New Tax Breaks and Rules for Charitable Donations

People give because they care. That’s the heart of generosity. Yet the rhythm of giving is often set by the tax code. It can make giving feel natural and rewarding, or it can add friction that makes it harder.

When the One Big Beautiful Bill Act was signed on July 4, 2025, the headlines focused on spending and tax rates. Less noticed were the provisions that quietly change how Americans give.

Starting in 2026, millions of households, high-income donors, and businesses will face new incentives and new hurdles when they decide how much to give.

The details are technical, but the story is simple: with the right strategy, you can give more, save more, and make sure your money tells the story you want it to.

A Universal Deduction for a Majority of Taxpayers

For years, most families gave to charity without any tax benefit. Unless you itemized, your generosity was invisible to the IRS. You gave because it mattered, not because it saved you money.

That changes in 2026. Under the new law, taxpayers who claim the standard deduction will also be able to deduct charitable contributions. This is no longer a benefit limited to those who itemize. According to the Tax Foundation, a nonpartisan research group, roughly 85% of taxpayers take the standard deduction, making this one of the broadest incentives for charitable giving.

Here is how it works: taxpayers who claim the standard deduction can now also deduct up to $1,000 in cash contributions each year, or $2,000 for married couples. The gifts must be made in cash, not appreciated assets, and they must go directly to eligible charities.

Why it matters: After 2025, everyday giving like your monthly tithe, your holiday donation, or your support of a local nonprofit will show up on your tax return. The small checks you were already writing now carry extra weight.

What this means for you: For illustrative purposes, take a family who does not itemize and donate $100 each month to charity. That is $1,200 over the year. Beginning in 2026, that full amount can be deducted from their taxable income, up to the $2,000 limit for married couples, $1,000 single filers. A family in the 22% bracket giving $1,200 saves about $264 in taxes.

Note: The figures here represent Federal tax savings. For Oregonians, there may be an extra layer of benefit. If the state aligns with the new Federal rules, that same $1,200 donation could also reduce state taxes by up to 10%, or $120. States are currently evaluating whether to adopt these provisions, so this piece is still unfolding.

The catch is that families used to the standard deduction often don’t track their giving. It never mattered before. Starting in 2026, it will. The habit of generosity now comes with a second habit: record keeping.

‘Bunching’ and a New Hurdle for Itemizers

Beginning in 2026, all itemizers will also face a new rule. Charitable contributions will only be deductible above 0.5% of your adjusted gross income (AGI).

Here is how it works: Suppose your AGI is $200,000 and you itemize deductions. If you give $10,000 to charity, the first $1,000 ($200,000 x 0.5% = $1,000) does not count. Only $9,000 reduces your taxable income. Any 0.5% disallowed amount will be suspended and carried forward for up to 5 years, to hopefully be deducted in a future year when eligible.

Why it matters: On paper, half a percent sounds small. But in practice, this will likely shift how people give. Smaller, steady donations may no longer deliver the same benefit, nudging families to think more strategically about timing and structure.

What this means for you: It is not the size of your gift that changes, but the rhythm. Two larger checks can sometimes be more effective than four smaller ones. Instead of giving the same amount every year, consider making larger gifts less often, a strategy often called “bunching.”

For example, donating $20,000 every two years rather than $10,000 annually. In the larger year, your gift clears the new floor and provides a stronger deduction. In the smaller year, you take the standard deduction and still come out ahead. A $20,000 gift, above the 0.5% AGI floor, in the bunching year may yield roughly $6,400 in tax savings (assuming 32% bracket).

The increased State & Local Tax (SALT) deduction in 2026 can make this even more attractive. Take a household with $25,000 in SALT deductions and $20,000 in charitable giving every other year. That totals $45,000 of deductions, easily clearing the standard deduction and ensuring the charitable contribution counts well above the 0.5% threshold. In the off years, they simply return to the standard deduction.

