Why 2025 is the year to frontload charitable giving
Below is some information from a board member who is also a financial advisor:
If charitable giving is part of your financial plan, 2025 is the year to maximize your tax benefits. Starting in 2026, the Big Beautiful Bill introduces new limits on deductions:
- Only gifts above 0.5% of adjusted gross income will count.
- Deductions will be capped at 35% versus 37% for the highest income earners now.
Example: A $10,000 gift today for someone in the 37% bracket generates $3,700 in tax savings. Under the new rules, that same gift would save $1,750, nearly a 50% reduction.
Why act now?
By frontloading charitable contributions in 2025, you can lock in today’s higher deduction limits while having the flexibility to support nonprofits over time. A Donor-Advised Fund (DAF) is often the most efficient way to do this. You receive the tax deduction now but can gift to charities in future years.
Other ways to give include:
- Appreciated securities (avoid capital gains tax while receiving fair market value for your tax deduction)
- Qualified Charitable Distributions (QCDs) from IRAs if you’re 70 ½ + (a highly tax-efficient strategy since gifts come directly from pre-tax income and can count toward RMDs)
- Charitable Trusts: Vehicles like Charitable Remainder Trusts (CRTs) or Charitable Lead Trusts (CLTs) provide both tax and estate planning benefits for larger gifts.
- Cash gifts for simplicity
Bottom line: For clients with strong charitable intent, 2025 is a good year to consider frontloading donations before deduction limits tighten in 2026. Please contact us with any questions about charitable donations or how best to structure your giving.
