As we approach the end of 2025, many donors are considering their year-end charitable contributions. This year carries special significance for tax-advantaged giving due to changes that will take effect in 2026 under the One Big Beautiful Bill Act (OBBBA). Understanding these changes now can help people make decisions about when to make donations to their favorite nonprofits and charities.
At Indian Creek Foundation, we are grateful for the generosity of our community as we approach the completion of our Mission to Serve Every ONE campaign. We are very close to reaching our $2 million goal and hope to meet that milestone before the end of the year. Many of our donors appreciate the tax savings available for their contributions to our mission.
New Limits on Charitable Deductions Begin in 2026
Starting in 2026, the OBBBA introduces a new cap on charitable deductions for people with high income who itemize their tax deductions. Under the new law, taxpayers in the highest tax bracket (37%) will be limited to deducting charitable contributions at a maximum rate of 35%, even though their income is taxed at the higher rate. This means that gifts will have a lower tax deduction value beginning next year.
High income individuals and married couples may want to maximize their charitable giving in 2025 in order to get the maximum tax benefit for their generosity.
For folks who simplify their taxes by taking the standard deduction, the OBBBA includes good news for future year giving. Starting in 2026, charitable contributions can be deducted even with the standard deduction. The limit for this deduction is $1,000 for individuals and $2,000 for married couples. A donation made in early January will be deductible on 2026 taxes.
The Power of Qualified Charitable Distributions
Beyond the timing considerations related to the OBBBA changes, there is another powerful tool for tax-advantaged charitable giving that aging donors should not overlook. This tool is called a Qualified Charitable Distribution (QCD) from an Individual Retirement Account (IRA).
A QCD allows individuals age 70½ or older to direct distributions from their IRA directly to a qualified charitable organization like Indian Creek Foundation. These distributions can satisfy the person’s Required Minimum Distribution (RMD) for the year while reducing their taxable income. When RMDs are taken in cash, they are added to the individual’s taxable income for that year. By donating the funds directly to a qualified charity, the individual does not have that income to report for taxes. Unlike regular charitable deductions, QCDs offer a unique advantage because they lower adjusted gross income (AGI) rather than simply providing an itemized deduction. Lower income may help older individuals avoid or reduce the impact of income-based taxes and improve eligibility for certain tax credits and deductions.
For retirees who do not need their full RMD for living expenses, a QCD provides a way to fulfill the distribution requirement while supporting meaningful charitable work.
QCDs are valuable whether donors take the standard deduction or itemize tax deductions because they reduce AGI directly. Since there is a tax benefit for every type of filer, QCDs can be an excellent option regardless of the level of giving. The 2025 limit for QCDs is $108,000 per individual, which provides substantial flexibility for donors who wish to make significant contributions. For married couples filing jointly, each spouse can make a QCD from their own IRA if they both qualify, effectively doubling the potential benefit.
At Indian Creek Foundation, we have seen the impact of QCD gifts from supporters who want to ensure that their legacy includes supporting individuals with disabilities in our community. These gifts offer retirees a way to contribute to our mission in ways that might not otherwise be possible.
Planning Your Year-End Giving
As you consider your charitable giving strategy for the remainder of 2025, there are several factors to keep in mind. First, assess whether you will be affected by the new charitable deduction cap beginning in 2026. If you are in the highest tax bracket and planning significant charitable contributions, accelerating those gifts into 2025 may provide greater tax efficiency.
Second, if you are age 70½ or older and have an IRA, evaluate whether a QCD makes sense for your situation. Speak with your financial advisor about how a QCD might fit into your overall retirement and tax planning strategy. Remember that QCDs must be made directly from your IRA to the qualified charity, so it’s important to complete the paperwork correctly.
Third, consider the type of assets you are giving. While cash donations are always welcome and valuable, gifts of appreciated stock or other assets may provide tax advantages. Real estate, planned giving arrangements, and memorial or honor gifts are additional ways to support our mission.
At Indian Creek Foundation, we welcome conversations with donors about the many ways to give. Always keep in mind that we are not tax professionals and do not offer tax advice. We provide information that is often helpful for supporters to take to their tax professional and financial advisor in order to optimize giving.
Your Gift Makes a Difference
Whether you choose to make a gift in 2025 to maximize current tax benefits, establish a QCD from your IRA, or explore other giving options, your support helps us continue serving children and adults with intellectual and developmental disabilities throughout Montgomery and Bucks Counties. Every gift, regardless of size, contributes to our ability to provide compassionate, professional care that empowers individuals to live fulfilling lives.
As we work to complete and surpass our Mission to Serve Every ONE campaign goal, we are grateful for every supporter who believes in our work. Your generosity ensures that we can continue to grow our services, support our dedicated staff, and meet the evolving needs of our community.
To learn more about tax-advantaged giving options and how your contribution can support Indian Creek Foundation’s mission, we encourage you to contact your financial advisor and tax professional. They can help you determine the most beneficial giving strategy for your unique situation. For more information about our Mission to Serve Every ONE campaign and the various ways to give, visit www.serveeveryone.org or contact Brett Wells, Director of Development, at bwells@indcreek.org.
The information provided in this blog is for educational purposes only and should not be considered tax advice. Please consult with your financial advisor and tax professional regarding your specific situation.