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A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide for wealthy investors and consumers. Register to receive future editions, straight to your inbox.
Lawyers for the wealthy are advising their clients to increase their charitable donations this year to take advantage of tax benefits that will decline in 2026.
President Donald Trump’s ambitious tax and spending bill included provisions that reduce the tax benefits of charitable donations for high earners. Since the provisions won’t take effect until next year, advisors to wealthy donors are recommending that they concentrate or “bundle” their giving this year to take advantage of the tax benefits.
“If you’re thinking about making a big gift, or you know you have a charity you want to support over the next couple of years and you have the money right now, now is the time to make a big gift,” said Dan Griffith, director of wealth strategy at Huntington Private Bank.
The bill handicaps higher-earning donors in two ways. First, starting in 2026, donors who itemize will not be able to deduct charitable contributions that exceed 0.5% of their adjusted gross income (AGI). With this floor, a household with an AGI of $400,000 who makes $10,000 in charitable donations in 2026 will not be able to deduct the first $2,000 of donations, according to Griffith.
Second, taxpayers in the 37% tax bracket will have their deduction reduced by 2/37.th of value. This cap reduces the effective tax benefit from 37% to 35%.
Although the floor and ceiling changes may seem small, they have notable consequences for top earners. For example, consider an entrepreneur who has $10 million in AGI after selling a business and donates $1 million to reduce his tax liability. If this were done in 2025, the entrepreneur would benefit from a tax reduction of $370,000, according to Griffith. Starting in 2026, the deduction would be reduced by $20,000 because of the cap and an additional $50,000 because of the floor, he said.
These caps are particularly important for entrepreneurs, who often make large donations when their AGI peaks to reduce their tax burden, according to Kaufman Rossin’s Todd Kesterson, who leads the accounting firm’s private client business.
“We have a lot of our clients because they had liquidity events. I think in every case, the year they had the liquidity event, they made charitable contributions,” he said. “But now it’s kind of the worst year to make them because the first half percent is not deductible.”
Kesterson expects a surge of donations before the end of the year to avoid a double whammy.
High earners who have a philanthropic spirit should consider bundling their donations, such as giving $500,000 now rather than contributing $100,000 a year over five years, he said.
If they can’t make their donation before the end of the year, they would still be better off making a large donation rather than spreading it out over several years and triggering the 0.5% floor multiple times, according to Griffith.
Despite the tax changes, high earners ages 73 and older can still achieve significant tax savings by donating the minimum required withdrawal from a retirement account.
“It’s actually a 100 percent deduction because it reduces their income, dollar for dollar,” Kesterson said of qualified charitable distributions.
For donors pressed for time as 2026 approaches, Justyn Volesko of Cerity Partners Family Office recommends contributing to a donor-advised fund. With a DAF, donors get an upfront deduction and can wait to decide which charities to fund. It’s also simpler and quicker to donate appreciated stock — which Volesko favors for capital gains tax savings — to a DAF rather than to a charity, he said.
While the Republican Party’s bill encourages donations from low- and middle-income donors, the wealthy make up the majority of charitable giving. Research firm Altrata estimates that some 500,000 ultra-wealthy individuals worth at least $30 million accounted for $207 billion in donations in 2023, or more than a third of total individual donations worldwide.
Kesterson said the new tax regime is more likely to be a nuisance to wealthy clients than an actual barrier to charitable giving. Griffith predicts some will wonder if donating is worth it.
“It’s certainly not going to encourage it,” he said.