Tax laws don’t tend to change that often. But over the last decade with TCJA, Secure Act, Secure Act 2.0, and most recently OBBBA (passed July 2, 2025), change is the new normal. That’s why we’ve reviewed every client’s return and strategy to highlight where the new rules create opportunities – starting with charitable gifting.

First, here’s a summary of the relevant changes for most of our clients as it relates to charitable gifting:

· SALT cap raised temporarily: The State and Local Tax (SALT) deduction cap increases to $40,000 (from $10,000), with phaseouts for income above $500,000.

It returns to $10,000 in 2030.

· A new above-the-line deduction for charitable donations starting in 2026: $1,000 for individuals / $2,000 for couples—even if you don’t itemize.

· Also new in 2026: Itemizers will now see a 0.5%income floor before charitable deductions count. Not a big deal if your income is $100,000, but if your income is $10M, that 0.5% means you don’t get any federal tax benefits on the first $50,000 you give to charity.

With the SALT change in particular, more of our clients will now itemize their deductions again, at least for the next few years. This means going back to keeping those non-cash donation receipts to places like Goodwill, filing away property and real estate tax bills, getting Form 1098 for any mortgage interest, and considering making 4^th quarter estimated state income tax payments in December instead of the January 15^th due dates.

The 0.5% floor on charitable giving starting in 2026 also makes two charitable gifting strategies potentially even more advantageous: charitable lumping and qualified charitable distributions (QCDs).

Strategy #1 - Charitable Lumping (Under Age 70.5) This strategy involves combining multiple years of charitable donations and giving them all in one year. It’s even better when you’re able to gift appreciated stock, and easier to implement if you utilize a donor advised fund (DAF),especially if you’re not ready to give the actual donations yet to the organizations you support.

Why 2025 is Unique for Charitable Lumping

1. At the time of this writing, we’ve experienced along bull stock market. Just about all our clients with taxable brokerage accounts have highly appreciated stock positions that might be good candidates for charitable gifting, since the unrealized gain on the positions is not ever taxed if you gift the appreciated stock position directly to a charity or DAF.

2. As noted above, a 0.5% income floor comes into effect starting in 2026. That means for anyone who makes charitable contributions in 2025, the 0.5% income floor is not applicable. Gifts made after 2025 would lose some of their tax benefits. Frontloading multiple years of charitable giving into 2025 might be particularly advantageous, but even if you lump gifts every other year, you’ll at least only be subject to the 0.5%income floor every other year.

Strategy #2 - Qualified Charitable Distributions (Over Age 70.5) Qualified charitable distributions (QCDs) involve gifting via a check directly from your IRA to a qualifying charity. Please note it does not mean you can take an IRA distribution to your name and then make a charitable donation, as that would create taxable income for you.

QCDs are so advantageous because the distribution never counts as income. Even if you take the standard deduction, you still get the benefit since you’re giving with pre-tax dollars. Even better, QCDs reduce what’s called your Modified Adjusted Gross Income (MAGI), which is used to calculate Medicare’s Income-Related Monthly Adjustment Amount (IRMAA) premiums. This means you may be able to help avoid additional Medicare premiums through this reduction in income. And for anyone still working and earning self-employment or other business income, QCDs can help you claim a higher Qualified Business Income (QBI) deduction, which starts to phase out at higher income levels.

Why 2025 is Unique for QCDs

1. The new senior deduction (discussed here) starts to phase out at $75,000 for single filers and $150,000 for married filing jointly. If you’re in the phase out range, making a QCD can help keep you eligible for the senior deduction.

2. It helps keep you eligible for the new car loan interest deduction.

3. If you’re still working, it helps keep you eligible for the new deductions for overtime and tips.

4. If you’re still a high-income earner, QCDs can help keep down the itemized deduction limit for people in the 37% tax bracket.

Note that when you receive a Form 1099-R for the distributions, in previous years it was not coded as a QCD. New for 2025, IRA custodians are required to identify QCDs by marking Box 7 with a code Y distribution. You’ll want to be sure this is reported properly both on Form1099-R and your tax return to get the correct tax benefit.

QCDs are limited to $108,000 per individual for 2025.

Closing

As always, every client’s situation is unique. If you’re considering a charitable gift this year, let’s talk through the timing, the best assets to use, and how to align it with the OBBBA changes.

We hope this helps you think about charitable giving in new ways, and we’re here to ensure your generosity has the greatest possible impact—for your family, your finances, and the causes you care about.

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FAQs

Q: What is OBBBA and when was it passed?

A: The One Big Beautiful Bill Act (OBBBA) was passed on July2, 2025, bringing sweeping changes to tax laws, including charitable giving rules.

Q: What is the new charitable deduction under OBBBA?

A: Starting in 2026, taxpayers can claim an above-the-line deduction of $1,000 ($2,000 for couples), even if they don’t itemize.

Q: How does the 0.5% income floor affect charitable deductions?

A: Beginning in 2026, itemizers must exceed 0.5% of Adjusted Gross Income (AGI) before charitable gifts count. For high earners, this could reduce the federal tax benefit of large donations, and in some cases, completely eliminate it.

Q: What are the benefits of charitable lumping?

A: Lumping donations into one year can help you itemize, maximize deductions, and either avoid the 0.5% income floor if done before 2026or limit its applicability if done 2026 or later.

Q: What are the benefits of qualified charitable distributions (QCDs)?

A: QCDs allow those 70.5+ to give directly from IRAs without increasing taxable income, helping with Medicare IRMAA premiums and phaseouts for QBI, the new senior deduction, car loan interest deduction, overtime and tips deduction, and the overall itemized deduction limit for taxpayers in the 37% federal tax bracket.

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Photo by Chang Duong on Unsplash.

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