New Tax Law and How It Affects Charitable Giving

Comprehensive tax and spending legislation was signed into law on July 4, 2025. Some provisions of the legislation will have a direct impact on charities and their donors and some possibly an indirect impact. Below is a summary of some of the more important of those provisions.

Most provisions of the 2017 Tax Cuts and Jobs Act (TCJA), including the current tax brackets ranging from 0% to 37%, were made permanent by the One Big Beautiful Bill Act (OBBBA). If these provisions had not been extended, the tax cuts and simplifications of TCJA would have reverted to their pre-2018 levels, which would have resulted in higher taxes for most taxpayers.
Tax brackets will continue to be adjusted for inflation, though in 2026 all brackets except the top three will get an extra inflationary adjustment.
The standard deduction, used by taxpayers whose total itemized deductions are less than the standard deduction, will also continue to be adjusted for inflation, which for 2025 is now $15,750 for single filers and $31,500 for a married couple filing jointly.
In addition to the regular inflationary adjustment, the standard deduction for some persons aged 65 and over will temporarily increase. An additional $6,000 may be added to the standard deduction in the years 2025 to 2028 with a phase-out for those whose adjusted gross income exceeds $75,000 ($150,000 if married and filing jointly).
A limited deduction for non-itemizers will be allowed starting in 2026. Those who make charitable gifts but take the standard deduction can deduct an additional $1,000 ($2,000 in the case of a couple filing jointly). It will be necessary to substantiate such gifts using documentation prescribed by the IRS. However, there is no phase-out on the amount of one's income.
For itemizers, charitable contributions are deductible only to the extent that contributions exceed 0.5% of adjusted gross income starting in 2026.
A temporary provision that allowed certain cash charitable deductions up to 60% of adjusted gross income has now been made permanent.
Individual taxpayers in the top 37% tax bracket can claim a 35% tax deduction for charitable gifts instead of the full 37% beginning in 2026.
Starting in 2026, the federal gift- and estate-tax exemption will be increased to $15 million ($30 million when the exemptions of a married couple are combined). There will be annual inflation adjustments starting in 2027. This means that a larger amount can be given to heirs tax-free.
The tax on college and university endowments will increase starting in 2026. The tax rate depends on the “student adjusted endowment,” which is the relation of the value of the endowment to the number of students. Instead of the existing flat tax rate of 1.4% on endowment investments, there is now a multi-tiered tax rate of up to 8% on larger endowments. A 4% rate applies to endowments worth between $750,000 and $2 million per student, and the 8% rate to endowments worth more than $2 million per student. Some smaller endowments will continue to be taxed at 1.4% or be exempt from the tax. “Per student” means the value of the total endowment divided by the number of students.

Please contact our office if we can help with any questions about your charitable giving. We welcome the opportunity to connect with you.

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