'Tis the Season for Giving

The holidays are the time for giving. Americans donated $592.5 billion in 2024 which was an increase of 6.3% over the prior year 1 . Even though that is a staggering stat, what’s even more impressive is that nonprofits generally raise between 24% and 47% of their total annual revenue during November and December 2 . Not only does charitable giving make us feel like we are making a difference in someone’s life, but it can also be a great tax deduction. Below are rules and limits for individual taxpayers.

Rules for Tax-Related Giving

To qualify for a charitable contribution, you must donate to a qualified tax-exempt organization and itemize your deductions on Schedule A of Form 1040. Such qualified organizations are typically U.S.-based 501(c)(3) organizations. You may deduct the

amount of your contribution in excess of any personal benefit (i.e. goods and services you received in return). You will often see organizations calculate the amount of your deductible donation net of any benefit. Donations are deducted in the year paid. So, if you make your donation on December 31st, 2025, such deductions should be reported on your 2025 tax return, not 2026.

Limits and Documentation

Donations may come in the form of cash or non-cash property contributions. The deduction for cash contributions is limited to 60% of adjusted gross income (AGI). So, if you have AGI of $450,000 married filing jointly, you may donate cash and take a

deduction up to $270,000. Non-cash property contributions (including appreciated stock) are limited to 30% of AGI. You must have held the property for more than one year to qualify. Donations made in excess of these limits may be carried forward on your return to be used in subsequent tax years. Cash donations under $250 need only a bank record or written receipt from the charity. Cash or property donations greater than $250 need a contemporaneous written acknowledgement from the charity. Such acknowledgement much include the amount of the donation and a description and/or

value of any goods or services received in return. Non-cash donations over $500 need a separate Form 8283 completed with Form 1040. Non-cash donations of over $5,000, not including publicly traded securities, require qualified appraisal.

How does OBBBA Change Charitable Giving?

If you recall, the OBBBA stands for the “One Big, Beautiful Bill Act” set forth and signed into law by President Trump in July 2025. Some of the changes, effective in tax year 2026, are significant. Taxpayers who do not itemize their deductions can take a

deduction on the front of their 1040 for up to $2,000 married filing jointly and $1,000 single. Contributions can only be made to qualified public charities. Donor advised funds and private foundations are not included. Taxpayers who itemize their deductions will be subject to a 0.5% of AGI floor. What does this mean? Well, if your AGI is $450,000 married filing jointly, you will not receive a deduction for any charitable giving until the total amount of giving goes over $450,000 x .005 = $2,250. The 60% AGI deduction cap for cash contributions is made permanent and for those taxpayers in the 37% tax bracket, charitable deductions are capped at a tax benefit of 35%.

Conclusion

It is good to be aware of the charitable contribution rules and limits, so you know what to expect from your giving. Keep in mind, there are items like Donor Advised Funds and Qualified Charitable Distributions from retirement accounts that we did not discuss in depth here. If you have questions on those items or about charitable donations in

general, please feel free to contact us at 571-445-0201 or abs@westhighlandtax.com. I hope everyone has a happy and safe holiday season.

1 National Philanthropic Trust - Charitable Giving Statistics

2 LexisNexis – The Giving Surge: Why Donations Peak at the End of the Year