New Tax Law and How It Affects Charitable Giving

Comprehensive tax and spending legislation was signed into law on July 4, 2025. Some provisions of the legislation will have a direct impact on charities and their donors and some possibly an indirect impact. Below is a summary of some of the more important of those provisions.

• Most provisions of the 2017 Tax Cuts and Jobs Act (TCJA), including the current tax brackets ranging from 0% to 37%, were made permanent by the new legislation. If these provisions had not been extended, the tax cuts and simplifications of TCJA would have reverted to their pre-2018 levels, which would have resulted in higher taxes for most taxpayers.
• Tax brackets will continue to be adjusted for inflation, though in 2026 all brackets except the top three will get an extra inflationary adjustment.
• The standard deduction, used by taxpayers whose total itemized deductions are less than the standard deduction, will also continue to be adjusted for inflation, which for 2026 is now $16,100 for single filers and $32,200 for a married couple filing jointly.
• In addition to the regular inflationary adjustment, the standard deduction for some persons aged 65 and over will temporarily increase. An additional $6,000 may be added to the standard deduction in the years 2025 to 2028 with a phase-out for those whose adjusted gross income exceeds $75,000 ($150,000 if married and filing jointly).
• A limited deduction for non-itemizers will be allowed starting in 2026. Those who make charitable gifts but take the standard deduction can deduct an additional $1,000 ($2,000 in the case of a couple filing jointly). It will be necessary to substantiate such gifts using documentation prescribed by the IRS. However, there is no phase-out on the amount of one's income.
• For itemizers charitable contributions are deductible only to the extent that contributions exceed 0.5% of adjusted gross income starting in 2026.
• A temporary provision that allowed certain cash charitable deductions up to 60% of adjusted gross income has now been made permanent.
• Individual taxpayers in the top 37% tax bracket can claim a 35% tax deduction for charitable gifts instead of the full 37% beginning in 2026.
• Starting in 2026, the federal gift- and estate-tax exemption will be increased to $15 million ($30 million when the exemptions of a married couple are combined). There will be annual inflation adjustments starting in 2027. This means that a larger amount can be given to heirs tax-free.

Please contact our office if we can help with any questions about your charitable giving. We welcome the opportunity to connect with you.

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