If you donate to charity each year, there’s an important tax change coming in 2026 that may reduce how much of your charitable giving is deductible. That’s why many families may be better off accelerating part of their multi-year charitable gifts into 2025, locking in today’s higher deduction while still supporting the same causes on their normal schedule. Pre-funding gifts—often through a Donor-Advised Fund (DAF)—can help you keep your long-term giving intact while improving the tax efficiency of what you already plan to give.
In this article, we outline key charitable deduction changes taking effect in 2026, why 2025 is a unique opportunity year, how donor-advised funds can help you pre-fund your giving, where Qualified Charitable Distributions (QCDs) still fit in, and who might want to act before December 31, 2025.
Key Charitable Deduction Changes Starting January 1, 2026
- New 0.5% AGI “floor” for itemizers. Only the portion of charitable gifts above 0.5% of your AGI will be deductible. (Example: with $300,000 AGI, the first $1,500 of annual giving won’t be deductible.)
- 35% cap on the tax value of itemized deductions for top-bracket filers. If you’re in the 37% bracket, the value of any itemized deduction—including charitable—will be capped at 35% starting in 2026.
- New above-the-line deduction for non-itemizers. Beginning in 2026, non-itemizers can deduct up to $1,000 (single) or $2,000 (married filing jointly) of cash gifts to qualifying charities—small, but helpful. (Not available for gifts to donor-advised funds.)
Why 2025 Is a Unique Year for Charitable Giving
Under current 2025 rules, there’s no 0.5% floor and no 35% cap on itemized charitable deductions. If you expect to give meaningfully in 2026–2027, pre-funding some or all of that giving in 2025 can produce larger deductions, especially if your income will be higher in those years (e.g., an earn-out, RSUs, business sale).
The simplest way to do this is through a Donor-Advised Fund (DAF). With a Donor-Advised Fund, you can contribute in 2025 (and take the deduction now) and then make grants to charities over time.
Example: Pre-Funding 2025 Gifts vs. Waiting Until 2026
Let’s suppose your adjusted gross income is $300,000 and you typically give $25,000 annually.
If given in 2026: Only the amount above 0.5% of AGI is deductible → $25,000 − $1,500 = $23,500 deductible. If you happen to be in the top tax bracket, the benefit is also capped at 35%.
On the other hand, if you pre-fund your contribution in 2025: The full $25,000 can be deductible under today’s rules (subject to the usual AGI percentage limits). Effectively realizing the same total charitable impact, but with better tax efficiency.
Smart Ways to Pre-Fund Charitable Giving (and Keep It Simple)
How to Use a Donor-Advised Fund (DAF) to Pre-Fund Giving
- “Bunch” multiple years of charitable gifts into a DAF in 2025. By contributing this year, you receive the deduction now and grant out in 2026/2027/2028 on your normal schedule.
- Consider using appreciated securities. Donating long-term appreciated stock/funds can avoid capital gains and still secure your 2025 deduction.
- Coordinate with high-income events. If 2026–2027 will be big-income years, the 0.5% floor grows with your AGI, making more of your first dollars non-deductible. Pre-funding in 2025 sidesteps that.
How QCDs Fit In (Age 70½ and Older)
If you’re 70½ or older, Qualified Charitable Distributions (QCDs) from IRAs still let you give directly to charity and exclude the amount from income—so QCDs aren’t affected by the new 0.5% floor or 35% cap (they’re not itemized deductions). Note: QCDs can’t go to donor-advised funds.
Who Should Consider Acting Before December 31, 2025?
- Families who itemize and plan to give annually in 2026+
- Anyone expecting higher AGI in 2026–2027 (business/event-driven income)
- Donors who want to lock in deductions now but gift later via a DAF
Next Steps: Deciding Whether to Pre-Fund Charitable Giving in 2025
- Decide how much of your next 2–3 years of giving you’d like to pre-fund.
- Pick cash vs. appreciated securities (or a mix).
- Set up or add to your Donor-Advised Fund before December 31, 2025.
- Keep your usual grant schedule in 2026 and beyond.
Thoughtful planning now can help you continue supporting the organizations you care about while making the most of today’s rules.
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