Since 1917, individual taxpayers who itemize have been able to deduct charitable gifts. The 2017 Tax Cuts and Jobs Act (TCJA) nearly doubled the standard deduction, beginning in 2018, which sharply reduced the number of households itemizing. In 2025, Congress made those provisions permanent under the One Big Beautiful Bill Act, ensuring the higher standard deduction will continue to grow with inflation. As a result, fewer taxpayers claim itemized charitable deductions, though starting in 2026, non-itemizers may deduct up to $1,000 ($2,000 for joint filers) in cash contributions to public charities. Itemizers also face new limits: Deductions must exceed 0.5% of adjusted gross income (AGI) and the tax benefit is capped at 35%, even for those in the top bracket.
Understanding the factors impacting tax benefits
For itemizing taxpayers, the tax benefits of charitable giving will depend on factors that include:
- The type of asset contributed (e.g., cash, long-term capital gain property, short-term capital gain property, tangible personal property, or self-created or intellectual property).
- The basis and fair market value of the assets donated.
- The type of charity to which the gift is donated — a public charity or a private foundation.
- The income level and tax bracket of the taxpayer. As a rule, an individual cannot offset their entire income in a year with a sufficiently large charitable gift. The amount one can deduct for charitable contributions is subject to different AGI limitations. There is a 60% AGI limitation for cash contributions to “50% charities.” There are two 50% limitations for aggregate deductible contributions. The deduction may be further limited to 30% or 20% of the AGI limit depending on the type of property given and the type of organization that receives it. For large charitable gifts, amounts exceeding those limits can be carried forward for five more years.
Planned gifts can make it possible for donors to give more than they would otherwise, while providing important tax advantages. Understanding the tax advantages will better prepare your organization for the in-depth conversation with your donors as well as board members, finance committees, and other decision-makers within your organization. Below is a high-level outline of what those options may be.
Cash contributions: Above-line deduction
Prior law temporarily allowed individuals who did not itemize deductions to claim up to $300 ($600 for joint filers) in above-the-line deductions for cash contributions to public charities. This incentive expired after the 2021 tax year.
While there were subsequent proposals — most notably the Charitable Act, which would have permitted up to $4,500 for individuals and $9,000 for joint filers — those bills were not enacted.
Instead, under the One Big Beautiful Bill Act of 2025, Congress reintroduced a smaller permanent incentive beginning in tax year 2026. Non-itemizers will be able to deduct up to $1,000 (single filers) or $2,000 (joint filers) in cash gifts made directly to public charities. Contributions to donor-advised funds, supporting organizations and private foundations, remain ineligible for this deduction.
Gift Appreciated Securities
Some of the most tax-efficient assets to give to charity are marketable securities held 12 months or longer that have appreciated with unrealized capital gains. By donating these directly to the charity, the donor receives a deduction based on the fair market value of the property, and neither the donor nor the charity pays a tax on the capital gains if the security is subsequently sold by the charity.
Donating highly appreciated stock enables a donor to automatically increase gift and tax deductions and save on capital gains taxes.
This is how it works: When a donor donates appreciated assets to charity, they generally take a tax deduction for the full fair market value of the asset rather than their basis. As a result, the value of the gift and the amount of the tax deduction increase, and the donor eliminates their capital gains tax exposure. When the charity later sells the stock, it pays no tax on the gain.
As an example, assume you are debating whether to donate $15,000 of cash, sell $15,000 in stock and donate the cash proceeds, or donate $15,000 worth of stock outright to the charity. What are the net tax savings of the different strategies?
| $15,000 Fair Market Value of Stock, $5,000 Cost Basis, Bought 5 Years Ago |
Donate $15,000 Stock Outright |
Donate $15,000 Cash |
Sell $15,000 Stock and Donate Cash Proceeds |
| Charitable donation |
$15,000 |
$15,000 |
$15,000 |
| Ordinary income tax savings (assume 37% rate) |
$ 5,550 |
$ 5,550 |
$ 5,550 |
| Capital gains tax paid (assumes 20% tax on $10,000 gain) |
$ 2,000 saved |
NA |
$ 2,000 paid |
| Net tax savings |
$ 7,550 |
$ 5,550 |
$ 3,550 |
Note: If the stock is worth less than the donor paid for it, it is better to sell the stock first and then donate the cash, so the donor can take the capital tax loss against current or future capital gains.
To maximize a charitable giving strategy, the donor must have enough deductions to make itemizing worthwhile. In tax year 2025, a donor will need to have at least $14,600 in deductions for single filers and $29,200 for married couples filing jointly to make it worth it. However, even if the donor takes the standard deduction this year and does not itemize the charitable deduction, they still benefit by eliminating the capital gains tax. This is a win for the charity and a win for the donor.
What is fair market value?
For publicly traded stock, that is the average of the high and low market price on the transfer date. Private company stock requires an appraisal unless the estimated value is less than $10,000.
