Gifting Strategies Aligned With Your Values and the New Tax Rules

Michelle (Eun) Cho
Dec 10, 2025
5 min read

By Michelle Cho, CFP®, BFA™, ChSNC® | Founder, Echo Wealth Partners

When you think about gifting, what comes to mind first?

For many of us, it’s the people and communities we’re most grateful for:

Family and the next generation
Teachers, mentors, and communities that shaped us
Nonprofits fighting for climate, poverty relief, social justice, gender equity, health equity or animal welfare

But in 2025, gifting is not only a values question but it’s also a time-sensitive tax planning question.

Beginning in 2026, new rules will change how much of your charitable giving is deductible. In particular, a new 0.5% “income floor” will apply to itemized charitable deductions:

Only the portion of your charitable giving that exceeds 0.5% of your Adjusted Gross Income (AGI) will be deductible.
Example: If your AGI is $1,000,000 in 2026, the first $5,000 of giving each year will not be deductible.

For high earners, there will also be a 35% cap on the value of itemized deductions, including charitable contributions even if you’re in the 37% tax bracket.

Translation: 2025 is a uniquely powerful year to be generous, especially if you use tools like donor-advised funds (DAFs) to front-load multiple years of giving.

Let’s look at how you can align your gifts with your values and the new tax reality.

1. Family Gifting: Love in Action (and Estate-Tax Friendly)

If you’re grateful for family and want to see the impact of your wealth during your lifetime, the annual gift tax exclusion is your simplest tool.

In 2025, you can give up to $19,000 per person without using any of your lifetime gift and estate tax exemption.
Married couples can “split” gifts and give up to $38,000 per recipient.

These gifts can:

Help adult children with a down payment
Fund 529 college savings plans for children and grandchildren
Support loved ones through caregiving, career changes, or transitions

Using Life Insurance as a Strategic Gifting Tool

You can also use annual gifts to fund a life insurance policy often owned by an irrevocable life insurance trust (ILIT), designed for the benefit of the next generation:

Annual exclusion gifts pay the premiums.
The death benefit can pass income-tax free to heirs and, if properly structured, outside your taxable estate.
It can help equalize inheritances when some children will receive a family business or real estate and others won’t.

Here, the question isn’t just “How much can I give?” but “What do I want this gift to teach?”

Responsibility, independence, stewardship, generosity — your structure sends a message.

2. Donor-Advised Funds (DAFs): Lock In 2025 Tax Rules, Give Over Time

A donor-advised fund is like a family giving account:

You make a contribution (cash, appreciated stock, sometimes other assets).
You get an immediate charitable deduction in the year you contribute, subject to AGI limits (up to 60% of AGI for cash to public charities, 30% for long-term appreciated assets).
The funds can be invested to grow tax-free, and you recommend grants to nonprofits over time.

Why a DAF is Especially Attractive This Year

Because of the 0.5% AGI floor and deduction caps starting in 2026, 2025 is a pivotal year for DAF funding:

In 2025, every deductible dollar counts (within the usual AGI limits). There is no 0.5% floor yet, so your entire DAF contribution can be deductible up to 60%/30% limits.
Starting 2026, the first 0.5% of AGI you give will not be deductible, even if you itemize.
If you’re in the 37% bracket, 2025 is the last year to potentially get a deduction at that full rate; in 2026 and beyond, the tax benefit is capped at 35% of the contribution, even if your marginal rate is higher.

This makes 2025 ideal for a “bunching” strategy:

Contribute several years’ worth of future charitable giving into a DAF now (in 2025), take a larger deduction under the more favorable rules, and then recommend grants slowly over the next 5–10 years.

You get:

A larger deduction in a high-income year
Potentially avoid the 0.5% floor altogether on those dollars
Full flexibility to support climate, poverty relief, social justice, gender equity, health equity, animal welfare, and other causes at your own pace

For many high-income donors, a DAF is the most efficient way to lock in 2025 tax rules while staying deeply aligned with their values.

3. LENDonate & Impact-Focused Gifting

If your gratitude extends to communities and nonprofits that are building solutions, you may want to go beyond traditional grants.

Platforms like LENDonate create a marketplace where donors and investors can lend and/or donate to vetted nonprofits.

Potential benefits:

Your capital can recycle — loans are repaid and can be redeployed.
Nonprofits gain access to affordable financing for growth, facilities, or bridge funding.
You can combine investment discipline with philanthropic purpose.

Tax-wise, interest income from loans is generally taxable, but any outright donation portion may be deductible (again, subject to the AGI limits and the new 0.5% floor starting in 2026). Structuring this well often involves pairing DAF grants with impact loans.

4. Private Foundations: Building a Legacy Institution

If you feel called to create a multi-generational platform for giving, a private foundation might fit.

Pros:

Formal structure for family involvement, board service, and governance
Ability to support a broad range of activities, including some that DAFs can’t (e.g., certain scholarships, international grants with extra diligence)
Opportunity to weave philanthropy into your family culture and identity

Trade-offs:

Higher administrative cost and complexity
Annual 5% minimum distribution requirement for most private foundations
Subject to the same new regime: 0.5% floor + 35% cap for itemized deductions beginning in 2026 (and DAFs/foundations are excluded from the new small above-the-line deduction for non-itemizers).

For some families, the right sequence is:

Use a DAF in 2025 to lock in tax benefits and begin structured giving.
Consider whether a foundation makes sense later, when governance and educational goals become central.

5. Direct Giving to the Causes You Care

Of course, you can always give directly to nonprofits. Direct cash or appreciated stock gifts to qualified public charities can still be incredibly tax-efficient especially in 2025:

Donate appreciated securities and you may avoid capital gains tax and get a deduction for fair market value, within AGI limits.
In 2026+, remember that the 0.5% AGI floor will reduce the deductible portion of smaller or moderate annual gifts, which may encourage more strategic, larger gifts in certain years.

Questions to Reflect On Before Year-End

As you think about your 2025 gifting strategy, here are a few powerful questions:

Who or what are you most grateful for? How can your money “say thank you” in a tangible way?
How much of your giving do you want to be spontaneous, and how much strategic? A DAF or foundation can give structure without killing joy.
Given the 2026 rule changes (0.5% floor + 35% cap), does it make sense to front-load several years of giving into 2025? Especially if you have unusually high income this year.
How do you want your children or heirs to experience your generosity? Through annual gifts, life-insurance-funded legacies, involvement in a DAF or foundation or all of the above?

Sharing the Joy of Gifting

At its core, gifting is an expression of love, gratitude and hope:

Love for your family and community
Gratitude for the people and opportunities that shaped us
Hope that our resources can make life better for those who are in need and who come after us

The new tax rules simply mean we need to be more intentional and strategic so that more of each dollar goes where you want it to go — to your family, your community, and the causes that reflect your deepest values.

Let’s share the joy of gifting.

This newsletter is for educational purposes only and does not constitute tax, legal, or investment advice. Tax rules are complex and evolving; please consult your CPA, tax advisor, and financial planner before implementing any gifting strategy for your specific situation.