C Corporation Charitable Contribution Deduction Limits Changing After 12/31/25

Beginning with C corporation tax years starting after December 31, 2025, charitable contribution deductions will be calculated under a significantly different framework. These new rules introduce two significant constraints on charitable giving:

• A 1% taxable income floor, meaning corporations may deduct only the portion of charitable contributions that exceeds 1% of taxable income.
• A 10% taxable income cap, which limits the total amount that may be deducted in a given year.

These changes will reshape how corporations approach charitable giving, especially those with long-standing community investment programs. Understanding the updated charitable deduction limitations now can help organizations adjust strategies before the rules take effect.

Understanding the 1% Taxable Income Floor

Under the new provisions, charitable contributions are deductible only to the extent they exceed 1% of taxable income. This means a corporation must first absorb 1% of taxable income as a nondeductible amount before any contributions generate a tax benefit.

For corporations with large philanthropic commitments, this floor may reduce immediate deductions and create a need for more detailed planning around donation timing and overall corporate giving rules. This change also affects businesses that historically relied on charitable deductions as a recurring tax offset.

The 10% Taxable Income Cap on Charitable Deductions

After meeting the 1% floor, total deductible charitable contributions will be limited to 10% of taxable income. Contributions above that cap cannot be deducted in the current year.

This limitation reinforces the importance of forecasting taxable income and evaluating how charitable contributions interact with other corporate tax deductions. Companies accustomed to contributing well above the 10% threshold will likely feel the impact most, particularly those in industries with robust giving programs or corporate social responsibility initiatives.

Carryforward Rules for Excess Contributions

Excess charitable contributions may be carried forward for up to five years. These are amounts above the 10% taxable income cap that cannot be deducted in the current year.

Importantly, when contributions exceed 10% of taxable income, the portion subject to the 1% floor can also be carried forward. This creates opportunities for multi-year charitable contribution planning, especially for corporations with variable taxable income from year to year.

Managing carryforwards effectively will require more intentional alignment of projected earnings, giving priorities, and annual contribution cycles.

Impact on Financial Institutions and Other Corporations

Financial institutions should anticipate a noticeable reduction in allowable charitable contribution deductions under the new framework. Given the sector’s historically strong commitment to community involvement and philanthropic programs, these limitations may drive broader changes to how charitable initiatives are structured and funded.

Other corporations with large community-giving commitments may face similar challenges. Industry-specific tax planning will become increasingly important to ensure charitable goals align with the evolving corporate philanthropy deduction rules.

Planning Strategies Under the New Deduction Limits

With the new limitations approaching, C corporations should consider proactive planning steps, such as:

• Evaluating the timing of contributions. Accelerating donations before the end of 2025 may provide more favorable deductions under current rules.
• Projecting taxable income levels. Understanding future taxable income will help determine the effect of both the 1% floor and 10% cap.
• Adopting multi-year charitable planning. Aligning contributions with available carryforward periods can help maximize long-term tax benefits.
• Assessing how contributions interact with other deductions. Taxable income management will play an increasingly important role in optimizing the value of charitable giving.

These steps can help organizations maintain their philanthropic commitments while adapting to new deduction limitations.

Prepare Now for New Charitable Deduction Rules

The upcoming charitable deduction limitations for C corporations—namely the 1% taxable income floor and 10% taxable income cap—represent meaningful changes for corporate charitable giving and tax planning. Now is the time to review taxable income forecasts, assess current contribution strategies, and develop multi-year plans that account for the new carryforward structure.

If you have questions about how these rules affect your organization or need support developing a charitable deduction strategy, contact your CRI advisor for guidance tailored to your business and giving objectives. By proactively planning now, you can help make sure your charitable goals continue to align with evolving tax requirements in the future.