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Significant changes to charitable giving rules are scheduled to take effect in 2026, stemming from the “One Big Beautiful Bill” Act (H.R.1) signed in July 2025. While tax law updates often create uncertainty, they also offer an opportunity to take a more thoughtful, values-aligned approach to philanthropy. With proper planning, you can continue supporting the organizations that matter to you while preserving the income-tax benefits that make charitable giving an important element of many wealth and estate-planning strategies.

At Sessa & Dorsey, we believe charitable planning is ultimately about expressing your values and strengthening your legacy. With that perspective in mind, here is what is changing, what you may wish to consider before December 31, 2025, and how to prepare for 2026 and beyond.

What Is Changing in 2026

Beginning January 1, 2026, individual donors who itemize charitable deductions will be subject to several new rules, most significantly:

A 0.5% “Floor” on Charitable Deductions for Individual Taxpayers

Taxpayers will need to contribute more than 0.5% of their Adjusted Gross Income (AGI) before any charitable deduction becomes available. Smaller or unplanned gifts may no longer provide a tax benefit unless they are combined or strategically timed.

A 1% “Floor” on Charitable Deductions for Corporations

A corporate taxpayer will need to contribute more than 1% of their taxable income before any charitable deduction becomes available. The total deductible amount remains capped at 10%.

A 35% Cap on Itemized Deductions for Certain Taxpayers

For higher-income individuals, total itemized deductions (including charitable contributions) will be capped at 35% of AGI, limiting the benefit of larger deductions in high-income years.

The 60% AGI Limit for Cash Gifts Becomes Permanent

Cash gifts to public charities will remain deductible up to 60% of AGI. In-kind contributions, such as appreciated securities or real property, will continue to be subject to lower AGI limits.

A New Universal Charitable Deduction for Cash Donations

Beginning in 2026, taxpayers who do not itemize may claim a $1,000 deduction per individual ($2,000 for married couples filing jointly) for cash donations to qualified charities. However, this universal deduction does not apply to contributions made to:

• Donor-advised funds (DAFs)
• Private foundations
• Supporting organizations

Estate and Gift Tax Exemption Increase

The new legislation raises the federal estate and gift tax exemption to $15 million per individual ($30 million per couple), meaning far fewer estates will face federal estate tax.

What to Do Now (Before 12/31/25)

The remainder of 2025 provides a meaningful opportunity to take advantage of the current charitable deduction rules before the new limitations take effect.

1. Accelerate Your Giving

High-income donors may benefit from front-loading gifts in 2025 to maximize deductions under the current itemized deduction rules, before the tighter caps take effect in 2026. This strategy can help reduce your taxable income in the current year.

2. Consider Funding a Donor-Advised Fund (DAF)

A DAF is one of the most streamlined and tax-efficient charitable vehicles available. Contributing to a DAF in 2025 allows you to secure a deduction under the current rules, before the 2026 deduction limits and 0.5% floor take effect. You can then recommend grants to the charitable organizations that reflect your priorities and values.

Advantages of DAFs include:

• Privacy: Donor identities and grant recommendations remain confidential.
• Simplicity: Administrative oversight is handled by the sponsoring organization.
• Efficiency: Many DAFs can be established quickly and funded with a wide range of assets.
• Flexibility: Donor decides how DAF is invested and when charitable contributions are made, immediately or over time.

Our DAF vs. Private Foundation comparison outlines when a DAF may be ideal and when a private foundation may better support long-term or family-centered charitable goals.

3. Make Charitable Gifts from Your IRAs

If you are 70 ½ or older, consider making a qualified charitable distribution (”QCD”) from your IRA. For 2025, an individual can distribute up to $108,000 ($216,000 for a married couple) directly from their IRA to a qualified charity. Your QCD counts toward your annual required minimum distribution and is not included in your taxable income.  

What to Do Later (2026 and Beyond)

Once the new rules take effect, charitable giving will benefit from earlier and more intentional planning. Many individuals traditionally decide on gifts toward year-end, but under the 2026 rules, planning throughout the year may offer greater tax savings and clearer alignment with your long-term charitable goals.

1. Plan Your Giving Early

Beginning in 2026, it will be helpful to:

• Estimate AGI as soon as possible.
• Determine how much giving will exceed the 0.5% threshold.
• Assess whether cash or appreciated assets offer the greater benefit.
• Time larger gifts to align with income and liquidity.
• Consider bunching contributions: Combine multiple years’ planned donations into a single year to ensure gifts exceed the 0.5% AGI floor and maximize deductions under the new rules.

Beginning in 2027:

• A new tax credit of up to $1,700 will be available for taxpayers who make contributions to private or religious primary and secondary schools for the purpose of funding scholarships for eligible students, regardless of whether they itemize deductions.

Early planning for these upcoming changes supports clarity and allows you to take full advantage of available deduction opportunities.

2. Coordinate Charitable Giving with Your Broader Wealth Plan

Charitable giving is most effective when integrated with your overall estate, tax, and financial planning. In addition to donor-advised funds (DAFs) and private foundations, long-term structures such as Charitable Remainder Trusts (CRTs), Charitable Lead Trusts (CLTs), and other split-interest trusts can help balance charitable goals with family planning, income needs, and legacy objectives.

With the federal estate and gift tax exemption now raised to $15 million per individual ($30 million per couple), making lifetime charitable gifts—whether to a DAF or another vehicle—can reduce your taxable estate, provide immediate income-tax benefits, and preserve flexibility for long-term philanthropic planning.

If you own a corporation, consult with your tax advisor about the best approach to making contributions.

For more details, see our Charitable Planning Options guide. 

Conclusion: Planning Makes the Difference

Charitable giving should reflect what matters most to you. Although the rules are changing, proactive planning can help you remain generous, strategic, and aligned with your long-term vision. With proper preparation, you can navigate the shifts coming in 2026 and continue supporting the organizations and causes that are important to you and your family.

If you are considering how these changes may affect your future charitable planning, the attorneys at Sessa & Dorsey are here to help. Contact us at (443) 589-5600 to get started.