The 2025 tax law reduced the value of charitable donations in two ways. Philanthropic planning has always been a valuable part of tax strategy through the changes made it even more important.
Two key changes in 2026 and beyond:
- There is a floor on the tax deduction for charitable giving of the first 0.5% of your taxable income (AGI). For someone with $1M in AGI, the first $5,000 of charitable contributions generates zero deduction.
- There is a cap on the tax deduction at 35%, which means filers with incomes in the top bracket get less of a deduction.
One mitigating change for some:
If you do not itemize deductions you can deduct cash gifts to charities up to $1K single / $2K joint, though this does not apply to donor funds / foundations.
Strategic options:
1. Donor-Advised Funds (DAFs) remain one of the most flexible tools.
Donating appreciated stock or crypto to a DAF still allows you to avoid capital gains of selling before donating and taking a deduction (within the new constraints above). Given the new law favors “bunching” concentrating multiple years of giving into a single tax year to clear the new AGI floor and maximize the deduction, DAFs allow you to make the tax deductible contribution to the DAF in one year and distribute to charities over multiple following years.
2. Charitable Remainder Trusts (CRTs).
This allows you to transfer appreciated assets, receive an income stream, and eventually pass the remainder to charity. The upfront partial deduction plus deferral of capital gains on the asset transfer can be compelling, especially for concentrated stock positions or business sale proceeds. A CRUT (unitrust) adjusts distributions with asset value, which works particularly well with growth assets.
3. Charitable Lead Trusts (CLTs) work in the opposite direction.
Charity gets the income stream first, and the remainder passes to heirs at reduced gift/estate tax values. They’re powerful for intergenerational wealth transfer, especially now that the estate tax exemption has been increased to $15M per individual under the OBBA tax law.
4. Private Foundations give you maximum control over investments and grant-making.
However they have the most operational cost and legal requirements: a 1.39% excise tax on investment income, required 5% annual distributions, and significant administrative overhead. They may make sense at $1M+ in initial funding and an expectation of a long duration philanthropic giving.
Do not let the tax tail wag the dog on the value of philanthropy, though it is worth considering the tax implications of how you structure your giving.
Meet the Authors
David Snider
David is the Founder & CEO of Harness, a platform to power entrepreneurial tax advisors & their clients. Harness was recognized by Inc Magazine as one of the 200 fastest growing companies in the U.S. David incubated Harness as an executive-in-residence at Bain Capital Ventures. Previously he served as COO & CFO of Compass, a real estate tech company that he helped grow from pre-launch to a valuation of $1.8 billion. David was an investor at Bain Capital private equity, where he completed investments worth over $2 billion as well as the IPO of Sensata on the NYSE. He is the author of Money Makers, published by Macmillan.
This document does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for information purposes only. To the extent that the reader has any questions regarding the applicability of any specific issue discussed above to their specific portfolio or situation, the reader is encouraged to consult with the professional advisor of their choosing.