Donor-advised funds (DAFs) make this easier. You can contribute a larger amount in one year, capture the deduction, and then spread your giving out over time so your favorite causes don’t feel the gap. Many DAFs even allow you to invest the balance, which means your dollars can grow before they’re granted. In that sense, a DAF turns one act of generosity today into even more generosity tomorrow. 

A 37% Deduction, Now 35%

If you itemize deductions and are in the top tax bracket, another change arrives in 2026. The maximum tax benefit you can receive from charitable deductions is limited to the equivalent of a 35% tax rate.

Here is how it works: Charitable gifts must first clear the new 0.5% of AGI floor. On top of that, the benefit of any eligible gifts above that floor will be limited to 35% rather than today’s 37%.

For example, with an AGI of $1,000,000 and a gift of $100,000, the first $5,000 provides no tax benefit today because of the 0.5% floor. The remaining $95,000 is deductible, producing a maximum tax savings of $33,250 in 2026. Under the current rates, a $95,000 gift would save $35,150.

The 0.5% floor can carry forward, but the difference between the 35% and 37% deduction rates does not.

Why it matters: For wealthy donors, the change is modest in dollars but meaningful in psychology. Even small shifts in after-tax cost can alter behavior at the margins, which is why thinking ahead about timing and tools matters more than ever.

What this means for you: For wealthy donors, every dollar still counts, but in 2026, each one counts a little less. It may make sense to accelerate some giving into 2025 before the new rules take effect.

C-Corp Business Owners and the New 1% Floor

Starting in 2026, C Corporations (C-Corp) will also face a new threshold. Charitable giving will only be deductible once it exceeds 1% of taxable income.

Here is how it works: If your company is a C-Corp and earns $1,000,000 and donates $8,000 (0.8% of income), you’ll no longer get a tax deduction for that gift. But if you give $15,000, you’ve crossed the 1% threshold, and the portion above $10,000 (the first 1%) is deductible.

The long-standing 10% cap on corporate deductions still stands, along with the five-year carryforward. The key difference is that smaller contributions that once carried a tax benefit may no longer qualify.

Why it matters: This rule discourages token giving and pushes companies toward more intentional generosity. Businesses that want their contributions to count, for both taxes and impact, will need to plan gifts as part of a larger strategy rather than as one-off gestures.

What this means for you: For C-Corp business owners, this change means smaller charitable gifts may no longer have a tax benefit. To maximize impact, you may choose to either increase your giving to clear the 1% threshold or bunch donations in certain years to secure the deduction.

A Special Planning Window in 2025

Before the new rules take effect, 2025 offers a unique chance to be more strategic with your generosity. The changes do not begin until 2026, which means as an itemizer you can still give under today’s more favorable framework: there is no 0.5% AGI floor for individuals, no 1% floor for corporations, and top-bracket donors can still receive up to a 37% deduction.

Why it matters: 2025 is one of the most favorable years in recent memory for charitable giving for itemizers. Acting before the rules change can mean more tax savings and more dollars flowing to the causes you care about.

What this means for you:

• A family giving $20,000 in 2025 can deduct the full amount. In 2026, with a $200,000 AGI, only $19,000 would count toward a deduction.

• A high-income donor with an AGI of $1,000,000 giving $100,000 in 2025 could reduce their taxable income by up to $37,000. The same gift in 2026 would shrink to $33,250 in savings, raising the after-tax cost of generosity.

• C Corporations who typically make smaller annual gifts may want to accelerate donations into 2025 before the 1% corporate threshold applies.

For those who want to keep supporting their favorite charities steadily, donor-advised funds can be especially effective. By contributing a larger amount in 2025, your secure today’s tax benefits while giving yourself flexibility to distribute grants to nonprofits over time.

Bringing It All Together

The new law will change how taxpayers experience charitable giving. Some will gain new opportunities, while others will need to be more intentional to keep their giving tax efficient.

