Trump’s 2025 tax plan changes the rules for donating to charity

In 2025, a new tax megabill championed by former President Donald Trump is reshaping the financial calculus behind charitable giving in America. While public attention has focused on changes to corporate rates and middle-income relief, one of the bill’s quieter shifts directly affects how individuals deduct charitable donations.

The bill eliminates the pandemic-era deduction for non-itemizers, tightens substantiation rules on in-kind and donor-advised gifts, and raises the giving cap for high-income earners. What looks like a technical rewrite may reshape not just tax filings, but nonprofit giving behavior and middle-class incentives. So, if you're among the millions of Americans who donate to charity—either casually or as part of your financial plan—here’s how the new rules affect your contributions, and what strategies can help you stay aligned.

The 2025 tax overhaul revises several core parts of the charitable contribution deduction rules:

• The above-the-line charitable deduction—introduced in 2020 as a temporary relief—has been removed. This means that unless you itemize your tax return, your charitable gifts will no longer reduce your taxable income.
• The AGI (Adjusted Gross Income) cap for cash donations has increased from 60% to 70% for itemizing individuals.
• Donor-Advised Funds (DAFs) now face stricter timelines and disclosure rules. To qualify for a deduction in the year of contribution, donors must disburse funds within 12 months unless a distribution plan is filed with the IRS.
• Non-cash contributions, especially appreciated assets over $5,000, require certified third-party appraisals with stricter valuation standards and filing deadlines.

In short, while itemizers with high incomes gain more room to deduct large donations, the broader public loses the simple, no-itemization giving incentive that briefly democratized charitable tax benefits during the COVID-19 years.

Who’s Affected:

1. Non-Itemizers Lose Out
For millions of taxpayers who use the standard deduction—now $14,000 for individuals and $28,000 for joint filers under the revised 2025 code—the removal of the universal charitable deduction means giving no longer offers a direct tax benefit. For households on tighter budgets, this changes the reward calculus.

2. High-Income Donors Gain Scope
Conversely, itemizing households, especially those with income spikes from bonuses, capital gains, or business income, benefit from the expanded 70% AGI deduction cap. This encourages “bunched” or one-off giving years designed to reduce tax exposure strategically.

3. DAF Users Face Pressure
Donors using DAFs must now distribute more quickly or face denial of deduction claims. While DAFs have long enabled flexible, delayed giving, the IRS now wants to tie deductions more closely to actual charitable benefit within a set timeframe.

4. Asset-Based Givers Must Recalculate
Non-cash donations like stocks or real estate—once a popular way to avoid capital gains while securing deductions—now require professional appraisals, potentially adding cost and friction. Casual givers with appreciated assets may think twice.

Let’s walk through two scenarios.

Scenario A: The Non-Itemizing Middle-Income Giver
Before: You donated $300 annually to your church and local food bank. In 2023, you claimed a $300 above-the-line deduction even with the standard deduction.

Now: That same $300 gets no tax recognition unless your total deductions exceed the new standard limit. Your tax return remains unchanged—your generosity is no longer financially recognized.

Scenario B: The Itemizing High-Income Professional
Before: Your AGI was $500,000, and you could deduct up to $300,000 in cash donations (60%).

Now: You can deduct up to $350,000 (70%), potentially lowering your taxable income by $50,000 more than before. If structured properly—perhaps via a timed DAF distribution—you could bring your effective tax rate down significantly. The gap here isn’t just numerical. It reflects a systemic change: from broadly encouraging giving, to nudging larger, more intentional contributions from higher-income segments.

Planning Techniques to Consider

In response to these changes, financial planners are now revisiting charitable strategies for clients. Three tactics are rising in relevance:

1. Donation Bunching
By consolidating multiple years of donations into a single tax year, you can exceed the standard deduction threshold and qualify to itemize. For example, instead of giving $5,000 annually, you might give $15,000 every three years and itemize that year.

2. Strategic Use of DAFs (Despite New Limits)
DAFs still offer front-loaded deduction benefits even as reporting rules tighten. By contributing in a high-income year but disbursing grants over time (within the IRS deadlines), donors can maximize tax impact without rushing nonprofit selection.

3. Asset Appraisal Readiness
If you’re donating appreciated stock or real estate, prepare for stricter appraisal rules. For gifts over $5,000, a professional valuation and IRS Form 8283 with attached appraisal must be filed within the same tax year to claim the deduction.

The US has toggled between inclusive and exclusive giving policies before. During the COVID-19 crisis, the CARES Act allowed even non-itemizers to deduct small donations—a move seen as both symbolic and functional. It brought more everyday donors into the tax-incentivized giving space.

The new rules, by contrast, mark a return to pre-2018 norms—but with tighter compliance and a higher deduction ceiling for those with means. It shifts charitable behavior away from “micro-donations with macro participation” toward “structured philanthropy with strategic intent.” In effect, the rules may reduce the total number of donors while increasing the dollar volume of large donations. This could reshape nonprofit fundraising strategies, especially for small and mid-sized organizations that rely on many smaller gifts.

Under the new framework, the US now diverges from several peer systems:

• United Kingdom: Uses the Gift Aid system, where charities reclaim 25% of a donor’s contribution from HMRC, regardless of the donor’s filing status.
• Singapore: Offers a 250% deduction on eligible donations—but only for tax residents who itemize, making it more exclusive but generous.
• Canada: Offers a two-tiered federal tax credit system (15% on the first $200 and 29% above) for qualifying donations, accessible even to lower-income filers.

In removing the standard deduction benefit, the US now places charitable incentive squarely back in the hands of those with surplus income and filing complexity.

These changes don’t necessarily require a donation halt—but they do demand better planning. As you evaluate your year-end giving, here are key questions to consider:

• Do I usually itemize—and if not, could donation bunching help me reach the threshold?
• Are my giving habits aligned with income timing (e.g., bonuses, inheritance, asset sales)?
• Am I still using a DAF built for flexibility when the IRS now wants more immediacy?
• Do I understand the new substantiation rules—and do my gifts qualify without error?

Giving, once a straightforward moral or emotional act, is now a tax-technical one too.

What appears to be a routine tax revision is, in reality, a reengineering of how the US encourages charitable behavior. The 2025 Trump megabill makes giving more attractive for the structurally wealthy—and more invisible for the everyday donor. This may change how Americans think about their philanthropy. Charitable giving will always carry emotional, ethical, and communal value. But under the new law, it also demands planning, documentation, and—perhaps most crucially—income alignment. For those who give with heart, now’s the time to give with structure too.

And the broader impact may ripple beyond individual donors. Nonprofits—especially community-based organizations—may face a shrinking middle donor tier, where $100 and $300 gifts once accounted for meaningful grassroots support. In their place, a more institutional model of philanthropy is likely to rise: large, time-bound gifts, disbursed through fiscal vehicles like DAFs, often tied to donor intent and legal conditions.

This doesn’t make giving less noble. But it does make it more negotiated.

For individuals navigating this new system, the challenge is less about generosity and more about clarity. Understanding how, when, and why your gifts still create both social and financial outcomes is now essential. Because in this new architecture of giving, the impulse to help is still welcome—but only intentional generosity gets counted.