How the OBBBA Impacts Charitable Deductions: Smart Planning Moves to Consider Before Year-End

As the year winds down, many high earners begin to think about two things: how to make a meaningful difference through charitable giving and how to make the most of available tax deductions. In fact, 30% of annual giving takes place in December, according to NP Source, a reflection of both heartfelt generosity and thoughtful financial planning. This year, these two motivations take on added importance. With the One Big Beautiful Bill Act (OBBBA) now signed into law, several provisions affecting charitable giving will take effect in 2026.

That means 2025 represents a final opportunity to take advantage of the existing, more favorable deduction rules, especially for those in higher tax brackets or with complex income situations. Let’s break down what’s changing, so you can act strategically to maximize both your impact and your tax benefits.

2025 Charitable Giving Rules

In 2025, the tax benefits of charitable giving remain the same as in recent years. The IRS currently allows:

• Cash gifts to public charities, including donor-advised funds (DAFs), of up to 60% of adjusted gross income (AGI).
• Non-cash gifts such as appreciated stock, real estate, or cryptocurrency held more than one year of up to 30% of AGI.
• If you give beyond those limits, you can carry forward unused deductions for up to five years, maintaining flexibility across tax seasons.

For now, there’s no minimum threshold before charitable deductions become eligible, and donors in the top 37% tax bracket still receive the full deduction value: 37 cents off their taxes for every dollar donated. However, these rules are set to shift in 2026.

What Changes for Charitable Giving in 2026 Under the OBBBA

The OBBBA extends many provisions from the 2017 Tax Cuts and Jobs Act, including the current income-tax brackets and the higher standard deduction. However, it also introduces several key updates that will reshape how donors think about giving.

#1: New Minimum Giving Threshold

Starting in 2026, taxpayers must give at least 0.5% of AGI before any charitable deduction can be claimed. For someone earning $1 million, for example, this means the first $5,000 of charitable gifts will no longer be deductible.

Strategy tip: If you typically donate smaller amounts throughout the year, consider “bunching” those gifts. This involves combining two or more years’ worth of charitable contributions into 2025 to exceed the upcoming 0.5% threshold and secure full deductibility.

For example, instead of giving $10,000 annually, you might contribute $20,000 this year and skip next year’s donation, allowing you to itemize deductions for 2025 and maximize your tax benefit before the new rules take effect.

#2: Cap on Charitable Deduction Value for Top Earners

Currently, someone in the 37% tax bracket who donates $100,000 can reduce their tax bill by $37,000. Beginning in 2026, the maximum benefit will be capped at 35%, reducing that savings to $35,000.

While the difference may seem modest, it adds up for large gifts. For donors who regularly make six-figure contributions, the 2025 window is the last chance to capture the full 37% value before the cap applies.

Strategy tip: If you expect a higher-income year—perhaps due to a bonus, vested RSUs, or a Roth IRA conversion—consider front-loading charitable giving this year to offset that income and lock in the higher deduction rate. In practice, this means making several years’ worth of planned donations in 2025, potentially through a donor-advised fund (DAF), so you can claim the full deduction now while distributing the funds to charities gradually over time.

#3: Universal Deduction for Non-Itemizers

In 2026, taxpayers who take the standard deduction will now be able to claim a $1,000 charitable deduction ($2,000 for joint filers) for cash gifts made directly to qualified operating charities. This new universal deduction opens the door for many households—roughly 90% of U.S. taxpayers—who don’t itemize to finally benefit from their generosity.

However, there’s an important distinction: gifts to donor-advised funds (DAFs) don’t qualify for this deduction. The rule only applies to cash gifts made directly to operating charities.

Planning Ahead: Why 2025 Matters

The year-end 2025 giving season represents a key planning opportunity for those who are charitably inclined. Donors who act before December 31 can take advantage of more favorable deduction limits, and in many cases, accelerate future giving for strategic tax benefits.

For high-income households, this means aligning giving strategies with income timing, capital-gains management, and broader financial goals. Here are some of the most effective moves to consider before the clock runs out.

#1: Contribute to or Establish a Donor-Advised Fund (DAF)

If you haven’t yet explored donor-advised funds, 2025 may be the perfect year to start. A DAF is a charitable investment account that allows you to:

• Contribute cash or appreciated assets by December 31 to receive an immediate tax deduction.
• Invest the assets within the fund for potential tax-free growth.
• Distribute grants to your favorite charities over time, on your own schedule.

This approach combines flexibility, simplicity, and tax efficiency, which can be particularly valuable in a year when deduction timing matters.

