Under New Tax Laws, Charitable Giving May Look Different 

October 20, 2025

Philanthropy has long been a cornerstone of wealth stewardship, allowing affluent families to align financial success with personal values. But beginning January 1, 2026, new rules under the One Big Beautiful Bill Act (OBBBA) will significantly alter the tax benefits of charitable giving. For high-income households, these changes could reshape not only how much you give but also when it’s most advantageous to give. 

Key Changes Ahead 

The OBBBA introduces two notable provisions: 

• A new deduction floor. Only charitable contributions that exceed 0.5% of adjusted gross income (AGI) will qualify for a deduction. For a household with $2 million AGI, the first $10,000 of giving each year will no longer be deductible. 

• Reduced tax benefit for top earners. For taxpayers in the 37% bracket, the bill applies an additional 5.4% reduction to itemized deductions, including charitable contributions. 

These adjustments mean that simply “giving as usual” may no longer yield the same tax benefits. Instead, careful planning will be essential to preserve both philanthropic impact and tax efficiency. 

Why 2025 Is a Window of Opportunity 

For the remainder of 2025, current rules remain in effect. That creates a unique, one-year opportunity to accelerate or “pull forward” donations before the OBBBA takes hold. 

Consider the following illustration: 

• Scenario A (Gift in 2025): A donor with $1 million AGI makes a $100,000 charitable contribution this year. Under current rules, the entire gift is deductible, potentially generating tax savings of $37,000. 

• Scenario B (Gift in 2026): The same donor waits until 2026. The first $5,000 (0.5% of AGI) does not qualify for a deduction, and the remaining $95,000 is subject to the 5.4% haircut. The effective deduction falls to about $89,900, reducing tax savings by several thousand dollars. 

Over time, the difference compounds. For families accustomed to significant annual giving, these new rules could meaningfully change the after-tax cost of generosity. 

Rethinking Timing and Strategy 

Planning the timing and structure of how you donate is very important. The changes may also flip traditional giving strategies on their head: 

• Bunching gifts. Rather than giving the same amount each year, it may become advantageous to combine multiple years of giving into a single, larger donation, then pause in subsequent years. 

• Shifting to lower-income years. Historically, donors prioritized charitable giving in years with high taxable income. Under the new AGI floor, it may be more efficient to give in lower-income years, when the nondeductible floor represents a smaller hurdle. 

• Leveraging vehicles. Donor-advised funds (DAFs), charitable trusts, or foundations can provide flexibility—allowing you to “front-load” contributions in 2025 while distributing grants to charities over time. 

Making Your Giving More Rewarding and Effective 

As you prepare for year-end, consider these practices to elevate both your philanthropic impact and tax efficiency: 

1. Set Clear Objectives and Goals 

Clarify the “why” behind your philanthropy. Are you motivated by legacy, personal experience, or the desire to strengthen your community? Identify the causes and outcomes you care most about—whether immediate relief, systemic change, or a blend of both. A clear vision guides not just how much you give, but where and when. 

2. Know When to Give 

The OBBBA makes timing a central part of charitable planning. Align your gifts with life events such as retirement, business sales, or liquidity events. Evaluate whether accelerating gifts into 2025, bunching in future years, or coordinating with estate planning creates the greatest overall benefit. 

3. Establish a Governance Framework 

Philanthropy often involves more than one person. If family or advisors are engaged, set clear expectations for participation and decision-making. Define funding priorities and exclusions to reduce conflict. Consider creating a family foundation or DAF with formal guidelines, ensuring your values endure across generations. 

4. Implement With Purpose 

Once objectives and timing are set, select organizations carefully. Look for transparency, measurable impact, and alignment with your goals. Decide whether your gifts should be restricted to specific projects or provide flexible, general support. For larger contributions, formalize your intentions with written agreements to ensure clarity and accountability. 

Looking Ahead 

Charitable giving has always been a blend of heart and strategy. The OBBBA doesn’t change the importance of generosity—it simply adds new complexity to how and when giving is most effective. 

For high-income donors, the remainder of 2025 represents an important inflection point. Accelerating gifts this year may create a greater impact at a lower after-tax cost. Looking forward, more intentional timing, structured vehicles, and thoughtful governance can ensure your philanthropy continues to serve both your values and your financial plan. 

Disclaimer: Private banking services offered through First Western Trust Bank, Member FDIC 

This content is for informational purposes only and does not constitute legal or tax advice. Please consult your legal or tax advisor for specific guidance tailored to your situation. First Western Trust Bank cannot provide tax advice. Please consult your tax advisor for guidance on how the information contained within may apply to your specific situation.