1. Individuals & Families who do not itemize will now enjoy a tax break for giving.

2. Itemizers will need to plan gifts to rise above the new floor.

3. High-income donors will face a slightly smaller size tax benefit.

4. C Corporations will need to give more intentionally to secure deductions.

5. 2025 offers a last-chance window to maximize giving before the new rules take hold.

Why it matters: These rules will shape how generosity shows up, but not why we give. With planning, your giving can still tell the story of what matters most to you. The new law will not change the reasons we give, but it will change the timing, structure, and strategy that make generosity as efficient as possible.

At Human Investing, we see our job as more than managing investments. We help align your values with your financial life so that every dollar reflects what matters most. That way, your giving becomes not only a tax-smart decision, but a lasting legacy.

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Tax Foundation. (2025). FAQ: The One Big Beautiful Bill Act tax changes. Retrieved from https://taxfoundation.org/research/all/federal/one-big-beautiful-bill-act-tax-changes/ Tax Foundation

Government Publishing Office. (2025). Public Law 119-21: One Big Beautiful Bill Act. Retrieved from https://www.congress.gov/119/plaws/publ21/PLAW-119publ21.pdf

Kitces, M. (2025, July). Breaking down the “One Big Beautiful Bill Act” (OBBBA): Tax planning, SALT cap, senior deduction, QBI deduction, Tax Cuts and Jobs Act (TCJA), AMT, “Trump Accounts”. Nerd’s Eye View. Retrieved from https://www.kitces.com/blog/obbba-one-big-beautiful-bill-act-tax-planning-salt-cap-senior-deduction-qbi-deduction-tax-cut-and-jobs-act-tcja-amt-trump-accounts/

Disclosure: This material is provided for informational and educational purposes only and should not be construed as tax, legal, or investment advice. Examples are hypothetical and for illustration purposes only; actual results will vary. Tax laws are subject to change, and their application may vary depending on individual circumstances. Clients should consult their own tax and legal advisors before making any charitable giving decisions. Advisory services offered through Human Investing, LLC, an SEC registered investment adviser.

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As a leader at your company, you are provided a comprehensive range of benefits that help achieve your financial and retirement goals. However, things can go awry at tax time. The newer Metro and Multnomah County taxes, in addition to regular Federal and Oregon taxes, are becoming an increasing burden for executives to navigate. 

By implementing a proactive forward-looking tax strategy and payment plan, company leaders have a significant opportunity to improve their financial situation, relieve stress related to taxes, and reduce unwanted April surprises!

In this article, we’ll examine a few of the biggest reasons you could get hit with an unexpected tax bill and ways to navigate it differently.

Tax hit #1: Limiting your withholdings on supplemental pay

Many sources of compensation beyond salary (such as PSP, LTIP/PSU vests, RSU vests, and stock option exercises) are taxed as “supplemental pay.” This comes with a fixed tax withholding percentage, regardless of your tax bracket or withholding elections on your base salary. For example, the fixed withholding rates set by the government on supplemental pay is 22% Federal and 8% Oregon. The reality is most executives are in a much higher income tax bracket, sometimes as much as 17% higher than the amount withheld. This discrepancy leaves a significant gap in the amount of taxes that should have been withheld versus the actual amount that was withheld.

As an example, Charlotte an executive has $50K of RSUs that vested on September 1st. With all her income sources (salary, PSP, LTIP/PSU, RSUs) her total taxable income is $400K. The taxes automatically withheld on the $50K vested RSUs would be about $15K (22% Federal + 8% Oregon). However, her total income puts her in the 35% Federal tax bracket + roughly 10% Oregon bracket. This makes the withholding on her RSUs about $7,500 short ($50K x 15% short).

To get this paid in, she could use Quarterly Estimated Tax vouchers to submit the underpaid tax to the IRS and Oregon. Or, depending on her overall tax situation, she may be able to wait and pay the balance due with her tax return in April without incurring underpayment penalties and interest – although this determination may require a tax professional to run a detailed tax projection. For many people, being hit with a large bill all at once in April may not feel great and they may opt for Quarterly Estimated Payments instead.

