5 charitable giving questions you may have at year-end

According to the IRS, the deduction limit for cash gifts to public charities, including donor-advised funds (DAFs), is 60% of adjusted gross income (AGI), while the limit for non-cash gifts (like stock) held more than one year is 30% of AGI. Deduction amounts over the 2025 limit may be carried forward up to five tax years. 

First, total charitable donations must exceed 0.5% of AGI before a charitable donation deduction can be claimed. For example, with an AGI of $200,000, total gifts must be more than $1,000 before being deductible. 

Second, with all charitable deductions, we see the tax benefits limited to a maximum reduction in taxes of 35 cents on the dollar. This rule will only affect taxpayers in the 37% federal income tax bracket. For example, a $100,000 donation deduction would give a person in the 37% tax bracket a maximum potential reduction in taxes of $35,000, instead of $37,000 under the old rules.  

Also beginning in 2026, donors who do not itemize deductions will be eligible for a $1,000 charitable deduction ($2,000 for married couples filing jointly) on top of the standard deduction for gifts made directly to qualified charities. Gifts must be cash and go directly to an operating charity—not to a DAF. 

Due to these changes, some donors who itemize deductions may want to increase their 2025 donations rather than waiting to give in 2026. Taking advantage of the tax deduction limits for 2025 may be valuable, especially for high earners in the top tax bracket.  

One option to consider is bunching multiple years of contributions into 2025. This strategy can help you exceed the standard deduction amounts (see question 3 below).  

Another way to increase your itemized deductions is to have a charitable donation and deduction offset the tax liability on a Roth IRA conversion or other extra income you received this year. 

What the One Big Beautiful Bill Act means for charitable giving 

Bunching charitable contributions 

Reduce taxes on a Roth IRA conversion with charitable giving 

Next year, non-itemizers will be able to take a charitable donation deduction of up to $1,000 for single filers or $2,000 for joint filers. To qualify, this donation must be made in the form of cash to an operating public charity—which means it cannot go to a DAF.   

IRA Qualified Charitable Distributions (QCDs): If you’re age 70½ or older, you can give up to $108,000 ($216,000 per married couple) directly from a traditional IRA to an operating public charity in 2025. A QCD allows you to give IRA assets without having to pay taxes, and it can meet your current year required minimum distribution (RMD) amount or help reduce future RMDs. A QCD, however, cannot be made to a DAF.  

Bunching contributions: You can combine multiple years’ worth of donations into one year to exceed the standard deduction threshold. This could allow you to itemize deductions in 2025 and then take the standard deduction in 2026, potentially maximizing your total deduction over that two-year period. Note that a DAF (see question 4 below) allows you to contribute a large sum before December 31 this year, to secure the tax benefits in 2025, and then spread out your grants over time. 

Giving with IRAs 

Bunching charitable contributions 

Contributing appreciated assets like stocks, mutual funds, real estate or even cryptocurrency to a DAF can help you potentially eliminate capital gains tax on the sale, increasing the amount available for charity by up to 20%, and qualify for a tax deduction. 

Giving non-cash assets to a DAF can be even more efficient: DAFs often accept a broader range of assets than some charities can directly process. 

This giving strategy is especially valuable in years with large investment portfolio gains. When reviewing your portfolio, it may be beneficial to look across all assets and consider donating some appreciated assets when rebalancing.