Tax Cuts and The Job Act: Key Changes that May Impact Charitable Giving
How Sunsetting Tax Laws might Affect your Charitable Giving Strategies
Condensed version Based on an article by Time Rowe, National Christian Foundation January 23, 2025
The Tax Cuts and Jobs Act (TCJA), passed in December 2017, brought major changes to taxes, affecting charities and generous donors. With many of its provisions set to expire in 2025, Congress is deciding whether to extend, replace, or let it expire. Here’s a look at some key changes and how they may impact charitable giving.
Income Tax Rates
The Tax Cuts and Jobs Act lowered the top income tax rate from 39.6% to 37%. If the rate returns to 39.6%, high-income donors might give more while maintaining the same net income. That’s because charitable deductions offset more taxes at the higher rate, making donations more impactful.
Charitable Deduction Limit for Cash Gifts
Before the TCJA, donors could only deduct cash donations up to 50% of their adjusted gross income (AGI). The TCJA raised this to 60%. Without changes, this limit will drop back to 50% in 2026, reducing how much donors can deduct.
Deductions and the Pease Limitation
The TCJA removed certain deductions and eliminated the Pease Limitation, which reduced itemized deductions for high-income taxpayers. These changes are set to return in 2026. While this may make more deductions available, the Pease Limitation could reduce the value of deductions, including charitable ones. Donors and tax advisors will need to revisit these rules.
A correlated aspect of this is the Pass Through Entity Tax (PTET). The pass-through entity tax (PTET) applies to taxpayers with pass-through business income who would normally pay state tax at the individual level. Partners in such businesses may elect to pay the tax at the entity level in certain states and therefore avoid the $10,000 Pease federal limitation. If an eligible entity elects to pay the PTET, its partners, members, or shareholders subject to tax deduction limitations may be eligible for a PTET credit on their State income tax returns.
The Qualified Business Income Deduction
The TCJA also introduced a Qualified Business Income (QBI) deduction, allowing business owners to deduct up to 20% of their qualifying income. Charities that own businesses benefiting from this deduction could lose resources if it sunsets. It could also indirectly impact donations if business owners have less income to give.
The Standard Deduction
The TCJA nearly doubled the standard deduction, which is $15,000–$30,000 in 2025 (based on inflation). A higher standard deduction means fewer people itemize, reducing the incentive to give. If the deduction is lowered, more taxpayers may itemize, possibly boosting donations. This may prompt donors to rethink their giving strategies.
The Child Tax Credit
The TCJA doubled the child tax credit, providing families with extra financial support. If the credit shrinks, families may face tighter budgets, making it harder to give generously.
Gift and Estate Tax
The TCJA increased the gift and estate tax exclusion to $10 million (about $13.99 million with inflation in 2025). This allows individuals to transfer more wealth tax-free. If it drops back to pre-TCJA levels, estates will face higher taxes. Donors may choose to give more to charities instead of paying taxes on their estates. This change could encourage more charitable giving as donors update their estate plans.
Permanent Changes
Some TCJA provisions are considered "permanent," but they could still change under new tax laws. These include:
The corporate tax rate, reduced to 21%
A longer holding period for carried interest (three years) to qualify for lower capital gains taxes
What’s Next?
If Congress doesn’t act, these changes will happen automatically at the start of 2026. While some provisions may reduce giving incentives, many donors are motivated by generosity and their desire to make a positive impact.
We are closely watching these developments. Our goal is to help donors navigate changes and maximize their deployment of the resources that God has entrusted to them either through giving or through redemptive business investments. We want to see God’s Steward’s maximize deployment for causes close to their hearts and we hope these shifts create new opportunities for impact, all for the glory of God.