For example, suppose you expect an unusually high-income year due to equity compensation, a business sale, or a Roth conversion. Contributing a meaningful amount to a DAF before year-end could:

• Offset your 2025 taxable income under the 60% AGI rule.
• Lock in the full 37% deduction before the OBBBA’s 35% cap takes effect.
• Give you time to decide which charities to support in 2026 or beyond.

You can also donate appreciated assets such as publicly traded stock or mutual funds to your DAF rather than selling them. This eliminates capital-gains taxes on the appreciation, potentially increasing your charitable impact by up to 20%.

For those who already have a DAF, contributing to it before year-end may be a smart way to capture deductions while preserving flexibility to give later.

#2: Give Appreciated Non-Cash Assets

While cash is the simplest way to give, it’s not always the most tax-efficient. Donating long-term appreciated assets like stocks, mutual funds, or real estate allows you to:

• Avoid paying capital-gains tax on the sale.
• Claim a charitable deduction for the full fair-market value.
• Potentially increase the amount available for charitable causes.

DAFs can make complex giving much easier by managing the transfer and sale of non-cash assets that many individual charities can’t accept directly. However, it’s important to keep in mind that not every donor-advised fund can process all asset types, so be sure to confirm which kinds of donations are supported before initiating the transfer.

If your portfolio has grown and you’ve accumulated a concentrated position in a single stock, donating appreciated shares can also serve as a strategic way to rebalance investments while supporting the organizations you care about.

#3: Time Your Giving Around Income Events

Charitable giving can be a powerful way to offset spikes in taxable income, especially in years when bonuses, equity awards, or business transactions significantly increase your earnings. Consider aligning your giving with key financial events such as:

• Roth IRA conversions. When you convert a traditional IRA to a Roth, the converted amount is treated as taxable income that year. Pairing the conversion with a large charitable contribution can help offset the tax impact, keeping your overall liability in check.
• Equity vesting or liquidity events. If your restricted stock units (RSUs) or stock options are vesting, or if you’ve sold part of your company, your taxable income may spike. Making a lump-sum donation, especially to a donor-advised fund, in the same year can help neutralize the additional taxes while giving you flexibility to distribute grants over time.
• Business or property sales. Selling a business, rental property, or other appreciated asset can trigger significant capital gains. Donating a portion of those assets directly to charity or through a donor-advised fund before the sale can help reduce your taxable gain and increase your charitable impact.

Planning ahead with your financial or tax advisor helps ensure these contributions are properly structured, documented, and completed before December 31 so they qualify for a 2025 tax deduction.

#4: Bunch or Stack Donations for Maximum Impact

For donors who alternate between itemizing and taking the standard deduction, bunching (also called “stacking”) contributions can amplify the tax benefit.

Here’s how it works:

• Combine several years’ worth of charitable giving into one tax year—for example, 2025—to exceed the standard deduction and itemize.
• Then, in 2026, take the standard deduction (and possibly the new $1,000/$2,000 universal charitable deduction).

This two-year cycle helps donors maximize total deductions while maintaining their giving patterns. A DAF can be an ideal vehicle for this strategy since you can contribute in 2025 but distribute grants gradually in later years.

#5: Take Advantage of the Higher SALT Deduction Cap

The One Big Beautiful Bill Act (OBBBA) temporarily raises the state and local tax (SALT) deduction cap from $10,000 to $40,000 in 2025, with a gradual 1% annual increase through 2029.

Under the previous $10,000 limit, many high-income households couldn’t deduct enough in state and local taxes to make itemizing worthwhile, especially given the higher standard deduction. With the new, much larger cap, more taxpayers may find that their total itemized deductions (including charitable contributions) now exceed the standard deduction threshold, unlocking additional tax savings.

If you’re charitably inclined, this creates an opportunity to layer deductions strategically. For example, you might combine the newly expanded SALT deduction with a large charitable contribution or donor-advised fund (DAF) gift in 2025 to significantly increase your total itemized deductions.

Maximize Your Charitable Giving Impact Before OBBBA Rule Changes

If charitable giving is part of your financial plan, 2025 represents a pivotal window of opportunity. Current deduction rules are more favorable than those taking effect in 2026, making this an ideal year to be both generous and strategic. By acting before December 31, 2025, you can lock in today’s higher deduction values, offset taxable income from bonuses or investments, and lay the groundwork for future philanthropy through a donor-advised fund.

At Simplicity Wealth Management, we believe giving should be both meaningful and mindful. Whether your goal is to create a lasting philanthropic legacy, support causes that inspire you, or simply make smarter use of your charitable dollars, our team can help you design a strategy that aligns your values with your financial goals. We’ll work with you to ensure your giving not only benefits the organizations you care about most but also enhances your overall financial picture.

Ready to make generosity part of your long-term wealth plan? Book a complimentary Simplicity Session to explore tax-smart giving strategies tailored to your unique situation.