Are Wealth Holders Prepared for the Next Era of Charitable Giving?

Charitable giving has long been a cornerstone of wealth management, offering both philanthropic impact and strategic tax benefits. Yet, as recent legislative changes reshaped the landscape, high-net-worth individuals and their advisors must be adaptable—balancing generosity with compliance and forward-thinking planning.

Key Changes on the Horizon

The enactment of the One Big Beautiful Bill Act in July 2025 has brought about several major changes, especially impacting individuals who plan to make charitable donations. Beginning January 1, 2026, the rules governing itemized deductions will change:

• Permanent repeal of most miscellaneous itemized deductions: This simplifies the deduction landscape but also removes certain planning levers.
• Cap on itemized deduction benefits: For individuals in the top income tax bracket (beginning at $768,700 for married filing jointly in 2026), the maximum benefit from itemized deductions will be capped at 35%. This represents a 2% reduction from current levels.
• 0.5% adjusted gross income (AGI) floor: This new provision will apply to charitable itemized deductions. This means only contributions exceeding 0.5% of AGI will be deductible, a calculation reminiscent of other AGI-based limitations.

Planning Opportunities: Timing and Strategy Matter

With these changes looming, 2025 presents a unique window for strategic charitable giving. Advisors should consider:

• Accelerating gifts: Making larger charitable contributions before the new limitations take effect may provide more favorable tax treatment under current law.
• Bunching deductions: For those whose itemized deductions are driven primarily by charitable giving, “bunching” contributions into alternate years could be advantageous.
• Pro forma modeling: Given the complexity of high-net-worth tax situations, running projections can help inform decisions about the timing and structure for gifts.

Compliance: The Devil Is in the Details

Charitable planning is not just about generosity—it’s about precision. The IRS continues to scrutinize large or complex charitable deductions, and compliance missteps can be costly.

• Form 8283 and Qualified Appraisals: Any non-cash gift over relatively modest thresholds requires the filing of Form 8283 and often, a qualified appraisal. Marketable securities are considered cash, but digital assets (such as Bitcoin) are not, and require an appraisal.
• Written Acknowledgment: For gifts over $250, donors must obtain a contemporaneous written acknowledgment from the charity, specifying donation details and whether anything was received in exchange.
• Appraisal Timing: The valuation date must be either the date of transfer or within 60 days prior. The appraisal itself can be completed after the gift, but the valuation date is strictly regulated.
• Complex Assets: Gifts of LLC interests, real estate (especially partial interests), and tangible personal property require careful attention as they may be subject to complex tax implications. The appraisal must reflect the actual interest donated—not simply a pro rata share of a whole asset.

Recent court cases underscore the risks: failure to meet these requirements can result in the loss of the deduction, regardless of intent or the value of the gift.

Trusts and Charitable Giving: A Different Set of Rules

Charitable planning through trusts offers powerful opportunities—but the rules differ markedly from those for individuals. Trust deductions are limited to income distributed to charity, not the in-kind value of asset transfers. The trust document must specifically say that qualifying charities are potential beneficiaries, and AGI limits do not apply to trusts as they do for individuals. When structured correctly, trusts can help reduce tax liability at the trust level—a compelling strategy for philanthropic families.

Next Steps for Wealth Holders and Their Advisors

As we approach year-end and prepare for the new rules, now is the time for proactive conversations:

• Review charitable giving plans for 2025 and 2026.
• Support compliance with documentation and appraisal requirements.
• Consider the implications of the new AGI floor and itemized deduction cap.
• Evaluate trust structures for charitable flexibility.

Charitable planning remains a vital tool for wealth holders—but success depends on both strategic foresight and rigorous compliance. As the regulatory environment evolves, collaboration with experienced advisors is essential, especially when navigating complex assets or unique giving scenarios.