Contribute to a donor-advised fund
A donor-advised fund (DAF) is a contractual arrangement that a donor enters into with a sponsoring charity to establish an account to benefit the donor’s chosen charities. If a donor is charitably inclined, they might consider a contribution to a DAF to offset unexpectedly high earnings and year-end bonuses. The basic concept of a DAF is straightforward:
- The donor contributes to the fund and subsequently recommends specific grants to favorite charities when ready.
- Keep in mind that the donor’s recommendations are subject to final approval by the administrating organization.
- The donor can claim a tax deduction for the year in which they put assets into a DAF; the amount and timing of any actual grant has no bearing on the tax deduction.
- DAFs are typically invested and grow tax free. Donoradvised funds also enhance giving flexibility. A donor does not have to identify nonprofit beneficiaries when they make tax-deductible contributions to their donor-advised fund, and they can distribute their contributions and investment gains to recipients over as long a period as they wish.
Private foundations also use DAFs to fulfill their 5% mandatory annual distribution requirement when the foundation is not ready to make a final decision about where to make its grants at the end of the year.
Legislative alert (2025 update)
The Accelerating Charitable Efforts (ACE) Act, first introduced in 2021, sought to accelerate the flow of resources from donor-advised funds (DAFs) and private foundations to working charities. The bill proposed changes to address timing mismatches between the charitable tax deduction and the delivery of charitable benefits.
For example, contributions to certain DAFs would not have been deductible until the sponsoring organization distributed the funds or sold the donated property. Additional provisions would have altered how private foundations meet their 5% annual payout requirement and how certain excise taxes are calculated.
Although the ACE Act generated significant debate, it was never enacted into law. More recently, charitable giving rules were revised under the One Big Beautiful Bill Act of 2025. That law did not include the ACE Act’s restrictions, but scrutiny of DAFs and private foundation payouts remains ongoing. Policymakers continue to explore ways to increase transparency and ensure funds move more quickly to active charities.
Offsetting the tax costs of a Roth IRA conversion
A charitable gift could save the donor taxes on a Roth conversion. Roth IRAs offer two important tax advantages:
- Unlike those of traditional IRAs and employersponsored plan distributions, qualified Roth IRA distributions are tax free.
- Unlike traditional IRAs and employer-sponsored plans, Roth IRAs are not subject to required minimum distribution (RMD) rules that must begin at age 73.
However, a change in the tax law and political developments could result in higher future taxes. If a donor believes their current tax rate is lower than it will be in the years they will be taking distributions from their retirement assets, a Roth conversion can be viewed as insurance against future tax rate increases that would otherwise apply. As a result, more retirement dollars will be available as a tax-free source of income and available to pass to beneficiaries.
The bad news is the amount converted from a traditional IRA to a Roth IRA is taxed as ordinary income in the year of conversion and may push the donor into a higher marginal federal income tax bracket. Keep in mind that not all states tax distributions from retirement accounts (the donor should check with their tax preparer to see if state income taxes will apply to the Roth conversion). If the donor is charitably inclined and plans to do a Roth conversion before the end of the year, a large itemized charitable tax deduction can help offset the taxes due to the Roth conversion. But there may be some more good news for older filers in 2025. Under the new tax law, seniors ages 65 and older qualify for a special “senior bonus” deduction— $6,000 for individuals or $12,000 for married couples. This deduction is available whether you take the standard deduction or itemize. However, it phases out at higher incomes beginning at $75,000 up to $175,000 for single filers and $150,000 up to $250,000 for couples. That means most middle-income seniors can benefit, but higher-income households will not qualify for the deduction.
For seniors below the income limits, the bonus deduction modestly reduces taxable income from a Roth conversion and can be stacked on top of itemized deductions such as charitable gifts. In other words, seniors who itemize to offset Roth conversion income with charitable giving can still claim the $6,000/$12,000 bonus. For higher-income seniors, the charitable strategy remains fully effective on its own.
Make qualified charitable distributions
A charitable rollover, also known as a qualified charitable distribution (QCD), can be an effective vehicle for charitable giving. QCDs enable an individual older than 70½ to make tax-advantaged charitable donations of up to $108,000 per year from their IRAs during their lifetime if the distribution is made directly to a charity. QCDs are only allowed from traditional IRAs; they are not allowed from employer-sponsored retirement plans. QCDs are not included in adjusted gross income and for those over their RMD age, the distribution will satisfy or help satisfy your required minimum distribution from an IRA. Any potential income taxes owed on these distributions are eliminated, which makes QCDs beneficial for standard deduction filers.
If a donor has IRAs with nondeductible contributions or multiple IRAs, there are special rules in determining what portion of deductible and nondeductible contributions has been distributed as a QCD and what portion of the remaining IRA is treated as including nondeductible contributions.
Be aware some states may not follow federal tax law and will not allow an exclusion of the QCD from state taxable income. The IRA owner should consult with their tax preparer regarding state taxability of QCDs.
Use split-interest charitable trusts
Split-interest trusts remain a popular strategy because they allow donors to benefit both a qualified charity and a noncharitable beneficiary. Currently, federal taxable estates above $13.99 million per individual (or $27.98 million per married couple) may face estate tax. Beginning in 2026, these exemption thresholds rise to $15 million per individual (or $30 million per couple) under the new tax bill, indexed for inflation.
