Charitable Deduction Limits: What Donors and Advisors Should Know Before Filing

Since our guidance last summer following passage of the One Big Beautiful Bill Act, I have had many conversations with donors, advisors, and family offices about what has actually changed and what it means for charitable planning.

Some donors are concerned that charitable deductions have been reduced. Others are unsure whether itemizing still makes sense. Advisors are focused on documentation and how the new AGI-related thresholds will apply during the current tax filing season.

The fundamentals of strategic giving remain intact, even though the rules have changed. With thoughtful planning, charitable contributions can still play a meaningful role in both tax efficiency and long-term philanthropic goals. This update is intended to provide clarity.

What Changed in 2025 and Why It Matters

Several provisions affecting charitable deductions are now in effect for the 2025 tax year. The three most important considerations are:

• A higher standard deduction threshold
• New limitations and documentation requirements under the OBBB legislation
• The State and Local Tax (SALT) deduction cap has increased to $40,000

The practical result is there may be changes in which taxpayers choose to itemize and which that do not. For those who do itemize, higher-income households must pay closer attention to new AGI-based thresholds and deduction caps.

Charitable income tax benefits also vary by state. Donors should coordinate federal and state planning with their tax advisor before finalizing significant gifts.

The 2025 Standard Deduction

You can claim a federal charitable deduction only if you itemize on Schedule A. For 2025, the standard deduction amounts are:

Filing Status, Standard Deduction (2025)

• Single or Married Filing Separately, $15,750
• Married Filing Jointly or Qualifying Surviving Spouse, $31,500
• Head of Household, $23,625

In practical terms, itemizing tends to make sense when:

• You give at higher levels, particularly with appreciated assets
• You carry meaningful mortgage interest and state or local taxes within federal limits
• You intentionally bunch multiple years of charitable gifts into a single tax year

For donors near the standard deduction threshold, timing matters. We are seeing more families coordinate multi-year philanthropic commitments through donor-advised funds to manage this hurdle more effectively. A donor can make a larger contribution in one year to capture the tax deduction, while recommending grants to charities gradually over time. This allows families to separate the tax decision from the pace of their charitable giving.

The OBBB Law and Its Impact on Charitable Deductions

The “One Big Beautiful Bill Act” introduced several changes affecting higher-income donors and complex gifts. As we approach tax filing season, three provisions deserve particular attention.

The 0.5 Percent AGI Floor

Under the updated rules, a charitable deduction is allowed only to the extent that total annual giving exceeds 0.5 percent of adjusted gross income.

For many donors, this threshold will not materially alter giving strategy. For others, particularly those making smaller annual gifts relative to income, it may influence whether itemizing produces a benefit. In these cases, some donors may choose to concentrate multiple years of charitable contributions into a single tax year in order to exceed the threshold.

The 35 Percent Cap on Itemized Deductions

The OBBB legislation introduced a new cap limiting the total value of itemized deductions to 35 percent for higher-income taxpayers. Charitable contributions are included within this limitation. For every dollar of qualified itemized deductions, donors in the highest tax bracket (37 percent) will receive a maximum of $0.35 in tax savings, a 2% reduction from previous tax regulations.

This does not eliminate the charitable deduction. It does mean that high-income households should model the impact before finalizing large gifts, particularly in years with significant liquidity events.

Changes to the SALT Deduction

New legislation also revised the federal deduction for state and local taxes (SALT). Under prior law, taxpayers could deduct no more than $10,000 in combined state and local income, property, and sales taxes when itemizing.

Beginning in tax year 2025, the SALT deduction cap has increased to $40,000 for many taxpayers, with the higher threshold scheduled to remain in place through 2029 before reverting to the previous $10,000 limit unless Congress extends the provision.

For taxpayers in higher-tax states, this change may significantly alter the calculus around itemizing deductions. Households that previously fell below the standard deduction because their SALT deduction was limited to $10,000 may now find that state and local taxes alone push them closer to or above the itemization threshold.

