Why 2025 Is the Last Year Top Earners Can Deduct Charity Without a Floor or a 35% Cap

The final weeks of 2025 are the last window in which high-income donors can deduct charitable gifts under the old, more generous rules. As law firm Davis Wright Tremaine laid out in a December 2, 2025 analysis, the One Big Beautiful Bill Act adds a floor and a benefit cap to itemized charitable deductions starting January 1, 2026. For households in the top bracket, the same gift will buy less tax relief next year than it does this month.

What changed

Three provisions matter most for affluent donors:

• A 0.5% floor. Beginning in 2026, only charitable gifts above 0.5% of adjusted gross income are deductible for itemizers. A couple with $1 million of AGI loses the deduction on the first $5,000 they give.
• A cap on the benefit. Donors in the 37% bracket will see the value of the deduction limited to roughly 35%. J.P. Morgan illustrates it simply: a $1,000 gift that saves $370 of tax today would save $350.
• A new deduction for non-itemizers. Taxpayers who take the standard deduction can deduct up to $1,000 of cash gifts to public charities, or $2,000 for joint filers. Gifts to donor-advised funds and supporting organizations do not qualify.

The law also makes permanent the 60%-of-AGI limit for cash gifts to public charities, which preserves room for large single-year gifts.

Who is affected

The cap bites hardest for households whose income reaches the 37% bracket, which for 2026 begins above $768,700 of taxable income for joint filers and $640,600 for single filers, according to IRS inflation figures. The floor affects every itemizer, but its dollar cost scales with income, so seven-figure earners who give modest amounts each year may find a meaningful share of their giving produces no deduction at all.

The after-tax math

Example: a married couple with $1 million of AGI, in the 37% bracket, gives $100,000 in cash. The figures below are simplified and ignore state taxes and other limits.

The gap of roughly $3,750 on one gift grows when giving is spread over years. Davis Wright Tremaine's illustration involves a donor planning to give $50,000 a year for five years. Contributing $250,000 to a donor-advised fund in 2025 secures the full deduction this year while grants to charities can still be recommended annually from 2026 on. Applying the simplified rates above, the 2025 deduction would be worth about $92,500. Giving $50,000 a year from 2026 instead, with $5,000 lost to the floor each year and a 35% benefit, would be worth about $78,750 over the five years, a difference of roughly $13,750.

Moves to discuss with your advisor

Households in this position often consider accelerating several years of intended giving into 2025, frequently through a donor-advised fund so the timing of grants stays flexible. Donors who hold appreciated stock may want to compare giving shares with giving cash, since the AGI limits differ. Families who expect to take the standard deduction in 2026 and later may prefer to keep some cash gifts for those years to use the new $1,000 or $2,000 deduction. It is worth running the numbers with a CPA, because bunching can push other itemized deductions and state tax positions around.

What to watch

Gifts must be completed by December 31, 2025 to count this year, and charities and fund sponsors often set earlier internal deadlines for stock transfers. The IRS has yet to issue detailed guidance on how the 35% limitation interacts with other itemized deductions, and those instructions will shape the precise 2026 figures.

After TAX is an independent publication. Articles are general information, not tax, legal or investment advice. Consult a licensed professional about your situation.