Jill On Money: Changes to charitable giving

A newly passed tax law will change charitable giving rules in 2026: itemizers face a reduced top-bracket deduction rate (from 37% to 35%) and a new minimum threshold requiring gifts to exceed 0.5% of AGI to be deductible, while standard filers will get a modest $1,000 ($2,000 joint) cash-only deduction above the standard deduction; none of these changes affect 2025. The practical takeaway for high-income taxpayers and tax-sensitive investors is to accelerate large gifts into 2025 and consider funding donor-advised funds now—allowing immediate deductions on cash and appreciated securities and tax-free investment growth—since the 2025 window offers more favorable deduction mechanics than the 2026 regime. Investors should also note the limited scope of the new standard-filer break (cash only, not DAFs or securities) and be vigilant against fraud and emerging “charitable LLC” schemes that target high-net-worth donors.

Analysis

The recently passed tax bill creates three discrete changes to charitable giving effective 2026: a reduction in the top-bracket charitable deduction benefit from 37% to 35% for taxpayers in the highest bracket, a new floor requiring itemizers to give more than 0.5% of AGI before claiming any deduction (for example, a taxpayer with $200,000 AGI must give more than $1,000), and a new $1,000 ($2,000 joint) cash-only above-the-line deduction for standard filers that specifically excludes gifts to donor-advised funds (DAFs); none of these changes affect 2025.
DAFs are highlighted as a practical 2025 planning tool because donors can contribute cash or appreciated assets (stocks, mutual funds, ETFs and in some cases private equity, hedge fund interests, crypto and restricted stock), take an immediate deduction, and allow funds to be invested tax-free for later grantmaking; Fred Kaynor of DAFGiving360 (a Charles Schwab subsidiary) emphasizes the “give now, decide later” flexibility and suggests 2025 may be the optimal window for high-bracket donors.
Implications for financial intermediaries and donors include likely elevated demand for DAF services through 2025 (a modest positive for providers such as Charles Schwab, consistent with the per-ticker sentiment score of 0.3), while overall coverage sentiment is mildly negative and the quantified market-impact score is low (0.25). Donor risk vectors increase: the article warns of impersonation scams, pressure tactics, payment-redirection (gift cards/wires) and “charitable LLC” fraud schemes, and recommends verification via the IRS Tax Exempt Organization Search and using traceable payment methods.

Key Decisions for Investors

• Accelerate large charitable contributions into 2025 and consider funding a donor-advised fund to lock current deduction rules and allow tax-free investment growth, especially if you expect to be in the top tax bracket in 2026
• When using a DAF, prioritize gifting appreciated securities (stocks, mutual funds, ETFs) where appropriate to maximize tax efficiency and immediate deduction utility, confirming each asset type is accepted by the sponsor
• If you typically take the standard deduction, don't expect a 2025 tax benefit; plan cash gifts with the $1,000/$2,000 2026 cap in mind but note it excludes DAFs and securities
• Monitor flow and asset growth at DAF providers (for example Charles Schwab/DAFGiving360) as a potential modest positive for their fee and custody business, but treat market impact as limited given the low market_impact_score
• Implement strict anti-fraud controls for charitable giving: verify charities via the IRS search tool, avoid gift-card or wire requests, use traceable payments, and avoid participating in "charitable LLC" schemes