Podcast Summary: Your Charitable Income Tax Breaks Are Changing in 2025 and 2026

Podcast: ACTEC Trust & Estate Talk
Date: November 4, 2025
Host: Natalie Perry, ACTEC Fellow
Guest: Professor Christopher Hoyt, University of Missouri School of Law

Episode Overview

This episode dives into the significant changes to charitable income tax deductions under the “One Big Beautiful Bill Act” (OB3), effective from 2025 and 2026. Professor Christopher Hoyt breaks down the implications for donors, particularly focusing on practical year-end tax planning strategies in light of new deduction limits, itemization rules, and special considerations for donors over and under age 70½.

Key Discussion Points & Insights

1. The OB3 Act – A Tax Law Overhaul

• Signed into law July 4, 2025, OB3 brings the most significant changes since 2017, affecting taxes, credits, and deductions—including those for charitable giving.
• Urgent need for professionals and taxpayers to understand and plan for changes impacting 2025 and 2026 filings.
• The Act is tongue-in-cheek referred to as “OB3,” a nod to Star Wars, reflecting its galaxy-far-far-away complexity.

  “They do look like they came from a galaxy far, far away.” – Christopher Hoyt [01:38]

2. New Above-the-Line Charitable Deduction for Non-Itemizers (2026 and Beyond)

• Starting in 2026: Taxpayers using the standard deduction (about 90% of filers) can now also deduct charitable gifts—previously only available to those who itemized.
  • Caps: $1,000 for single; $2,000 for married filing jointly; CASH gifts only.
  • Not available for gifts to donor advised funds, private grant-making foundations, or section 593 supporting organizations.
  • Requires contemporaneous written acknowledgment for gifts over $250.
  • Practical Planning: Consider delaying December 2025 donations until January 2026 to take advantage of the new deduction (if donating less than the cap).

    “January is the new December.” – Christopher Hoyt [03:35]

3. Expansion of State and Local Tax (SALT) Deduction

• 2025–2029: The SALT deduction limit rises from $10,000 to $40,000, retroactive to Jan 1, 2025.
  • Result: More taxpayers (estimated 14%, up from 10%) will itemize, especially in high-tax states.
  • Phaseout: For incomes over $500,000, the SALT limit begins phasing back down to the old $10,000 cap; once income is over $600,000, only $10,000 is allowed.
  • Tax Planning: Taxpayers just below $500,000 AGI may try to manage income to maximize deductions.

4. Age-Based Planning: Over vs. Under 70½

A. Over Age 70½: Qualified Charitable Distributions (QCDs)

• Best practice: Use IRA funds for charitable gifts—up to $108,000 in 2025, completely excluded from taxable income.
• Advantages: Not subject to new deduction limits or reduced benefits for high-income donors.
• Note: Those over 72 should generally make ALL charitable gifts from IRAs.

“Most donors over the age of 72 should make all of their charitable gifts from their IRAs. Their IRA can be their charitable foundation.” – Christopher Hoyt [09:51]

B. Under Age 70½: Regular Charitable Giving

• Avoid IRA gifts (especially under 59½, to sidestep income taxes and the 10% penalty).
• Best asset to donate: Appreciated stock, not cash, for those who itemize.

5. New Itemizer Restrictions Beginning 2026

• Charitable gifts only deductible to the extent they EXCEED 0.5% of Adjusted Gross Income (AGI).
  • Example: $200,000 AGI → $1,000 “floor,” so only gifts above $1,000 are deductible.
  • 2025: Deduct full gift. 2026: Only amount above the floor.
• Year-End Planning 2025: Front-load contributions for more favorable deduction.
  • Example: Bunching donations or using donor advised funds to lock in full deductibility before the limit hits.

    “Year end tax planning for 2025 is to make more gifts. You might put $40,000 into a donor advised fund. You’ll deduct all of it in 2025.” – Christopher Hoyt [08:42]

6. Limits for High-Income Taxpayers

• For those in the 37% tax bracket ($615K single, $730K married), charitable deduction tax savings are capped at 35%—not the top bracket rate.
  • Example: $100 interest income taxed at 37%; $100 charitable gift yields only 35% tax savings.
  • May also apply to trusts and estates, which hit 37% at only $16,000 of income.

“The new law provides that you have to reduce your itemized deductions so you only get a 35% tax savings.” – Christopher Hoyt [07:53]

Notable Quotes & Memorable Moments

• “January is the new December.”
  – Christopher Hoyt [03:35]
  (Encouraging donors who contribute less than the cap to consider deferring gifts to January to take advantage of the new deduction.)

• “If your donor is over the age of 70½, you don’t have to worry about these rules... They can use their IRA to give away up to $108,000 in 2025 and exclude it from their income.”
  – Christopher Hoyt [05:32]

• “If you’re wealthy and you’re in the 37% income tax bracket... your charitable deductions only produce 35% tax savings.”
  – Christopher Hoyt [07:53]

• “Most donors over the age of 72 should make all of their charitable gifts from their IRAs. Their IRA can be their charitable foundation.”
  – Christopher Hoyt [09:51]

Timestamps for Important Segments

| Timestamp | Segment Description | |------------|---------------------------------------------------------------| | 00:41 | Introduction to OB3 and overview of charitable tax changes | | 01:32 | Only 10% of taxpayers itemize; above-the-line deduction coming| | 03:25 | Planning advice: “January is the new December” | | 04:55 | Expanded SALT deduction and implications for itemization | | 05:32 | QCDs for donors over age 70½, IRA as “charitable foundation” | | 06:50 | Itemizer changes: new 0.5% AGI floor begins 2026 | | 07:53 | 37% bracket: deduction savings reduced to 35% | | 08:42 | Case study and donor advised fund planning example | | 09:51 | QCD advice: over 70½ ignore the new complexity |

Practical Takeaways

• 2025 is a pivotal year for charitable gift planning; act now to maximize deductions.
• Non-itemizers: Watch for new above-the-line deduction in 2026 and possibly shift the timing of smaller annual gifts.
• Itemizers: Consider bunching gifts or using donor advised funds before 2026’s more restrictive rules.
• High-income and older donors should strongly consider IRAs as the vehicle of choice for charitable gifts.

For further detail on qualified charitable distributions for donors over age 70½, ACTEC provides an April 2025 webinar link on their site.