If Charlotte doesn’t realize that her withholding was short until she files her tax return next April, she could face yet another surprise – 7 months of underpayment interest and penalties. Depending on her overall tax picture, the IRS and Oregon may have been accruing this since September. Yet another unwanted surprise for Charlotte.

Tax hit #2: Not withholding enough (or at all) for Multnomah County’s “Preschool for All” tax

The Preschool for All tax is 1.5% on taxable income over $125,000 for individuals or $200,000 for joint filers, with an additional 1.5% on taxable income over $250,000 for individuals or $400,000 for joint filers. The rate is currently scheduled to increase by 0.8% in future years. If you live or work in Multnomah County, you are likely subject to the “Preschool for All” tax that started in 2021.

Unfortunately, your company might not use payroll withholding to cover this tax, in which case you would be responsible to fully submit this tax on your own. Multnomah County expects these payments to be received quarterly to avoid interest and penalties. This can be submitted using vouchers or paying online.

We often see the most challenges for residents of Multnomah County who travel outside the county boundaries to work for an employer that does not currently have Preschool tax withholding options. Determining how much to pay and navigating this alone can be stressful. And for any late or underpaid tax, the county is quick to send notices in the mail. To reduce this headache, we recommend finding trusted advisors or tax professionals to serve as a guide to help you navigate complexities throughout the year.

Tax hit #3: A lack of coordination on how much to withhold for the Metro tax if you and your spouse both work

The Metro Supportive Housing Services tax (a.k.a. the Homeless tax) also began in 2021. It is a 1% tax on applicable income over $125,000 for single filers or $200,000 for joint filers.  If you don’t know whether your residence or your workplace is located within the Metro, you can look up the address here: Metro Link.

The challenges described above for the Preschool tax are similar for the Metro tax. Additional issues arise for families when each spouse works at a different company, and we see this frequently because the Metro area is larger. The income threshold for this tax is based on total household income. Since the spouses’ two different employers likely do not communicate with each other, there can be significant over or under withholding of these local taxes.

For example, Nike is located within the Metro boundary. If a Nike executive has income of $400K, Nike will start to withhold Metro tax once the executive’s income for the year is over $200K. Let’s say their spouse earns $90K by working for a different company, ABC Co., located across town but still within the Metro. Since this $90K alone is under the threshold, ABC Co. does not automatically withhold Metro tax. However, we know the total household income of $490K is over the threshold, which means all of the ABC Co. income is subject to Metro tax too. You see how this can create an issue? Unless the spouse realizes this and works with ABC Co.’s HR department to turn on withholding or diligently submits quarterly payments to the Metro on their own, the family may discover a balance of tax, penalties, and interest to pay in March/April right around a spring break vacation with their kids. Not fun!

In short, if you live or work in the Metro boundaries, it is important to be aware of the withholding options that your employer provides, and to be certain you are opted in or out accordingly.

Tax hit #4: Incorrectly reporting stock transactions and the complexity that comes with it

Up to this point, we’ve discussed withholdings on your salary and benefits. What about company stock that you own and decide to sell – what can go wrong there?      

When you sell company stock (whether you’re still at the company or have moved on), it is reported to you and to the IRS by the custodian (i.e. Fidelity, Schwab, Computershare) on a Form 1099. On this form, the custodian clearly reports the sale date, quantity, sales price, and name of the company’s stock that was sold. What is not so clear is the basis – the portion of sales proceeds that is not taxable because it has already been taxed on your W-2.

If the stock was acquired as part of your employee benefits package, this information is often buried within dozens of pages in the Form 1099. And these pages can be detailed, complex and confusing to read - especially as each custodian has a different template and the layout can change from year to year. We recommend seeking the help of a professional if you are unsure about your basis or how to report it. An experienced tax preparer sees MANY of these forms each season. They know where to look to find the basis of the company stock you sell, and how to translate that information accurately onto your tax return.

