Wealthy individuals are advised to increase charitable donations this year due to tax advantages that will decrease in 2026. The tax bill signed by President Trump will limit deductions for charitable contributions to 0.5% of adjusted gross income starting in 2026, impacting high-earning donors. There is a rush to donate before year-end to maximize tax benefits.

The tax bill will reduce benefits for donors in the 37% tax bracket, lowering the effective tax benefit from 37% to 35%. This change will significantly impact top earners, especially entrepreneurs who often make large donations to lower their tax burden. Advisors recommend bunching donations to maximize tax benefits in light of the new regulations.

Despite the changes, individuals 73 and older can still receive significant tax savings by donating their required minimum withdrawal from a retirement account. Qualified charitable distributions from retirement accounts can result in a 100% deduction by reducing income dollar for dollar. There is a recommendation to contribute to a donor-advised fund for upfront deductions and flexibility in choosing charities to support.

Wealthy donors account for the majority of charitable giving, with ultra-wealthy individuals worth at least $30 million contributing a significant amount to charitable causes. While the new tax regime may be a nuisance for wealthy clients, it is not expected to be a major obstacle to charitable giving. The changes may lead some to question the value of donating, as the tax benefits are reduced under the new regulations.

Read more at CNBC: Why top earners should make donations before 2026