The 2025 One Big Beautiful Bill Act quietly changed the rules for charitable deductions. If you are charitably inclined, an update to the tax code that you should be aware of is a 0.5% Adjusted Gross Income (AGI) floor that now applies to charitable contributions for itemizers.
Previously, charitable donations received a one-to-one deduction, up to a certain percentage of AGI, depending on the type of donation. If you donated $2,500, you could deduct the full $2,500 from your taxable income. Under the new law, the first 0.5% of your AGI generates no deduction at all. For example, if your AGI is $500,000, you won’t be able to deduct the first $2,500 if you itemize.
This creates an opportunity to “bunch” multiple years' worth of donations into a single tax year.
Using the example above, assume your AGI is $500,000 and you plan to donate $2,500 each year to a qualified charitable organization. If you do it in three separate years, you won’t get any tax benefit, as the $2,500 wouldn’t be enough to cover the 0.5% AGI floor. Instead, if you give $7,500 in a single year, only the first $2,500 would fall under the floor, and you’d receive a deduction for the other $5,000.
If you or the organization prefers to spread the gifts over multiple years, you can explore vehicles such as donor-advised funds that allow you to make a lump-sum gift to receive the full deduction in one year while letting you transfer the funds to the organization at a later date.
Changes like this are a reminder of why smart planning and integrating tax strategy into your overall plan can help you avoid costly mistakes. By mapping out multiple years of income and gifting desires, you can preserve your charitable interests while maintaining tax efficiency.
If you’re interested in learning more or want help developing a strategy, don’t hesitate to reach out.