Jeb Bladine: Tax laws impact charitable gifting in America

There are three weeks left in the holiday season — still time to consider how our altruistic feelings and personal finances can merge into year-end charitable giving.

The Fed cut interest rates again, now down 1.75 percent since September 2024, and the Dow Jones soared to record highs. Consumers will benefit and, gradually, home buyers can better afford high housing costs.

But rising prices have made living in America less affordable, which increases the number of people needing services from our amazing array of charitable nonprofit organizations. State and federal tax laws encourage charitable giving, but this year, analysis of those potential tax benefits takes CPA-level advice.

This isn’t that!

However, the review of a few tax law changes might spark interest in 2025 giving and, for some, even in delaying that giving to early 2026. Atop that list of changes, many taxpayers previously taking the high standard deduction will — for 2025 and beyond — be able to itemize deductions because of the “SALT” changes.

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In 2024, the cap was $10,000 for deductions of state and local taxes (SALT); in 2025, that cap quadruples to $40,000, including property taxes and either income or sales taxes. Many people with high SALT now can effectively itemize deductions, allowing them new tax breaks for charitable giving.

There is one catch — nothing’s simple in taxation: A new “floor” for all taxpayers allows charitable deductions only for amounts exceeding 0.5 percent of adjusted gross income. But that doesn’t begin until 2026, so gifting before Dec. 31 this year may be best for small but satisfying donations.

On the flip side, there’s a new tax law encouraging charity from people with low SALT and average incomes, but not until next year. Starting in 2026, taxpayers taking the standard deduction also can deduct cash gifts up to $1,000 in charitable giving by single filers, or $2,000 for married joint returns. So even non-itemizers should keep track of small contributions made through the year.

For high-income earners, the maximum deduction benefit for all itemized deductions drops from 37 percent to 35 percent in 2026. One estimate suggests that those taxpayers, in 2026, will lose 10 percent of tax benefits for contributions identical to what might be given in 2025.

For lower income taxpayers, advisors suggest “bunching” small contributions into January 2026, donating two years’ worth of planned contributions at that time.

There are other tax law changes too confusing even to mention here — more reason to consult CPAs or other tax specialists. It’s all part of an important ethic in America, where charitable giving reportedly reached a record of nearly $600 billion in 2024.

Of course — and consider the fairness of this — low income taxpayers receive the lowest benefit, or no benefit at all, for making charitable contributions because they have low or even zero marginal tax rates.

How about, instead of tiny deduction benefits, we give lower income taxpayers a 25 percent refundable credit for charitable contributions? Now that would give a boost to our annual giving season.

However you view tax laws, this quote from the John Templeton Foundation rings true:

“Generosity is a simple act with an extraordinary impact. From toddlers who instinctively share to adults who find deeper life satisfaction through helping others, generosity runs deep in our biology and evolution. And when we give — whether time, resources, or kindness — we not only strengthen our communities, but we also enhance our own sense of purpose and happiness.”

Jeb Bladine can be reached at jbladine@newsregister.com or 503-687-1223.