By Zaher Fallahi, CPA, Attorney at Law
The One Big Beautiful Bill Act (“OBBBA”) will significantly reduce the tax benefits of charitable giving starting January 1, 2026. By contrast, 2025 offers far more favorable rules, creating a unique opportunity for donors to maximize deductions before the changes take effect.
For many individuals, especially high-income taxpayers and those with multi-year giving plans, 2025 may be the ideal year to accelerate charitable contributions, including through Donor-Advised Funds (DAFs).
What Changes in 2026
• New 0.5% AGI “floor” for charitable deductions
Beginning in 2026, itemizers can only deduct charitable gifts that exceed 0.5% of adjusted gross income (AGI).
Example: A taxpayer with $1,000,000 AGI loses the deduction on the first $5,000 of charitable giving.
2025 advantage: every deductible dollar counts.
• Deduction value decreases for high-income taxpayers
Under current law, charitable deductions offset tax at approx. 37%.
Starting in 2026: value drops to approx. 35%.
This makes giving more expensive beginning in 2026.
• New above-the-line deduction for non-itemizers
Up to $1,000 (single) or $2,000 (married filing jointly) for cash gifts to public charities.
(Not available for DAFs or supporting organizations.)
• 60% AGI limit for cash gifts becomes permanent
Helpful but partially offset by the new AGI floor and reduced marginal deductibility.
Why Many Donors Should Give in 2025
- No AGI floor—enhanced deductibility
- Higher marginal deduction value under 2025 tax brackets
- Ideal alignment for those expecting unusually high 2025 income (liquidity events, QSBS, business sales, stock options, trust distributions)
- Greater control and efficiency for multi-year giving strategies
Any gifts deferred into 2026 or later will be subject to the new restrictions and lower tax benefit.
Using a Donor-Advised Fund (DAF) in 2025
A DAF allows taxpayers to secure a full 2025 deduction while distributing to charities over future years.
Benefits of funding a DAF this year:
- Capture higher 2025 tax benefit
- Avoid the 2026 AGI floor
- Invest contributions tax-free within the DAF
- Maintain complete flexibility over future grants
- Support consistent annual giving while maximizing a single-year deduction
Example:
A donor intending to give $50,000 per year for five years may contribute $250,000 to a DAF in 2025, deduct the full amount now, and recommend $50,000 in grants annually beginning in 2026.
Advanced Giving Tools: Charitable Trusts
For long-term and high-impact planning:
- Charitable Lead Trusts (CLTs): income stream to charity first, remainder to heirs.
- Charitable Remainder Trusts (CRTs): income to donor/heirs first, remainder to charity.
Both can create meaningful deductions and integrate with estate planning.
Action Steps Before December 31, 2025
- Review whether accelerating gifts into 2025 increases tax savings
- Consider establishing and funding a DAF
- Model 2025 vs. 2026 outcomes with your CPA or financial advisor
- Confirm AGI projections and timely obtain charitable receipts
Charitable planning should be tailored to each taxpayer’s financial and estate planning goals.
Zaher Fallahi, CPA, Attorney at Law (California and Washington, D.C.)
Zaher Fallahi is a dual-licensed Tax Attorney and CPA with extensive experience in tax law and audits, cryptocurrency taxation, and foreign inheritance and gift compliance. He represents clients nationwide.
Tel.: (310) 719-1040 | (714) 546-4272 | (877) 687-7558
Websites: zflegal.com | zfcpa.com
Email: taxattorney@zfcpa.com