Impact of Trump’s Tax Legislation on Charitable Deductions
President Donald Trump’s tax reform, often referred to as the “big beautiful bill,” introduced significant changes to the tax code, enacting trillions in tax breaks primarily benefiting affluent Americans. However, starting in 2026, some taxpayers may face reduced deductions for charitable donations, urging proactive strategies for high earners.
Understanding Charitable Deductions Post-2025
Under the current tax system, taxpayers who itemize can claim charitable deductions based on their income and the nature of the donated assets. The recent tax overhaul introduced two pivotal amendments for itemizers: a deduction “floor” and new caps for top earners. Starting in 2026, taxpayers will only receive a charitable deduction if their contributions exceed 0.5% of their adjusted gross income (AGI). Additionally, the benefits for individuals in the highest 37% tax bracket will be limited under the new provisions.
Planning Ahead for Charitable Giving
Certified financial planner Edward Jastrem emphasizes the necessity for “proactive planning” in 2025, allowing taxpayers to take advantage of more favorable charitable deduction conditions before the new rules take effect. Techniques such as “bunching” multiple years of donations into a single year through a donor-advised fund may be beneficial. This approach not only provides a larger upfront deduction but also functions as a charitable checkbook for future giving.
New Tax Breaks for Non-Itemizers
Beginning in 2026, Trump’s tax legislation introduced a new charitable deduction for individuals who do not itemize deductions. Single filers can claim a tax offset of up to $1,000 for cash donations, while married couples filing jointly may receive a deduction of up to $2,000. Taxpayers with more flexible donation timelines may choose to hold their gifts until January to benefit from this new deduction.
Potential Impact for High Earners
According to Justin Miller, a partner at Evercore Wealth Management, the changes could significantly affect high-income individuals. For instance, if a taxpayer in the 37% tax bracket donates $100,000 in 2025, the charitable deduction could translate to a tax savings of $37,000. However, under the 2026 regulations, the same donation may yield only about $33,250 in benefits due to the deduction floor and new limits—a difference of $3,750.
Calculating Charitable Deductions Under New Rules
The calculation becomes more complex with the new provisions. The 0.5% floor will reduce the deductible amount based on the taxpayer’s AGI. For instance, a $100,000 donation would be adjusted down to $95,000 after applying the floor. Additionally, applying the new limits results in further reductions. This illustrates why strategic donation planning becomes critical for maximizing tax benefits.
Simple Solutions for Tax Savings
Miller notes that even for those earning $1 million, saving $3,750 is significant, particularly when the method for achieving these savings is straightforward. Donors are encouraged to adjust their giving timelines strategically by prioritizing 2025 contributions over 2026, thereby optimizing their deductions.
Utilizing Donor-Advised Funds Effectively
Utilizing a donor-advised fund is another recommended strategy for 2025. This method allows individuals to front-load several years of charitable contributions, an essential tactic for those who are already set up with such accounts. By funding these accounts by year-end, high earners can maximize their tax benefits before the new legislation takes effect.
