As the year winds down, many BSW Clients are thinking about how to make a meaningful impact through charitable giving. One of the most flexible and tax-efficient tools available is the Donor Advised Fund (DAF). A quick refresher on how Donor Advised Funds work:
- Contribute now, deduct now. Generally, taxpayers receive an immediate tax deduction in the year they contribute to the DAF.
- Contribute Strategically. You can donate cash (and deduct up to 60% of your AGI) or contribute appreciated or concentrated stock (and deduct the full fair market value up to 30% of your AGI) with a five-year carryforward. This can also help reduce or eliminate capital gains tax on appreciated assets held for more than one year
- Give later. There’s no pressure to distribute funds right away. You can recommend grants to IRS-qualified 501(c)(3) charities at your own pace.
And remember, while your charitable dollars sit in a DAF, they don’t sit idle. DAF funds can be invested, managed and integrated into your BSW portfolio.
For many BSW clients, this creates an opportunity to align their investments with their values. One option is using Sustainable Investing strategies in the underlying portfolio, allowing your charitable assets to work on two levels: through the grants you recommend, and through the investments that support the causes you care about. For example, a client focused on environmental sustainability might grant funds to organizations addressing climate change, while utilizing an investment strategy that seeks to reduce carbon emissions and conserve natural resources. It’s one more way to amplify your impact, today and over time.
Why 2025 is a Strategic Year for Gifting
The One Big Beautiful Bill Act, signed into law this July, will, in some ways, limit tax breaks for charitable giving starting in 2026. This makes the remainder of 2025 a unique window for tax-efficient charitable giving. Here are two major updates that could impact charitable strategies starting in 2026:
- New 0.5% income floor: Taxpayers who itemize will need to subtract 0.5% of their AGI from their charitable contributions before deductions apply. In other words, only the portion of donations above that threshold will be deductible.
- Reduced deduction cap: For those in the top tax bracket, the maximum deduction rate will drop from 37% to 35% of modified adjusted gross income (MAGI), meaning each dollar donated will receive a slightly smaller tax benefit.
An example of what this would look like: A donor with $500,000 in AGI who contributes $25,000 to charity in 2026 would only be able to deduct $22,500 due to the new floor. In 2025, under current rules, that same $25,000 would be fully deductible.
So here are our key takeaways…
With these changes on the horizon, 2025 may be a smart year to front-load charitable giving, particularly through a DAF. Doing so may allow you to:
- Maximize your current-year deduction under the 2025 rules
- Maintain the flexibility to distribute grants in future years
- Align your giving with personal values through sustainable investing strategies
At BSW, we can help you model different giving scenarios, projecting when your contributions might cross the 0.5% AGI floor or be affected by the 35% deduction cap, so you can make informed, intentional decisions about charitable strategies. As always, we’re here to help you give with purpose and efficiency. If you’re considering a Donor Advised Fund or looking to update your charitable strategy ahead of 2026, let’s have a conversation. Your giving reflects who you are and how you want to shape the world. Let’s make it count!
Lily Beitel-Horton, Advisor
