By Osnat Gafni-Pappas
The so-called “One Big Beautiful Bill Act” (OBBBA) passed by Congress earlier this year introduces several important tax changes that may affect how one plans their 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 one’s 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.
For those 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, those claiming the standard deduction, 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 one’s 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 one’s estate.
Charitable gifts of appreciated assets remain a best practice, especially for those who have experienced significant growth in their investment portfolio. Such gifts can provide a deduction for the full current value of the asset, as well as avoiding the capital gains tax that would apply if the assets were sold and then the after-tax proceeds were gifted.
Donate to a Donor Advised Fund (DAF). For those considering a significant donation to charity over time or who want the ability to plan their charitable grants over a period of years, opening a DAF or adding funds to an existing DAF can be a strategic option. Funding a 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): For those over age 70.5, IRA rollovers, or QCDs, are an attractive option that permit transferring directly to charity up to $108,000 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) for those who 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 the holder 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 current taxable income as well as remove the assets from one’s estate.
For more information about charitable giving options, visit JewishAnnArbor.org/ways-to-give/foundation. For those interested in talking through their philanthropic goals with someone, reach out to Jewish Federation CEO Eileen Freed (eileenfreed@jewishannarbor.org).