By Jordon Rosen, CPA, MST, AEP® (Distinguished)
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In last month’s issue I discussed how charitable contributions will be impacted by the One Big Beautiful Bill (OBBB), with
several changes taking effect next year meaning it may be wise to look at your charitable giving from a multi-year perspective and possibly accelerating gifts before year end (see November 2025 JLD article at JewishLivingDelaware.org/navigating-charitable-giving-after-obbb for details).
If you can itemize deductions, writing a check to your favorite charitable organization, such as Jewish Federation of Delaware (JFD) or any of its constituent or supported agencies, is the quickest way to contribute. OBBB made permanent that, for 2025 and beyond, cash contributions are deductible up to 60 percent of adjusted gross income (AGI), with any excess available for carryover for up to five years.
Cash may be king, but when it comes to charitable giving, donating appreciated property is a better deal, since you get a full fair market value deduction for the donation and don’t have to recognize gain on the appreciation had you first sold the asset. It also doesn’t drain your checking account. Shares of stock, mutual funds, and ETFs are easy to donate, but you can also donate real estate and shares of a closely held business. The deduction for donating appreciated property is generally limited to 30 percent of AGI with the same five-year carryover for any excess amount. You can also donate appreciated securities to a donor advised fund (DAF) and get the same benefits and you can decide later where and when to distribute the funds. Bunching a larger amount of securities and/or cash into a DAF before the end of the year may give you a larger 2025 tax deduction since itemizers will see a reduction of the amount they can deduct based on income beginning in 2026 and higher-income taxpayers will also see a limited overall tax benefit starting next year (again, see my article from November JLD).
If you have an unincorporated business or partnership that reports on a cash basis, you can reduce taxable profits for 2025 by simply paying qualified 2025 expenses before the end of the year. If you make contributions to charity out of the business, however, they will not reduce your business income, but you can still claim them on Schedule A as a charitable deduction if you itemize.
I mentioned bunching charitable contributions above, but it is worth repeating. If you didn’t qualify to itemize last year, consider “bunching” several years’ worth of contributions into 2025 to maximize your charitable deduction this year and then claim the higher standard deduction for the next few years. The standard deduction in 2025 for a married couple under age 65 is $31,500. Since OBBB increased the limit for the state and local tax deduction from $10,000 to $40,000 beginning this year, for many taxpayers it will allow them to either get closer to or be able to itemize, thus making the bunching strategy in 2025 more beneficial (and avoid the 2026 reductions).
Age 70 ½ or over? You now qualify for making a qualified contribution distribution (QCD) directly from your IRA (or
inherited IRA) up to $108,000 in 2025 directly to a charitable organization(s) (other than to a DAF). If your spouse is at least 70 ½, they can do the same from their IRA. The benefit of a QCD is that the distribution is not included in AGI but still counts toward your required minimum distribution (so keep this in mind for 2026 as well). Keeping a lower AGI can mean a lower Medicare Part B and D premium, increased medical deductions and other benefits that are based on AGI.
If you have a paid-up life insurance policy, consider donating it to Jewish Federation of Delaware (JFD) rather than canceling the policy. You will get a deduction for the cash value. If premiums are still due, payment of future premiums would also be a charitable deduction.
Thinking of selling your business or real estate? Getting a large bonus? Rather than first selling the shares or real estate which would subject you to federal and state tax on the gain, consider first establishing a charitable remainder trust (CRT) and donating the shares/real estate to the trust. The trust can sell the asset and, since it is recognized as a 501(c)(3), it pays no tax on the gain. In short, the trust pays you (or joint with another person) an annuity or unitrust amount for your lifetime or for a set number of years (not to exceed 20), with the remainder going to the charity(ies) of your choice, such as JFD and its related agencies when the trust terminates. In the meantime, you get a deduction for the contribution to the trust in the year funded (less the value of the future benefit you will be receiving), you avoided paying tax on the sale of the asset and the full value of the assets in the trust are out of your estate. This is great for those that are philanthropically
inclined and still want to receive income from the assets for the remainder of their life. With interest rates still relatively high, the benefits of a CRT can be substantial.
Another vehicle that does well when interest rates are higher is a charitable gift annuity (CGA). Similar in nature to a CRT, the purchase of a CGA will result in the annuitant receiving a partial tax deduction and a lifetime annuity, with any remainder going to a specified charity(ies). For example, a couple, each age 70 purchasing a joint/survivor CGA could receive a 5.5 percent annuity based on the amount contributed (6.2% for age 75 and 6.9% for an 80- year-old couple).
It’s not too late to contact your tax advisor to see how you can best lower your 2025 taxes while accomplishing your philanthropic goals.
The above does not constitute tax, legal or financial advice. You should always consult with a competent advisor before implementing any charitable strategy.
For further information on how to set up a donor advised fund, endowment or to make a contribution of securities to Jewish Fund for the Future, please contact Lesley Tryon at Lesley@ShalomDel.org.
Jordon Rosen is a former shareholder at the Wilmington, DE CPA firm of Belfint, Lyons & Shuman, P.A. and is Treasurer of Jewish Federation of Delaware.
