The so-called “One Big Beautiful Bill Act” (OBBBA) passed by Congress earlier this year introduces several important tax changes that may affect how you plan your charitable giving. Some of these updates make 2025 an especially good year to be generous, before new limits take effect in 2026.
Here are some key takeaways on what is changing and ways to maximize charitable giving.
* This information was prepared by Jewish Federations of North America.
Changes Going Into 2026
Tax rates made permanent: OBBBA permanently extends several key provisions, including the individual income tax brackets (10% to 37%), the increased standard deduction, and the elimination of personal and dependent exemptions.
Of note, some people aged 65 and older may be eligible for a new deduction of up to $6,000 for tax years 2025 through 2028.
State and Local Tax (SALT) deduction increased: The SALT deduction cap temporarily increases to $40,000 for married couples filing jointly who have a modified adjusted gross income below $500,000, effective for 2025.
This increase could enable some to claim itemized deductions, including the charitable contribution deduction, on their 2025 tax return.
Charitable Deductions subject to floor and ceiling: Starting in 2026, only the portion of charitable gifts above 0.5% of your adjusted gross income will be deductible for those who itemize. In addition, the value of all itemized deductions, including charitable contributions, will be capped at a tax savings of 35% for those in the higher 37% bracket.
If you are contemplating a large gift to charity in 2026 or later, it may be beneficial to accelerate the gift before the end of 2025 to avoid the application of the new floor or ceiling. Accelerating contributions to Donor Advised Funds (DAFs), including bunching several years’ worth of contributions before December 31, 2025, will avoid or minimize the impact of the new charitable deduction cutbacks.
Nonitemizers will be entitled to a charitable deduction for cash gifts: Starting in 2026, if you claim the standard deduction, you still will be entitled to a charitable contribution of up to $2,000 (married filing jointly) for cash contributions to public charities, but not DAFs.
Ways to Maximize Charitable Giving
Donations to charity can reduce current income taxes and avoid capital gains taxes. Gifting appreciated assets held for more than one year – rather than cash – both lowers your overall income tax bill and is not subject to capital gains. Gifts of retirement assets can provide a current tax benefit as well as remove the gifted assets from your estate.
Charitable gifts of appreciated assets remain a best practice, especially if you have experienced significant growth in your investment portfolio. Such gifts can provide you with a deduction for the full current value of the asset, as well as avoiding the capital gains tax that would apply if you sold the assets and gifted the after-tax proceeds.
Donate to a Donor Advised Fund (DAF). If you are considering a significant donation to charity over time or want the ability to plan your charitable grants over a period of years, opening a DAF or adding funds to an existing DAF can be a strategic option. Funding your DAF with appreciated assets can be especially beneficial.
The Greater Ann Arbor Jewish Community Foundation’s DAF program is an accessible option for those looking to give charitably over time. A DAF can be established with just $5,000, and those funds can be disbursed over any period of time, in increments of $100 or more—a lower and more accessible threshold than many similar programs.
“Bunching” charitable gifts to maximize tax benefits: While not everyone has sufficient deductions to itemize and claim the benefit for charitable contributions in 2025 ($31,500 for married couples), there is an option to utilize a “bunching” strategy, which combines two or more years of giving before year-end, making itemizing advantageous. This strategy can be even more beneficial this year with the new floors and ceiling on charitable deductions taking effect in 2026.
Utilize qualified charitable distributions (QCDs) from Individual Retirement Accounts (IRAs): If you or your spouse is over age 70.5, IRA rollovers, or QCDs, are an attractive option that permits you to transfer up to $108,000 directly to charity from each individual retirement account, free of any income tax, in 2025.
QCDs are an effective charitable giving strategy especially for those who do not itemize their deductions. In addition, such rollovers help satisfy pension law requirement minimum distributions (RMDs) if you have reached the age when such distributions must be taken into income (generally age 73). Note that QCDs also remove these retirement assets from any potential estate tax exposure. Additionally, Congress recently expanded the IRA rollover to allow for a one-time distribution of up to $53,000 to fund a charity gift annuity that can pay you a fixed amount of money each year for life.
Gifting assets to younger generation or others: The annual gift tax exclusion for 2025 is $19,000 per recipient. Gifting assets is an effective way to both reduce your current taxable income as well as remove the assets from your estate.
For more information about charitable giving options, visit JewishAnnArbor.org/ways-to-give/foundation. If you are interested in talking through your philanthropic goals with someone, reach out to Jewish Federation CEO Eileen Freed (eileenfreed@jewishannarbor.org).