Charitable Giving Benefits Under New Legislation

On July 4, 2025, Congress passed the awkwardly named “One Big, Beautiful Bill Act.” For donors, the changes are straightforward: non-itemizers get a meaningful above-the-line deduction, itemizers face a small floor before charitable deductions begin, and the 60% of AGI limit for cash gifts to public charities is now permanent. That mix creates planning opportunities—and a few traps—as we head toward December 31.

What Changed (and Why It Matters)
For non-itemizers, the law restores an above-the-line charitable deduction and makes it useful: up to $1,000 for single filers and $2,000 for joint filers, limited to cash gifts to qualifying charities. You can claim this even if you take the standard deduction.

For itemizers, Congress added a 0.5% of AGI floor. Think of it as a haircut: your first 0.5% of AGI in charitable gifts doesn’t count; amounts above that are deductible (subject to the usual limits). Separately, the rule allowing cash gifts to public charities up to 60% of AGI has been made permanent. If you’re considering substantial year-end giving, you can plan around that stable ceiling.

How to Think About Your Own Gifts
Start with two questions: (1) Will I itemize anyway? (2) How much will I give in cash this year? If you won’t itemize and you plan any cash gifts, the above-the-line deduction is simple: give before December 31 and claim up to $1,000/$2,000.

If you’re on the cusp of itemizing, run the numbers. The new floor means some donors will do better taking the standard deduction and using the above-the-line deduction, while others will still benefit from itemizing — but only if they bunch gifts to clear the floor by a healthy margin.

Quick Illustrations

• Single, $120,000 AGI → 0.5% floor = $600. A $1,500 cash gift yields a $900 deduction if you itemize. If you won’t itemize, the above-the-line could allow up to $1,000.
• Joint, $400,000 AGI → 0.5% floor = $2,000. A $10,000 cash gift still generates a large deduction; the floor barely registers, and you remain well within the now-permanent 60% of AGI limit.

Practical Moves Before December 31

• Bunch strategically. If you toggle between itemizing and the standard deduction, consider bunching two years of gifts into one calendar year to clear the floor decisively. A donor-advised fund lets you contribute once, deduct now, and grant over time.
• Use cash intentionally. The above-the-line benefit is cash-only. Non-cash gifts (like appreciated securities) still make tax sense for itemizers—especially to avoid capital gains—but they don’t count toward the $1,000/$2,000 above-the-line limit.
• Mind the timing. For 2025 deductions, the gift must be completed by December 31 (credit card charged; check mailed). Keep acknowledgments.
• Remember the ceiling. If you’re making substantial cash gifts, you can now plan with confidence around the permanent 60% of AGI limit, with excess generally eligible for carryforward.

FAQs I’m Already Hearing

• Do donor-advised fund contributions qualify for the above-the-line? Yes, if your contribution is a cash gift to a qualifying sponsoring charity. Grants the DAF later makes don’t affect your deduction year.
• What about employer matches? Helpful for your favorite charity, but the match is your employer’s deduction, not yours.
• What if I exceed the limits? Excess charitable contributions generally carry forward for up to five years.

This post is for information only and isn’t tax or legal advice. Talk to your advisor about your specific situation.

Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on federal tax and fundraising regulations nationwide. Ellis also advises donors concerning major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.