2025 Year-End Tax Alert

As a valued member of KidWorks’ community, we want to bring your attention to urgent changes in the tax landscape that may significantly affect your year-end charitable giving decisions.

The recent passage of the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, is ushering in a new era of charitable contribution planning. While many key provisions are not effective until January 1, 2026, this makes the few remaining weeks of 2025 a critical window for maximizing your tax benefits.

Key Changes Affecting Your Deductions (Effective 2026)

The OBBBA introduces new limitations that will generally reduce the tax benefit of charitable contributions for itemizers starting next year:

• 0.5% AGI Floor for Itemizers: Taxpayers who itemize will only be able to deduct contributions that exceed 0.5% of their Adjusted Gross Income (AGI). This means the initial portion of your annual giving will no longer be deductible.
• Cap on Deduction Value: The maximum tax benefit derived from a charitable deduction will be limited to the 35% tax rate, even for those currently in the 37% bracket

On a positive note, the law also introduces a Universal Deduction for non-itemizers, allowing those taxpayers to deduct up to $1,000 (single) or $2,000 (Married Filing Jointly) for cash gifts made to qualified operating charities (excluding Donor-Advised Funds). Additionally, the 60% AGI limit for cash donations to public charities has been made permanent.

Strategic 2025 Year-End Planning Opportunities

To maximize your current benefits before the new limitations take effect, we strongly encourage you to consider “accelerating” your planned donations into the 2025 calendar year:

• Front-Load Contributions: Consider combining your planned 2026 donations into your 2025 giving to lock in the full deduction value and maximize the benefit of the current tax rules (including the 37% deduction value). This strategy can also help you clear the new 0.5% AGI floor that begins in 2026.
• Utilize Donor-Advised Funds (DAFs): A contribution to your DAF in 2025 allows you to secure the immediate tax deduction under the current, more favorable rules, while allowing you to distribute grants to charities like Shattuck-St. Mary’s over time.
• Donate Appreciated Securities: Donating appreciated stock or other non-cash assets remains an excellent way to receive a deduction for the fair market value while avoiding capital gains tax

Important Disclaimer

This information is for general awareness only and is based on our understanding of the new tax legislation. KidWorks is not qualified to provide tax or legal advice. We strongly urge you to consult with your personal tax advisor, attorney, or financial professional to determine how these specific law changes impact your individual financial situation and charitable strategy.