Tax changes for charitable giving: Here's what to know

How Trump’s Tax Reforms Could Impact Charitable Donations and Investor Tax Strategies

Think of tax rules like the changing rules of a board game—what worked for your strategy last year might not work this year. That’s why it’s important for investors to know how new tax laws could affect their charitable giving and, in turn, their investment portfolios.

Why Charitable Giving Rules Matter for Investors

Giving to charity isn’t just about helping others—it can also be a smart move for your wallet. Tax breaks for donations can make a real difference in how much you owe the IRS, which leaves you with more money to invest elsewhere. When the rules change, it’s a bit like new traffic laws: you have to know them to avoid losing time or money.

The Good News for Smaller Gifts

  • Most people—about 90%, according to the IRS—take the standard deduction, not itemized deductions. That means they usually can’t get a tax break for their charitable gifts.
  • But starting in 2026, new rules will let people who don’t itemize get a special tax break for giving to charity: up to $1,000 for singles or $2,000 for couples.
  • If you usually make small donations at the end of the year and don’t itemize, it might be smart to wait until January 2026 to give. That way, you can claim the new tax benefit.

The Challenge for Big Donors

  • For people who give large amounts or have higher incomes, the rules are getting tougher starting in 2026.
  • You’ll only get a tax break if your donations are more than 0.5% of your income. For example, if you earn $400,000, you’d need to give over $2,000 to start claiming a deduction.
  • There’s also a new cap: if you’re in the highest tax bracket (37%), your deduction is now worth less—only 35%. That means less of your donation lowers your tax bill.

What the Experts Suggest

  • Financial planners say it could be smart to “bunch” your donations in 2025—give more this year to take advantage of current rules before they change.
  • One way to do this is by using a donor-advised fund. You put money in now, get a tax break up front, and then decide later which charities to support.
  • This strategy can help you keep your giving steady, even as tax rules shift.
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Bulls vs. Bears: The Debate on Charitable Giving Changes

  • Bulls (Optimists):
    • The new break for non-itemizers could encourage more people to give, increasing total donations.
    • Investors who plan ahead can use these changes to maximize both their giving and their tax savings.
  • Bears (Skeptics):
    • Higher-income donors might give less if the tax benefits shrink, which could hurt charities that rely on big gifts.
    • Frequent rule changes make it harder for everyone to plan, which could discourage giving overall.

Putting It in Context

Charitable giving in the U.S. reached $392.45 billion in 2024, up about 5% from the year before (Giving USA). But history shows that big tax changes can shake up how, when, and how much people give. For example, after the 2017 tax law overhaul, itemized charitable deductions dropped sharply—by about $54 billion in one year (Urban Institute).

Investor Takeaway

  • If you make small donations and don’t itemize, consider waiting until 2026 to give and claim the new tax break.
  • If you’re a high earner or give large amounts, think about accelerating your donations into 2025 to get the most tax benefit before the rules change.
  • Look into donor-advised funds to “bunch” your gifts and lock in bigger tax breaks now.
  • Plan ahead—changing rules mean it’s smart to talk with a financial advisor about your giving strategy.
  • Keep an eye on how these changes could affect your favorite charities and your overall portfolio.

For the full original report, see CNBC

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