When taxpayers begin itemizing again, charitable contributions once more become a meaningful part of the overall deduction strategy.

In practice, advisors in states such as New York, New Jersey, and California are already modeling scenarios where the higher SALT deduction, combined with mortgage interest and charitable giving, makes itemizing more advantageous for certain households than it has been in recent years.

IRS Ground Rules: What Counts and How Much

Before refining strategy, it is important to confirm that a gift qualifies and understand which AGI limitation applies.

Two questions guide most planning discussions.

Is the Recipient a Qualified Charity?

To be deductible, gifts must go to an IRS-qualified 501(c)(3) organization, either a public charity or private foundation. Donors can confirm eligibility using the IRS Tax Exempt Organization Search tool.

Donor-advised funds sponsored by public charities remain eligible recipients.

What AGI Percentage Limit Applies?

Charitable deductions are subject to AGI-based limits depending on the asset type and recipient.

For 2025:

• Cash contributions to public charities generally qualify for a deduction up to 60 percent of AGI.
• Long-term appreciated assets, such as publicly traded stock, donated to public charities are generally deductible at fair market value up to 30 percent of AGI.
• Certain non-publicly traded assets or real estate are often subject to the 30 percent limit and require a qualified appraisal.
• Unused charitable deductions may be carried forward for up to five additional years, subject to applicable limits in those years.

For donors giving at scale, asset selection often drives the outcome more than the headline deduction percentage. Coordinating income levels, liquidity events, and asset type remains central to maximizing both deduction value and tax efficiency.

Frequently Asked Questions

Are charitable donations deductible if I do not itemize?

Generally, no. Most federal charitable deductions require itemization. Donors close to the standard deduction threshold should evaluate whether bunching contributions into one year could produce a benefit.

However, non-itemizers can claim an “above-the-line” deduction for cash charitable contributions, capped at $1,000 for single filers and $2,000 for married couples filing jointly. This deduction allows taxpayers taking the standard deduction to also deduct qualifying charitable gifts.

If I donate $10,000, how much can I deduct?

The deduction depends on your itemization status, the type of asset donated, and your AGI. Example:

• You donate $10,000 in cash to a donor-advised fund.
• You itemize deductions, and your total itemized deductions (including this gift) exceed the standard deduction.
• If your AGI allows it, the full $10,000 is deductible in 2025. (Note that this will change for the 2026 tax year, where the 0.5% floor applies.)

Can I deduct volunteer time?

You cannot deduct the value of your time. Certain unreimbursed out-of-pocket expenses incurred while volunteering may be deductible with proper documentation.

Maximizing Charitable Deductions Through Strategic Use of a Donor-Advised Fund (DAF)

Many donors may wish to maintain consistency in their giving while navigating higher thresholds and new deduction caps. The higher SALT deduction cap may also change how some donors approach charitable timing. For taxpayers who now expect to itemize again (particularly in higher-tax states), charitable contributions may once again provide incremental tax efficiency within a broader deduction strategy.

In these cases, DAFs can help donors coordinate larger contributions in years when itemization is beneficial, while maintaining consistent support for charities over time.

DAFs continue to provide structural advantages:

• An immediate charitable deduction at the time of contribution
• The ability to grant funds over time
• Acceptance of appreciated and complex assets
• Administrative efficiency and consolidated documentation

For donors who expect income variability, liquidity events, or multi-year philanthropic commitments, a DAF can serve as a planning anchor. Contributions can be timed strategically, while grantmaking proceeds thoughtfully over time.

As NPT continues to refine how we support donors and advisors, our focus remains on clarity, execution, and partnership. Charitable planning should integrate seamlessly with broader financial and estate strategy. That coordination becomes especially important in years when tax rules shift.

For more, our team at National Philanthropic Trust is available to continue the conversation.

Contact NPT at (888) 878-7900 or npt@nptrust.org.