Maximizing Your Charitable Impact Under the New Tax Law
There’s never been a better time to give to your favorite nonprofits and support the missions you care deeply about. According to a 2024 WSJ article, “the side effects of a charitable act may include a better mood, lower blood pressure and a longer life.”
It’s common for people to develop a retirement plan or an estate plan, but few apply that same intentionality to their charitable giving. With the new 2025 Tax Law, this is a particularly important moment to think strategically about how and when you donate and give with purpose.
The new tax law impacts charitable giving starting in 2026 and is the perfect prompt to create a charitable giving plan that maximizes your impact and the tax deductibility of your giving under the new law. New restrictions on tax deductibility require advanced planning and a few smart moves outlined below. Then, unleash your generosity!
- If You’re Over 70½, Make Qualified Charitable Distributions (QCDs)
For those age 70½+, donating directly from your IRA to a qualified nonprofit is the single most tax-efficient way to give. These Qualified Charitable Distributions (QCDs):
- Are not taxed as income and are fully tax-exempt!
- Count toward your Required Minimum Distribution (RMD) if you’re 73 or older
- Do not require you to itemize deductions
In 2026, you can donate up to $108,000 this way. A donation from your bank account is not nearly as tax advantageous especially due to new tax deductibility restrictions under the new law.
- If You’re Not Yet 70½, Open a Donor-Advised Fund (DAF)
Too young for QCDs? Opening a Donor-Advised Fund (DAF) is the next best move you can make. A DAF provides the individual with the tax deduction up front in the year the funds go into the account, not when they are distributed to your favorite causes.
Why is this significant? Under the new law, the first 0.5% of your AGI donated to charity is not deductible if you itemize. But by consolidating your giving into one large DAF contribution, that floor only affects you in that one tax year. You can then give from your DAF in future years without any impact from the new rule. Plus, it is quite easy to set up a DAF. To recap, DAFs allow you to:
- Bundle several years of charitable giving into a single tax year to maximize your deduction
- Avoid the 0.5% AGI floor in future years
- Distribute the money to charities over time, whenever you’re ready
- You Still Get Credit for Giving—Even if You Don’t Itemize
Starting in 2026, taxpayers who take the standard deduction can deduct up to $1,000/$2000 (individuals/married-filing jointly) for cash gifts without itemizing. If you have a simpler return, this is a terrific way to support your favorite causes while receiving a tax benefit in return.
- Be Aware of the New 0.5% AGI Deduction Floor
If you itemize your deductions, you won’t be able to deduct the first 0.5% of your AGI given to charity. This is the biggest change that impacts your charitable giving under the new law:
- AGI of $100,000 → first $500 of giving not deductible each year
- AGI of $300,000 → first $1,500 not deductible each year
- AGI of $500,000 → first $2,500 not deductible each year
This creates an incentive to bunch or bundle giving using a DAF to sidestep the annual 0.5% floor.
- If You Live in a High-Tax State Like New York, You May Itemize Again
One of the biggest changes in the new law is the expanded SALT (state and local tax) deduction cap. For New Yorkers with AGI under $500,000, the cap rises to $40,000—up from $10,000 in prior years.
Many households in New York will once again benefit from itemizing their deductions, including charitable gifts. So pay attention to the strategies above when developing your charitable giving plan.
Bottom Line
Talk to your tax advisor as you create your own charitable giving plan to ensure it complies with all tax laws. Your financial advisory firm can assist you in opening a DAF and also show you how easy it is to make a charitable gift through your IRA.
About the Author Sari McConnell CFRE MBA is a strategic fundraising expert whose firm, Donor Boom, helps nonprofits grow their revenue. She works with nonprofit board members, executive directors, and development staff to ignite generosity. She is also the proud daughter of Ellen Makofsky.
Makofsky Valente Law Group is located in Garden City, NY and serves all of the New York area and may be reached at 516 228-6522, by e-mail or by visiting the website.