Without reporting the basis, or reporting it incorrectly, your taxable income could potentially be overstated significantly and you may accidentally pay more money to the IRS than is actually due. Fixing this after your tax return has been filed can require a time consuming process of preparing an amended return and waiting for the government to return your money. If you suspect you overpaid your taxes, you can always reach out to a tax professional to review your tax return. CPAs within our firm often provide this review to clients throughout the year as part of our financial planning services. 

While tax is a complex subject, it is only a piece of your unique financial picture. Planning appropriately for taxes should be done cooperatively with other parts of your financial plan, such as cash flow, retirement and estate planning. Done right, they’ll fit together like a perfect puzzle.  

Want to minimize the tax headache? A few Actions you can take now

Action #1:  Bring in experienced tax professionals.

Tax professionals can work with you to run “tax projections” to track how much you need to pay and monitor your April balance. These tax projections can be done any time throughout the year and can be refined near year-end to give you peace of mind and limit unwanted surprises.

If you’re looking for tax savings now or in retirement, we highly recommend proactive tax planning. A professional who is well-versed in your company’s benefits can use your tax projection to provide customized strategies to minimize your tax liabilities.

Action #2:  Talk with your financial planner.

We know that for many company executives, setting aside additional tax payments from your monthly household cash flow can become stressful, especially since the amounts can be so inconsistent. If you’re feeling that stress, tell your financial planner – they’ll want to know so they can help you navigate it well and feel more confident going forward. 

One strategy we may suggest is the “Pay as You Receive” method, which calculates an estimated amount of taxes due from each type of supplemental income when it hits your bank account. Making tax payments at the time you receive the income- while you have the funds to do it- will leave your monthly cash flow separate and unaffected.

These estimated tax payments, when combined with your payroll withholding, should be equal to your anticipated tax bracket for the calendar year. This approach helps ensure that your total payment to the IRS, Oregon, Multnomah County, and Metro aligns with your overall tax obligations.

Action #3:  Find a team that has BOTH!

It is important to note that any tax payment and mitigation strategies should be part of a comprehensive financial plan that is tailored to your specific financial situation. If you’re considering a firm that can look at your full financial picture, we’d love to help. At our Lake Oswego office, our team has licensed CERTIFIED FINANCIAL PLANNER® professionals and Certified Public Accountants, and we constantly share knowledge with one another.

We’re here to talk you through local, state, and federal complexities and we want to help you get things right the first time. Our mission is to serve you faithfully and be there to guide you through your benefits packages as you advance in your career or make a move.

If you have questions about how to set up a proactive forward-looking tax strategy, please contact our team to learn more.

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Disclosures: The information provided in this communication is for informational and educational purposes only and should not be construed as investment advice, a recommendation, or an offer to buy or sell any securities. Market conditions can change at any time, and there is no assurance that any investment strategy will be successful. Investing involves risk, including the potential loss of principal. Past performance is not indicative of future results.

Diversification does not guarantee a profit or protect against a loss in declining markets. Asset allocation and portfolio strategies do not ensure a profit or guarantee against loss.

This material is not intended to provide, and should not be relied upon for, tax advice. Please consult your tax advisor regarding your specific situation.

Scenarios discussed are hypothetical and for illustrative purposes only. They do not represent actual clients or outcomes and should not be interpreted as guarantees of future results.

The opinions expressed in this communication reflect our best judgment at the time of publication and are subject to change without notice. Any references to specific securities, asset classes, or financial strategies are for illustrative purposes only and should not be considered individualized recommendations.

Human Investing is a SEC Registered Investment Adviser. Registration as an investment adviser does not imply any level of skill or training and does not constitute an endorsement by the Commission. Please consult with your financial advisor to determine the appropriateness of any investment strategy based on your individual circumstances.

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