Three reasons to think about your charitable intentions prior to “giving season”

Historically, charitable giving practices have been tied to one’s desire to make an impact or leave a positive legacy on their communities.

Following a decade long trend of fewer U.S. households donating money, 2024 saw a fifth straight year of record setting donations at $592.50 billion.1 But there are some things to consider in 2025 that are trending differently from previous years in light of the updated charitable provisions of the “One Big Beautiful Bill Act,” as well as potential unsettled economic circumstances that may result from federal action or inaction and/or ongoing trade tariffs. Considering your 2025–26 philanthropic plan, how will you respond to each of the following questions?

① Are there causes or entities that you are passionate about who are losing federal funding?

According to the NonProfitTimes, 52% of Nonprofits face instability amid federal cuts.2 No one will really know the impact of all of the federal cuts to grants and funding until sometime in the future, but we do know that donors will need to bridge the gap in order for entities to continue the scope of their planned operations. From news outlets, and the arts, to food banks, nonprofits are going to need funders now more than ever, and it may mean a change in your philanthropic plans. It’s a good time to check in on the entities you care about to determine if they need you to make a broader, deeper impact.

② Did you donate to help in the recovery from any natural disasters this year?

According to the NOAA’s National Centers for Environmental Information, the U.S. sustained 403 weather and climate disasters from 1980-2024. The total cost of these 403 events exceeds $2.915 trillion. In 2025, we continued to see natural disasters across the U.S. from the Los Angeles fires to the Texas floods, however, the NOAA has stopped updating the weather and climate disasters reporting. 

Donating to disaster relief does not need to be reactive, it can be a proactive component of your philanthropic plan. You can purposely allocate gifting to disaster relief funds, by doing your due diligence on non-profits now, and creating a short list to incorporate communities harmed in natural disasters, help them rebuild, recover, and adapt for the future. It helps them ensure resiliency going into the future. There are many non-profits set up now, small and large, that are funded prior to disasters, so that when they occur, relief is immediate and efficient.

③ Are you aware of the impact of the “One Big Beautiful Bill Act (H.R. 1)” (OBBBA), signed into law on July 4, 2025, where planning around current and future donation strategies is likely to take center stage?

Key considerations include:

Deductibility limits on cash gifts. While originally slated to sunset on January 1, 2026, the OBBBA made permanent the 60% Adjusted Gross Income (AGI) limit for cash gifts to public charities, including Donor Advised Funds (DAF).

Universal charitable deduction. For the first time since the COVID-era relief bills, taxpayers who do not itemize can now deduct charitable contributions — up to $1,000 for single filers and $2,000 for married couples filing jointly. This deduction is “above-the-line,” meaning it reduces AGI and is available to over 90% of filers who typically take the standard deduction.

AGI floor for itemizers. For those who do itemize, a new 0.5% AGI floor applies. This means taxpayers must contribute at least 0.5% of their AGI before charitable deductions apply. This provision is intended to encourage more substantial giving but may require planning adjustments for mid-level donors.

Cap on deduction value for high earners. For taxpayers in the top 37% bracket, the value of the charitable deduction is capped at 35% of the donation amount and may be further reduced if the taxpayer also claims a SALT deduction.

Example: A married couple filing jointly with an AGI of $600,000 plans to donate $50,0000 to a qualified charity in 2026. Here’s how the new rules apply:

• Because they itemize, they must first meet the 0.5% AGI floor, which is $3,000. Only the amount above that — $47,000 — is eligible for deduction.

• Since they are in the 37% bracket, the tax benefit is capped at 35% ($16,450), meaning they will only receive a tax benefit of 35 cents per dollar deducted rather than the previous 37 cents per dollar ($17,390) under the Tax Cuts and Jobs Act of 2017 (TCJA).

• If they also claim a SALT deduction, the charitable deduction, the charitable dedication may be further reduced depending on the interaction between the two caps.

This example highlights the importance of coordinated planning between charitable giving, other itemized deductions, and income thresholds.

Corporate giving changes. Corporations can now only deduct charitable contributions if they exceed 1% of taxable income, though the existing 10% cap remains.

Considerations for planning prior to “giving season” All of these trends and changes provide an opportunity for clients to revisit their giving strategies. There is still time before the new regulations take effect in 2026 for thoughtful implementation, depending on current and projected income levels, total philanthropic goals, and the types of assets being considered for donation. Bunching donations or using DAFs may allow for maximizing deductions which would be less if given in 2026. For other donors, timing gifts to maximize tax efficiency under the new rules may prove more valuable depending on when and what type of income is expected in 2026.

BMO’s U.S. Wealth Management team brings a breadth of experience in assisting clients with their philanthropic goals and objectives. Through a comprehensive wealth plan, your dedicated team of advisors can assist in weighing options to ensure the strategies you implement are most optimal in your unique situation.