitable donations
Front-loading multiple years of planned charitable giving into 2025 is a prudent strategy. When donors accelerate future donations into the current tax year, they can maximize deductions under today’s more favorable rules while maintaining their long-term philanthropic commitments.
This bunching strategy is particularly effective when combined with a donor-advised fund. Such an approach allows donors to secure immediate tax benefits at peak value while preserving the flexibility to support their chosen causes steadily over time.
Compressing five years of giving into 2025 could maximize deductions at the 37% value—a level of tax efficiency that will not be available again.
Donors worried about cash flow don’t need to be overly concerned. You can use appreciated investments (like stock) or other non-cash assets to fund this giving, which avoids tying up your cash. The trick is to carefully calculate the optimal amount to donate to maximize your tax savings without hurting your other financial goals.
Using donor-advised funds before the deadline
Donor-advised funds (DAFS) are probably the standout vehicle for capturing 2025’s enhanced tax benefits while maintaining flexibility over the timing of future charitable grants. These tools allow donors to act decisively now without rushing their philanthropic decisions.
Unlike direct charitable gifts, assets in donor-advised funds can grow tax-free, amplifying the impact of your accelerated giving strategy. This combination of immediate tax benefits, long-term growth potential, and flexibility makes donor-advised funds particularly attractive before the rule changes.
For donors facing uncertain future income, funding a donor-advised fund in 2025 provides dual benefits. It locks in maximum tax advantages during a high-income year while creating a charitable reservoir that can sustain giving through potential lower-income periods.
The exclusion of donor-advised funds from the new universal deduction makes 2025 contributions even more valuable for donors who might not itemize in future years. When establishing these funds, working with experienced providers is important as they can help manage immediate tax strategies, long-term giving plans, and compliance requirements under the new rules.
Optimizing asset selection for maximum impact
The choice of assets for charitable giving can dramatically impact your tax benefits. Donating appreciated securities held longer than one year offers a double advantage: you avoid capital gains tax while receiving a deduction for the full fair market value.
Business owners have a particularly interesting opportunity. Donating a portion of closely held business interests before a liquidity event could allow for deductions based on higher valuations. Although this strategy requires careful timing and valuation, it can yield substantial tax benefits.
When considering charitable contributions, donors should look beyond traditional securities. Nontraditional assets—including real estate, private equity interests, and cryptocurrency—can offer major tax advantages when donated, making them well worth considering in your 2025 giving strategy.
Planning for post-2026 charitable giving
In the post-2026 environment, strategic bunching of donations into alternate years will take on increased importance. This approach will help donors clear the 0.5% AGI floor while maximizing deductible amounts in years when they choose to give.
Qualified Charitable Distributions from IRAs will also be an increasingly attractive option after 2026. For donors aged 70½ or older, these distributions bypass both the new deduction floor and the 35% value cap, maintaining their full tax efficiency.
That said, high-income donors will need to fundamentally rethink their giving approach. This might mean focusing on fewer, larger gifts or exploring charitable vehicles that optimize tax benefits under the new rules.
How Harness can help
While 2025 still offers major tax benefits to high-income donors, 2026 will require a new approach to charitable giving. For individuals looking to remain tax efficient under the new rules, Harness can connect you to specialized tax experts who understand the subtleties of the new tax laws.
Delivering highly tailored advice, our tax professionals can help you formulate a strategic giving plan, ensuring that your philanthropy remains both impactful and tax-efficient. Get started with Harness and transform your charitable intentions into an optimized financial strategy.
Disclaimer:
Tax related products and services provided through Harness Tax LLC. Harness Tax LLC is affiliated with Harness Wealth Advisers LLC, collectively referred to as “Harness Wealth”. Harness Wealth Advisers LLC is a paid promoter, internet registered investment adviser. Registration does not imply a certain level of skill or training. This article should not be considered tax or legal advice and is provided for informational purposes only. Please consult a tax and/or legal professional for advice specific to your individual circumstances. This article is a product of Harness Tax LLC.
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