If you are planning to make a significant contribution to charity, this month – December 2025 – may be a particularly good time to do so. Admittedly, charitable donations reach their peak in December every year – not just because of the holiday spirit, but also because taxpayers are seeking to claim deductions for charitable contributions made before the end of the year. Changes in tax law make this month a particularly good time to donate for many taxpayers, but other opportunities for charitable giving will open up starting January 1, 2026.
These changes came from H.R. 1 (2025), originally known as the “One Big Beautiful Bill Act,” enacted on July 4 of this year. Among the many changes made by this law were provisions relating to the deductibility of charitable contributions.
Specifically, for individuals, effective in the year 2026, any charitable contribution which would otherwise be allowed as a deduction shall be allowed only to the extent that the aggregate of such contributions exceeds 0.5% of the taxpayer’s adjusted gross income for the taxable year. So, for example, suppose that a taxpayer has $100,000 of gross income in 2026 and makes $5,000 in charitable contributions. For that taxpayer, 0.5% of their adjusted gross income would be $500. Therefore, the taxpayer would be able to claim as a deduction only $4,500 of the $5,000 charitable contributions they made.
The result of this change is that charitable contributions made in 2025 will provide a greater tax benefit to a taxpayer than charitable contributions made in 2026.
In addition, starting in 2026, high-income taxpayers will benefit less from their itemized deductions than they otherwise would have. Currently, in effect, every dollar more in itemized deductions means (for example) 22 cents more in tax savings for a taxpayer in the 22% bracket, 32 cents more in tax savings for a taxpayer in the 32% bracket, up to 37 cents more in tax savings for a taxpayer in the 37% bracket. However, starting in 2026, taxpayers in the 37% bracket will have their tax savings capped at 35 cents on the dollar for itemized deductions. (The 37% tax bracket for 2026 will be for single taxpayers with taxable income of at least $640,601 and married couples filing jointly with taxable income of at least $768,701.)
For those high-income taxpayers, this change will apply to all itemized deductions – not only charitable contributions, but also medical and dental expenses, state and local taxes, and mortgage interest. Hence, people in the highest tax bracket would benefit from making charitable contributions (and/or making payments for other itemizable deductions) before the end of 2025 rather than waiting until 2026.
On the other hand, most taxpayers don’t have enough deductions to claim to warrant itemizing and thus claim the standard deduction. In 2025, the standard deduction is $15,750 for single taxpayers, or $31,500 for married taxpayers filing jointly; those amounts will increase in 2026 to $16,100 for single taxpayers and $32,200 for married taxpayers filing jointly. And for taxpayers who claim the standard deduction, a new opportunity for charitable giving will open up in 2026.
Starting in 2026, taxpayers who don’t itemize deductions will be allowed to claim charitable contributions up to $1,000 as a deduction if they are single, or up to $2,000 for married taxpayers filing jointly. To qualify as a deductible contribution under this provision, a donation must be made in cash (rather than in property). In addition, the donation cannot be made to a donor-advised fund, nor to an organization which is organized and operated for the benefit of, to perform the functions of, or to carry out the purposes of one or more other public charities.
Furthermore, a new tax benefit will begin in 2026 for a specific type of charitable contribution. In summary, this benefit is intended to support school choice by encouraging the establishment and funding of organizations which provide scholarships to private schools for students from elementary school through high school.
A tax credit – rather than a deduction – will be allowed for donations to scholarship-granting organizations serving elementary and secondary school students. This tax credit will apply to donations up to $1,700 per year. And because this will be a tax credit rather than a deduction, donors will see their taxes reduced by $1 for every dollar they donate. (Double benefits are not allowed; a taxpayer can’t claim a charitable deduction for contributions that they also claim for the tax credit. Nor can a taxpayer claim this credit to the extent that the taxpayer receives a state tax credit for the same contribution.)
There are a number of requirements that must be satisfied for contributors to a scholarship-granting organization to receive the tax credit:
The organization must be a tax-exempt public charity (not a private foundation).
The organization must operate within a particular state or the District of Columbia.
The organization must use the contribution solely to fund scholarships for eligible students in its own state. An eligible student must be a member of a household whose income is no more than 300% of the area’s median gross income and must be eligible to enroll in a public elementary or secondary school.
The organization must provide scholarships to 10 or more students who do not all attend the same school.
The organization must spend at least 90% of its income on scholarships for eligible students.
The organization cannot provide scholarships for any expenses other than qualified elementary or secondary education expenses.
If the organization receives contributions for other purposes, it must keep the contributions to fund scholarships for eligible students in a separate account to prevent commingling of funds.
The organization cannot earmark or set aside contributions for scholarships on behalf of any particular student.
The organization must prioritize scholarships to eligible students who were awarded scholarships for the previous school year, followed by eligible students who have a sibling who was awarded a scholarship from the organization.
The organization must verify the annual household income and family size of applicants to ensure that recipient students meet the requirement of being members of a household whose income is no more than 300% of the area’s median gross income and limit scholarships to students who meet that criterion.
The organization cannot give scholarships to “disqualified persons,” such as children or grandchildren of its directors or officers.
The state where the organization operates must voluntarily elect to participate by providing the Treasury Department with a list of the scholarship-granting organizations that are located in the State.
The last of these criteria – requiring that a state voluntarily participate before a scholarship-granting organization can receive donations eligible for the tax credit – will allow each state to decide whether or not to encourage school choice by providing the list of organizations within the state. That said, even if a state chooses not to participate, taxpayers who live in that state will still have the opportunity to use the tax credit by donating to scholarship-granting organizations in other states.
If you’re interested in further advice about how to benefit from these changes in tax law, please feel free to contact Marc Lane in confidence at mlane@marcjlane.com or 312/800-372-1040.
Joshua S. Kreitzer is a Senior Associate Attorney with The Law Offices of Marc J. Lane, P.C.