IRS announces new income tax brackets and deductions for 2025
The IRS has announced major tax changes for 2025 in line with inflation, including adjustments to income tax brackets, deductions, and capital gains.
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- Starting in 2026, taxpayers who claim the standard deduction may be allowed to take a new deduction for cash donations to qualified charities.
- You do not need to itemize your deductions to claim this new tax reduction.
Many people aim to write a check to their favorite charity by December 31st as part of their year-end giving. However, the situation could change significantly in 2025 due to major tax changes.
This year, some quirky new tax rules could mean one group of taxpayers wants to contribute more money in 2025 than planned. Other groups may want to postpone cash donations to January.
Well, nothing is simple when it comes to the new rules of the One Big Beautiful Bill Act, signed into law by President Donald Trump on July 4th.
What to do if you don’t want bullet points
We are considering two different tax scenarios for 2025 charitable giving. At the end of the day, you either itemize your deductions, as most taxpayers do, or you take the standard deduction.
Starting in 2026, taxpayers who claim the standard deduction may be allowed to take a new deduction for cash donations to qualified charities. You do not need to itemize your deductions to claim this new tax reduction.
The new deduction applies to 2026 federal income tax returns filed in 2027 and is limited to $1,000 per year for single filers and $2,000 per year for married couples filing jointly. Experts say there is no provision to adjust these amounts for inflation.
“This deduction applies only to cash donations to qualified charities, excluding donor-recommended funds and support groups,” said Tom Oseven, registered agent and director of tax content and government relations for the National Association of Tax Professionals.
However, note that this new tax reduction does not apply to your 2025 return. That’s why some tax planners are recommending that some people who take the standard deduction write a check to charity in 2026 instead of rushing to donate in late 2025.
George Smith, a certified public accountant with Andrews Hooper Pavlik in Bloomfield Hills, said tax filers who don’t itemize — and he’s one of them — should recognize the new $1,000 and $2,000 deductions for non-itemizers starting in 2026.
Donors will be able to provide funds with cash, credit card or check in 2026 and claim a deduction for their charitable contributions.
Elizabeth Young, director of tax and ethics at the American Institute of Certified Public Accountants, pointed out that virtual currencies, including Bitcoin, are not considered “cash” for purposes of this deduction. Bitcoin donations are treated as non-cash property donations and different rules apply.
Young also pointed out that non-cash donations, such as donations of clothing and other items, are not eligible for the new non-item tax deduction.
On your 2025 federal income tax return, you can generally only deduct your charitable contributions if you itemize them. Even if you claim the standard deduction and donate the money in 2025, you won’t get a tax break on that charitable contribution.
In this case, you may be able to save on taxes by waiting a few weeks. At a 22% tax rate, if you’re single and contribute $1,000 in 2026, you could save $220. In this example, if you were married and contributed $2,000 in 2026, your tax deduction would jump to $440.
Considering that about 90% of individual taxpayers claim the standard deduction and don’t itemize, this is a pretty big change for many people.
Taxpayers must keep records. And those making these cash donations must get approval from the charity for gifts over $250. Concurrent written authorization will be required indicating that you have not received the goods or services.
Some advisors even declare to taxpayers who don’t itemize that “January is the new December.”
For example, a single person who normally contributes $500 each December would only need to write a check for $500 in January and contribute $500 normally in December 2026. That way, if you don’t itemize, you’ll get the full $1,000 deduction above the limit on your 2026 federal income tax return.
How charitable donations are treated by item
The strategy is different for some taxpayers who expect to be able to itemize deductions when they file their 2025 federal income tax returns next year. Many in this group will want to meet the Dec. 31 deadline for making charitable contributions in 2025.
For taxpayers who itemize, it is essential to understand that there will be a new floor on 2026 income tax returns filed in 2027.
Starting in 2026, only total charitable contributions exceeding 0.5% of adjusted gross income will be deductible. The 0.5% floor only applies to those who itemize charitable deductions on their 2026 federal income tax return or later.
According to the Tax Foundation, an independent tax research organization, “Some taxpayers may adapt their giving strategies to maximize tax benefits, such as bringing donations forward to 2025 to avoid new caps on charitable deductions starting in 2026 or limits on overall itemized deductions.”
Young said taxpayers will most likely see changes incorporated into Schedule A for 2026.
How will the new floor work?
Oseven gave the following example: If your adjusted gross income is $100,000, the first $500 of your charitable contributions are not deductible. Subject to normal AGI percentage limits, only amounts in excess of $500 are deductible. A person with an AGI of $300,000 can only deduct amounts in excess of $1,500.
How will the new restrictions on cash donations to charities work?
Starting in 2026, itemized taxpayers will only be able to deduct cash contributions up to 60% of their adjusted gross income each year, subject to other limitations, Oseven said.
You can’t do both. Oseven said taxpayers can either itemize and claim the appropriate deductions for charitable contributions, or they can take the standard deduction and make adjustments based on their income. You cannot take advantage of both strategies and tax breaks in the same year.
Many of the innovative tax breaks included in the One Big Beautiful Bill Act will take effect when you file your 2025 tax return next year. These include a tax break on some overtime pay, a tax break on tips, a new deduction for auto loan interest, and additional deductions for people 65 and older.
A major change in charitable giving will occur in 2026. Still, before 2025 ends, crunch the numbers for yourself now and see what kind of charitable giving strategy will work best for you this year.
Contact personal finance columnist Susan Tompol: stompor@freepress.com. follow himr X @tompor.
