We always want to keep our donor community in the loop, so we’re sharing some helpful guidance from our friends and Investment Advisors at Traveka Wealth. New Federal Tax Code updates are scheduled for 2026, and they may change how charitable contributions are deducted.
These changes won’t affect everyone. They’re most relevant if you:
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Itemize your deductions
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Expect to be in a higher federal tax bracket
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Make charitable gifts through a business
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Are 70½ or older and give from retirement accounts
For some donors, these updates might make it especially smart to give before the end of 2025 to maximize tax benefits. And if you’re over 70½, gifts from retirement accounts (QCDs) may become an even more powerful tool for your philanthropy.
If you don’t itemize, or if charitable deductions aren’t part of your tax planning, these shifts may not affect you—but it’s still helpful to know what’s ahead as you think about your 2025 giving and beyond.
We would like to bring to your attention several upcoming changes to the Federal tax code beginning in 2026 due to the passing of the large Republican omnibus bill passed earlier this year that will have an impact on the tax deductibility of your charitable donations moving forward.
For our individual donors who itemize, a new floor of 0.5% of your Adjusted Gross Income (AGI) will limit your deductible donations. For example, if your AGI is $100,000 and you donate $10,000 to your favorite charities of choice, $500 of your $10,000 donations will no longer be deductible. Additionally, for our donors who are in the top Federal income tax bracket will now be able to only deduct 35% of the total amount of their itemized deductions, including charitable gifts.
For our corporate donors, a new 1% floor on taxable income will now apply. For instance, if your taxable income is $100,000 and you were to donate $10,000 to your favorite charities, $1,000 of your $10,000 donations will no longer be deductible.
To plan before next year’s rule changes, you could consider a few strategies to help maximize your charitable deductions for 2025. One option to consider is to contribute multiple years’ worth of donations to a Donor Advised Fund. This could help maximize your charitable contribution deductions now and then allow you to make those donations to your charities over time as you see fit. This is a great way to generously give some of your investment assets that have done extremely well in the stock market but now have a large capital gain that you would have to pay if you sold the asset yourselves.
If you are 70½ or older, Qualified Charitable Distributions (QCDs) from your Traditional, Inherited, SEP, or SIMPLE IRA are another tax-efficient way to give generously, as QCDs count as non-taxable distributions. This strategy can also help reduce the taxable amount of your Required Minimum Distributions if you have reached the age where you are required to take them.
Now, this information reflects our current understanding of the new tax law and some of the impacts that may affect you moving forward. However, we understand that each individual tax situation can be unique, complex, and vary greatly. We strongly recommend consulting with your qualified tax professional to determine the best course of action for your specific financial circumstances.
We are deeply grateful for the generosity, care, and commitment you bring to the Cabrillo Festival. Your support ensures that new music thrives and that our community continues to be a home for creativity and discovery.
Please reach out if you have questions—we’re here to help however we can.