Sharp-eyed readers of our newsletters may recall that I wrote an article espousing the virtues of charitable giving about a year ago.  Much has changed since then, not the least of which is the effect that the One Big Beautiful Bill Act (OBBBA) will have on charitable activity.  In my view, the need for charitable giving has only intensified, with shifting tax incentives and cuts to many government programs causing many not-for-profits to struggle to survive in a volatile environment.  

There is still much that you can do as an individual donor.  I contend that donating to charity is not only a boon to the recipient but also a major mood-booster.  The knowledge that you’re giving back to your community and donating to causes that resonate with you is hugely empowering and, in turn, can make you feel happier and more fulfilled.  If you’re so inclined, there are few better times than the fourth quarter of the year to exercise your generosity muscle.  

Here is a brief overview of a few of the most common charitable vehicles.

Annual gifts and tax exclusions

The easiest way to donate is by using the annual gift tax exclusion.  Gifts below the annual exclusion (i.e., $19,000 for both 2025 and 2026) bear no tax consequence to either donor or recipient.  Simply write a check up to the prescribed amount and you’re done – no tax filing or reporting required.  Married couples can double their charitable impact, as the limit for any one recipient is $19,000 for each spouse for a total of $38,000.  As an alternative to cash, donations of appreciated securities can also help the donor avoid capital gains tax.  I often see this technique used to fund 529 plans for children or grandchildren or to help loved ones in need.  

The OBBBA has changed the landscape for those who are charitably inclined. Starting in 2026, taxpayers who take the standard deduction can claim a limited charitable deduction of up to $1,000 for single filers and $2,000 for joint filers. This new incentive aims to encourage broader giving among the vast majority of Americans who do not itemize their taxes.  On the flip side, also starting in 2026, itemizing taxpayers can only deduct the portion of their charitable contributions that exceeds 0.5% of their AGI. For a taxpayer with an AGI of $100,000, the first $500 in donations is not deductible, which may encourage donors to make large, planned contributions in 2025 to avoid the new itemized deduction limits. 

The OBBBA also:

• Extends the higher cap on cash contributions to public charities, allowing a deduction of up to 60% of adjusted gross income (AGI) for itemizing taxpayers.  

• Beginning in 2026, caps the value of all itemized deductions, including charitable donations, at a 35% tax benefit for individuals in the top tax bracket.

• Permanently increases the federal estate and gift tax exemption to $15 million per person ($30 million for married couples), reducing the tax incentive for wealthy individuals to make charitable gifts in their wills. 

Qualified Charitable Distributions (QCDs)

QCDs allow investors 70 ½ and older to donate pretax funds directly from their traditional IRAs to charities and owe no income tax on those withdrawals.  The QCD limit is $110,000 for 2025 and $115,000 (estimated) for 2026 for each IRA owner and can encompass many separate donations.  Further, QCDs can be subtracted from Required Minimum Distribution (RMDs), thereby lowering taxable income, the 3.8% surtax on net investment income, and the Medicare IRMAA charge.  However, doing so can be somewhat logistically complicated, as QCD donors must have their IRA sponsor cut checks to the charities or write checks directly from the IRA, and they must ensure that the charities properly acknowledge the gifts and receive the checks and cash them before year-end.  

Donor-Advised Funds (DAFs)

Unlike QCDs, DAFs have no age restriction and can be appealing to those who are uncertain about where they want their funds to go.  With a DAF, the donor gives money or assets to a dedicated account at an umbrella charity and gets an immediate tax deduction.  Donors can then postpone further giving decisions until they’re ready and the funds are invested and grow tax-free until disbursement.  Logistically, DAFs are less complicated that QCDs, as the sponsors handle any required paperwork.  Caution must be taken, however, to fully understand the effects of DAF contributions and their interplay with the standard deduction and AGI.    

This can be a useful tool for bunching contributions into a single year to exceed the new itemized deduction floor or to offset capital gains generated by investment portfolio repositioning.  

Conclusion

Nonprofits face a challenging and uncertain future under the OBBBA. While the universal charitable deduction provides a new avenue for fundraising from smaller donors, this positive effect may be outweighed by the reduced tax incentives for high-income and corporate donors, who historically contribute a significant portion of charitable funds. If you’re so inclined and financially able to do so, there is no better time than now to donate to a cause that you believe in.

As usual there are caveats surrounding each donor and their individual circumstances.  Even though these vehicles are now quite common and standardized, be sure to consult with your financial advisor and tax accountant before proceeding.