Navigating the New Rules of Charitable Giving: Is Uncle Sam Being More Generous?

We talk a lot about building your financial "house"—that sturdy structure designed to shelter you throughout retirement. But as we all know, the rules of the neighborhood occasionally change. In this case, Congress has passed a complicated new law called the One Big Beautiful Bill Act (OBBBA), and it’s doing some remodeling on the tax code that might affect how we protect your hard-earned money.

If you are a regular charitable donor, you might be wondering if you should itemize your deductions or stick with the standard deduction, or if your donations will still save you money on taxes. The short answer? It’s a mix of good news and some new hurdles. Let’s break down what this means for your bottom line.

The Good News: Reinforcing the Walls

First, let’s look at where the government has actually strengthened our defenses.

• The SALT Cap Has Lifted: You might remember the frustration of the $10,000 cap on State and Local Tax (SALT) deductions. For those of us living in areas with higher property taxes, that cap felt like a hole in the roof. Under the new rules for 2025, that cap has quadrupled to $40,000. This creates a huge opportunity for many of you to itemize your deductions again, potentially exceeding the standard deduction when you combine taxes, mortgage interest, and charitable gifts.

• A Sweetener for Standard Filers: If itemizing still doesn’t make sense for your financial blueprint, there is a small win for married couples filing jointly. You can now claim an enhanced standard deduction of $31,500 plus an extra $2,000 deduction for cash charitable contributions. This boosts your total pre-tax deduction to $33,500. It’s a nice little bonus for doing good.

The Cautionary Note: Watch Out for the Floor

However, even the best renovations come with some dust. The new law introduces a "floor" on charitable donations for those who itemize.

Here is the catch: Your charitable deduction will now be reduced by 0.5% of your Adjusted Gross Income (AGI).

Think of it like an entry fee. If your income (AGI) is $500,000 and you want to donate $6,000 to your favorite charity, the IRS is going to ignore the first $2,500 of that gift (which is 0.5% of $500,000). So, while you gave $6,000, you only get a tax deduction for $3,500.

Your "Secret Weapon" in Retirement: The QCD

If you are reading this and you are over age 70½, you have a powerful tool in your shed that bypasses these new headaches: the Qualified Charitable Distribution (QCD).

A QCD allows you to move money directly from your IRA to a qualified charity. Why is this my favorite strategy for retirees?

• It counts toward your Required Minimum Distribution (RMD) if you are of age.

• It lowers your taxable income (AGI) directly, which can help protect you from other costs, like higher Medicare premiums (IRMAA).

• Most importantly, it completely avoids that new "0.5% floor" and the itemizing restrictions.

For 2025, the limit for a QCD is $108,000 per person. It remains one of the most tax-efficient ways to support the causes you love while keeping your financial moat secure.

Planning for the Future

For those with higher net worths concerned about leaving a legacy, the estate tax exemptions have also been extended and increased to $15 million per individual (and $30 million for married couples) starting in 2026.

The landscape is changing, and while some of these new rules add complexity, they also offer opportunities if we plan correctly. Whether it’s using a Donor-Advised Fund to "bunch" your donations into 2025 or utilizing a QCD, we have strategies to make sure your generosity is rewarded.

Let’s make sure we aren’t just building your financial house, but protecting it against the changing weather of tax laws.