With Tax Law Changes Looming, 2025 is a Strategic Year to Give

By Thomas Beirne III, CFP®
Vice President and Senior Wealth Planning Officer
Washington Trust Wealth Management 

As 2025 draws to a close, it’s time to look at how upcoming tax law changes could affect your charitable giving strategy. The good news? You’ll get some new benefits when the calendar flips to 2026. The bad news? Several important deductions, especially for higher-income earners, will shrink. Acting before year’s end could help you preserve valuable deductions and give more effectively to the causes you care about.

The Good News for 2026

Let’s start on a positive note. Several updates will work in your favor beginning in 2026:

• Higher standard deductions. You’ll be able to keep more income tax-free. The standard deduction will rise to $15,750 for single filers and $31,500 for married couples filing jointly (MFJ) in 2026.
• A charitable deduction even if you don’t itemize. You’ll still be able to claim up to $1,000 single or $2,000 MFJ in charitable contributions, even if you take the standard deduction.
• An increased SALT (state and local tax) deduction. The cap on SALT deductions will jump from $10,000 to $40,000 (or $20,000 if married filing separately). This change allows more taxpayers to itemize rather than take the standard deduction.

If your combined deductions—SALT, mortgage interest, and charitable giving—exceed the standard deduction, you’ll be able to itemize and reduce taxable income even further.

The Not-So-Good News

Unfortunately, these changes come with caveats, especially for higher-income households.

• The SALT increase does not apply to taxpayers earning more than $600,000. If your income exceeds that threshold, the benefit begins to phase out starting at $500,000.
• A new 0.5% adjusted gross income (AGI) floor will apply to charitable deductions. That means your total charitable deduction will be reduced by 0.5% of your AGI. For example, if your AGI is $400,000, your deduction is reduced by $2,000. A $50,000 gift effectively becomes a $48,000 deduction.
• Beginning in 2026, itemized deductions will be capped at 35%, meaning that even if you’re in the 37% tax bracket, you’ll only receive a 35% deduction. The 37% bracket will apply to incomes above $640,600 (single) or $768,700 (MFJ) in 2026.

Together, these changes could significantly reduce the value of your charitable deductions if you wait until 2026 to give.

How High-Income Earners Are Affected

If you’re in a higher tax bracket, two major limitations kick in for 2026:

1. The 0.5% AGI floor on charitable deductions.
2. The 35% cap on itemized deductions.

Here’s how it plays out. Suppose you and your spouse file jointly with $1,000,000 of taxable income and plan to make $250,000 in charitable gifts while deducting $10,000 in state and local taxes (SALT) in 2026.

• Step 1: The AGI floor. Your $250,000 charitable gift is reduced by 0.5% of your AGI ($5,000), so you can only deduct $245,000.
• Step 2: The 35% deduction cap. Your total itemized deductions ($245,000 + $10,000 = $255,000) are further reduced because the portion attributed to the 37% bracket is limited to 35%. That trims about $12,503 from your deduction, leaving you with $242,497.
• Step 3: The SALT cap. Since your income exceeds $600,000, your SALT deduction remains capped at $10,000.

The result: your charitable impact remains the same, but your tax benefit is significantly smaller. Your itemized deductions will be reduced from $260,000 to $242,497. 

Why 2025 Is a Strategic Year to Give

Fortunately, you still have time to act. Charitable giving in 2025 can help you lock in today’s more favorable tax rules. 

Bunching with Donor-Advised Funds (DAFs)

By “bunching” charitable contributions—making multiple years’ worth of donations in 2025—you can push your total deductions above the standard deduction threshold and preserve the full 37% deduction that will disappear in 2026. One efficient way to do this is through a donor-advised fund (DAF). You can contribute a large amount this year, receive the immediate tax deduction, and then distribute grants to charities over time. Pairing a DAF contribution with the higher 2025 SALT deduction could make it easier to itemize and reduce your overall tax liability.

Washington Trust Wealth Management Can Help

The upcoming changes may look modest, but for generous givers and high-income taxpayers, the difference between giving in 2025 and waiting until 2026 could mean thousands of dollars in lost deductions. Now is the time to review your charitable giving strategy with your Washington Trust wealth advisor.  Thoughtful planning now ensures your charitable gifts deliver maximum impact—to your causes and your bottom line.