As interest rates increase, charitable remainder trusts (CRTs) provide more benefit since the deductible portion is higher. A CRT provides noncharitable beneficiaries with exclusive rights to distributions until their interests terminate; at that time, charitable beneficiaries receive the assets left over in the trust. CRTs have been particularly useful for investors who want to diversify highly appreciated assets but have been concerned about incurring the capital gains tax. The deferral or avoidance of capital gains tax has been a popular feature for funding CRTs with appreciated assets.
Individuals with large retirement accounts should consider naming a CRT as beneficiary, particularly in light of a recent law (The SECURE Act of 2022) that requires retirement account benefits to be distributed within 10 years after the year of the retirement account owner’s death. In general, a CRT provides a current income tax charitable deduction and a stream of income to noncharitable beneficiaries, such as the donor’s children, for a term of no longer than 20 years or the life of one or more of the noncharitable beneficiaries. By using a longer payout term, a CRT can potentially avoid subjecting a beneficiary to a higher tax bracket and the 3.8% surtax on net investment income. When the trust term ends, the remainder passes to a charity or charities.
Gift Planning Summary of Outright Charitable Contributions – 2025
| Outright Contribution |
Income Tax Deduction |
Capital Gain Considerations |
Method of Transfer |
Special Considerations |
| Cash |
Amount of cash, up to 60% of donors’ AGI for gifts to public charities (50% charities); up to 30% of AGI for gifts to private foundations. Five-year carryover allowed for excess deductions. |
None |
Checks or other cash equivalents including credit card charges, electronic transfer, and physical delivery of cash. |
Carried-over deductions from cash gifts are considered before carryovers of property gifts. |
| Marketable Securities |
Current market value if long-term transferred to a 50% charity, up to 30% AGI, or long-term transferred to a 30% charity, up to 20% of AGI. Limited to cost basis if short-term gain up to 50% of AGI (30% for private foundations). Five-year carryover for excess. |
No gain reportable when donor gives appreciated securities. |
Transfer can be made to charity’s account or be delivered to charity’s agent in negotiable form. |
Donors or appreciated securities can qualify for the 50% AGI ceiling by electing to reduce their contribution deductions by 100% of the gain. Strategy could be effective where long-term capital gain is insubstantial. |
| Donor Advised Funds (DAF) |
Donor receives charitable deduction when contributions are made to a DAF. No additional deduction allowed when DAF makes transfer to a recipient charity. |
No gain reportable if donor gives appreciated assets to a DAF. |
Account owner can make recommendations of gifts to individual charities, but DAF retains ownership and control over distributions. |
Good if donor does not have individual charities identified yet, but still wants current year tax deduction. Currently no minimum annual distribution required by a DAF account. |
| Real Property |
Current value of appreciated real estate held long-term, less any indebtedness transferred to a 50% charity, up to 30% of AGI with five-year carryover for excess deduction. Transfer to 30% charity is deductible at cost basis only, up to 20% of AGI with five-year carryover. |
NoNo gain reportable by donor. gain reportable by donor. |
Transfer of title of contributed realty is generally made by quitclaim deed. |
Verify charity’s policy on accepting real estate gifts. |
| Closely Held Securities |
Current value of appreciated closely held securities if long-term transferred to a 50% charity, up to 30% AGI with five-year carryover of excess deduction. Transfer to 30% charity deductible at cost basis only, up to 20% of AGI. |
No gain reportable by donor. |
Delivery of securities in negotiable form to charity or agent by transfer of certificate into charity’s name. |
Gifts of closely held securities are often negotiated with anticipation of corporate redemption of charity’s stock. Gifts may also be attractive where sale of corporation is anticipated. Be aware of pre-arranged sales that could cause the gain to be recognized by donor. |
| Life Insurance |
FMV of policy (interpolated terminal reserve value) or donor’s costs basis, whichever is less, subject to 50% of AGI ceiling (30% for private foundations). Policy loans reduce deductions. No deduction for term policies. |
Ordinary income property. Generally, no recognition of gain unless policy is subject to a loan. |
Ownership of policy is transferred to charity by an endorsement by the donor on forms supplied by the insurance company and accompanied by delivery of the insurance policy. |
If the donor continues to pay the policy premium, donor receives a charitable income tax deduction. |
| Qualified Charitable Distributions from IRAs (QCDs) |
No deduction. But qualified donors (IRA owners ages 70½ and older) do not include the distribution (up to $108,000) in income. Also counts toward RMD requirement. |
None |
IRA owner can request trustee or custodian of account to make a QCD to a qualified charity (does not include a DAF or supporting organization). |
Currently, employer sponsored retirement plans are ineligible for QCDs. A CRT or CGA can be a qualified charity, however, the distribution amount is limited to $54,000 and it is a once-in-a-lifetime gift. |
Encourage donors to consider making gifts to your organization this year and advise them to consult with their advisor and their legal or tax advisor to determine which strategy could help maximize the benefits for them, their families, and their chosen charitable causes.
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