Charitable Giving and Taxes at Year-End: What’s Changed Under the One Big Beautiful Bill (OBBBA)

As the holidays approach and the year winds down, many taxpayers start thinking about giving back — both to their communities and their bottom line.

Charitable donations remain one of the most meaningful ways to make a difference while potentially reducing your taxable income. But with the One Big Beautiful Bill (OBBBA) changing several deduction rules, it’s more important than ever to understand how your generosity translates into tax benefits.

Why Charitable Giving Still Matters

When you give to a qualified charitable organization, those donations can lower your taxable income if you itemize deductions on your return. That means you’re not just supporting causes close to your heart — you’re also reducing the amount of income that the IRS can tax.

However, the landscape has shifted slightly under OBBBA. While the standard deduction increased (making it harder for some taxpayers to benefit from itemizing), OBBBA expanded limits on cash donation deductions for certain qualified charities — up to 65% of adjusted gross income (AGI) for 2025, compared to the previous 60% cap. This small adjustment can mean big savings for larger givers.

Key Things to Know Before You Donate

1. Choose Qualified Organizations

To be deductible, your donation must go to an IRS-recognized 501(c)(3) organization — not individuals, crowdfunding campaigns, or political groups. You can confirm eligibility through the IRS Exempt Organizations Search Tool.

2. Keep the Right Documentation

Even small donations require records. For gifts under $250, a simple receipt or bank statement is enough. Anything over $250 must include a written acknowledgment from the charity with details of the contribution and whether any goods or services were received in exchange.

3. Don’t Overlook Non-Cash Contributions

You can donate more than money. Gently used clothing, vehicles, art, or appreciated stocks can all qualify for a deduction — but fair market value rules apply. If you donate an item worth more than $5,000, a formal appraisal is required.

4. Timing Is Everything

Donations must be made by December 31, 2025, to count toward your 2025 tax return. If mailing a check, the postmark date is what determines the deduction year.

Year-End Giving Strategies That Still Work

Bundle Donations to Maximize Deductions

Because the standard deduction remains high under OBBBA, fewer taxpayers itemize each year. But by “bunching” multiple years of charitable donations into a single year, you may exceed the standard deduction and unlock itemized benefits.

Donate Appreciated Assets Instead of Cash

Stocks or mutual funds that have increased in value can be donated directly to a charity. You’ll deduct the full fair market value and avoid paying capital gains taxes — a win-win strategy.

Leverage Qualified Charitable Distributions (QCDs)

If you’re age 70½ or older, you can transfer up to $105,000 from your IRA directly to a charity. This counts toward your Required Minimum Distribution (RMD) but doesn’t increase your taxable income. Under OBBBA, the annual QCD limit now adjusts for inflation — a small but valuable update for retirees.

Consider a Donor-Advised Fund (DAF)

Donor-advised funds let you make a large, immediate contribution (and claim the deduction this year) while distributing the funds to charities gradually over time. This is a great option for those who want to manage their charitable impact strategically.

Avoid These Common Pitfalls

• Missing the December 31 deadline — late donations count toward next year’s taxes.

• Donating to unqualified entities — generosity doesn’t equal deductibility.

• Guessing non-cash values — overestimations can trigger IRS scrutiny.

A Smart Way to Give Back

Charitable giving is more than an act of kindness — it’s a powerful tax strategy when done correctly. With the new OBBBA rules in effect, it’s wise to review your giving plan before the year ends to ensure every dollar counts for both your causes and your return.

If you’re unsure how these changes impact your situation, or whether you should itemize this year, the team at Rae’s Accounting can help you evaluate your best strategy.

Thoughtful planning now ensures that your generosity goes even further — for your community, your finances, and your peace of mind.