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A model of this text first appeared in CNBC’s Inside Wealth e-newsletter with Robert Frank, a weekly information to the high-net-worth investor and client. Enroll to obtain future editions, straight to your inbox.
Attorneys to the rich are advising shoppers to ramp up their charitable giving this yr to benefit from tax benefits that can decline in 2026.
President Donald Trump’s sweeping tax-and-spending invoice included provisions that scale back the tax advantages of charitable giving for prime earners. Because the provisions do not take impact till subsequent yr, advisors to rich donors are recommending they frontload or “bunch” their giving this yr to benefit from tax advantages.
“For those who’re fascinated by making an enormous present, or you already know you might have a charity that you just need to be supportive of over the following couple years, and you bought the money proper now, that is the time make an enormous present,” mentioned Dan Griffith, director of wealth technique at Huntington Non-public Financial institution.
The invoice handicaps top-earning donors in two methods. First, beginning in 2026, donors who itemize will solely be capable of deduct charitable contributions in extra of 0.5% of their adjusted gross earnings (AGI). With this flooring, a family with an AGI of $400,000 that makes $10,000 of charitable donations in 2026 won’t be able to deduct the primary $2,000 in giving, in keeping with Griffith.
Second, taxpayers within the 37% tax bracket can have their deduction diminished by 2/37th of the worth. This ceiling reduces the efficient tax profit from 37% to 35%.
Whereas the ground and ceiling adjustments could seem small, they’ve notable ramifications for prime earners. As an example, think about an entrepreneur who has $10 million in AGI after promoting a enterprise and donates $1 million to decrease his tax legal responsibility. If completed in 2025, the entrepreneur would get a tax discount of $370,000, in keeping with Griffith. Beginning in 2026, the deduction could be diminished by $20,000 due to the ceiling and one other $50,000 as a result of flooring, he mentioned.
These caps are particularly vital to entrepreneurs, who typically make giant donations when their AGI peaks in an effort to decrease their tax burden, in keeping with Kaufman Rossin’s Todd Kesterson, who leads the accounting agency’s non-public shopper enterprise.
“We now have numerous our shoppers as a result of they’d liquidity occasions. I believe in each case, the yr they’d the liquidity occasion, they made charitable contributions,” he mentioned. “However now it is sort of the worst yr to make them due to the primary half p.c isn’t deductible.”
Kesterson anticipates a flurry of donations earlier than the year-end in an effort to keep away from the double whammy.
Prime earners who’re philanthropically minded ought to think about bunching their donations, corresponding to giving $500,000 now somewhat than contributing $100,000 yearly over 5 years, he mentioned.
If they can’t make the donation earlier than the tip of the yr, they’re nonetheless higher off making one giant donation than spreading it out over a number of years and triggering the 0.5% flooring a number of instances, in keeping with Griffith.
Regardless of the tax adjustments, prime earners who’re 73 and older can nonetheless get main tax financial savings by donating their required minimal withdrawal from a retirement account.
“It is in impact, a 100% deduction, as a result of it is lowering their earnings, greenback for greenback,” Kesterson mentioned of certified charitable distributions.
For donors pressed for time with 2026 shortly approaching, Justyn Volesko of Cerity Companions Household Workplace recommends contributing to a donor-advised fund. With a DAF, donors get the upfront deduction and may wait to determine which charities to fund. It is also less complicated and quicker to donate appreciated inventory — which Volesko favors for capital-gains tax financial savings — to a DAF than a charity, he mentioned.
Whereas the GOP invoice encourages giving by lower- and middle-income donors, the rich account for almost all of charitable giving. Analysis agency Altrata estimates that some 500,000 ultra-wealthy people value at the very least $30 million accounted for $207 billion in donations in 2023, greater than a 3rd of the world’s whole giving by people.
Kesterson mentioned the brand new tax regime is extra prone to be a nuisance for rich shoppers than a real impediment to charitable giving. Griffith anticipates some will marvel if donating is value it.
“It is actually not going to incentivize it,” he mentioned.
