End-Of-Year Charitable Contributions Considerations and Donor Acknowledgement Letters

Changes to Charitable Contribution Deduction Rules

The One Big Beautiful Bill Act (OBBB) that was signed into law in July of 2025, made several changes to the charitable contribution deduction rules. In short, the law established donation floors regarding claiming a deduction for charitable contributions for individuals who itemize and corporations. The floors are 0.5% of adjusted gross income (AGI) for individuals and 1% of taxable income for corporations. Starting in tax year 2026, individuals who itemize will not be able to take advantage of the charitable contribution deduction unless they donate over 0.5% of their AGI. Similarly, corporations must donate 1% of their taxable income in order to claim the deduction. And then only the amount that is above the floor gets deducted. These changes will reduce or essentially eliminate the charitable contribution deduction for many taxpayers.

The OBBB also implemented a charitable contribution deduction for individuals who do not itemize: up to $1,000 for single filers and up to $2,000 for married filing jointly.

With the new rules on charitable contribution deductions coming into effect in 2026, not-for-profit organizations may want to consider conversations with donors regarding how donors can maximize their tax benefit and the impact to the organization. Some donors have found it advantageous to bunch their donations into a single year, instead of making smaller donations spread out over multiple years.

Reminders on Completing Donor Acknowledgement Letters

As 2025 comes to a close, it is important that tax-exempt organizations provide acknowledgement letters that meet Internal Revenue Service (IRS) requirements to their donors for charitable contributions. The IRS provides specific recordkeeping and substantiation rules that are critical for tax-exempt organizations to understand when providing acknowledgement letters.

When a tax-exempt organization receives a cash donation of $250 or more, the acknowledgement must include the name of the tax-exempt organization, the amount received, date of receipt and a statement that no goods or services were provided in return for the contribution.

When a tax-exempt organization receives a cash donation of $75 or more and goods or services are provided in return, the acknowledgment letter must include the value of goods and services provided in return as well as the name of the organization, the amount received and date of receipt.

When a non-profit organization receives a non-cash donation of $250 or more, the acknowledgement letter to the donor must include: the name of the organization, date of receipt, description of the property received but not the value of noncash item(s), a statement that there were no goods or services received in return (or the value of goods and services provided). It is the responsibility of the donor to determine the value of noncash donations given to qualified charities.

The acknowledgements should be contemporaneous and written. For the written acknowledgment to be considered contemporaneous, a donor must receive the acknowledgment on or before the earlier of:

the date on which the donor files the donor’s individual federal income tax return for the year of the contribution; or

the due date (including extensions) of such return.

Charities typically send written acknowledgments to donors no later than January 31 of the year following the donation. If there are multiple gifts from a single donor in one year, charities can aggregate them into one letter.

It is also important to note that certain states have requirements that must also be included in the letter or the written request for the contribution.