As we approach the end of the year, now is a great time to think about proactive tax planning opportunities, especially in light of changes coming from the One Big Beautiful Bill Act (OBBBA) for 2025 and beyond.
Charitable Giving
Beginning in 2026, the OBBBA will introduce new limitations on itemized charitable deductions:
- New floor: The first 0.5% of Adjusted Gross Income (AGI) will not be deductible.
- Example: For a married couple with $500,000 AGI, the first $2,500 of charitable gifts will not be deductible; only amounts above that threshold will qualify.
- New ceiling: The maximum tax benefit from itemized deductions will be capped at 35%, instead of the current top marginal rate of 37%.
Therefore, for individuals or couples in the highest tax brackets who benefit from itemizing deductions, it may be advantageous to maximize charitable giving in 2025 before these limitations take effect.
As a reminder, there are a few more tax-efficient charitable giving strategies than writing a check:
- Donate Appreciated Securities
Receive a full fair-market-value deduction and avoid capital gains tax.
- Contribute to a Donor-Advised Fund (DAF)
Front-load multiple years of donations and claim the full deduction in the current year while distributing gifts to charities over time. - Use a Qualified Charitable Distribution (QCD)
For individuals aged 70½ and older, a QCD can satisfy Required Minimum Distributions (RMDs) and reduce taxable income.
Managing Your Tax Bracket
Effective tax planning is about proactively managing today’s marginal tax bracket while keeping future income in mind. The OBBBA introduces several new deductions, credits, and phaseouts starting in 2025:
- New Age-Based Deduction (2025–2028)
Individuals age 65+ may claim an additional $6,000 deduction per person, with phaseouts beginning at $75,000 AGI for individuals and $150,000 AGI for married couples filing jointly. - Increased SALT Deduction (2025-2029)
The State and Local Tax (SALT) cap increases from $10,000 to $40,000, but it begins to phase out for modified AGI above $500,000 for both single and joint filers and is fully phased out once income reaches $600,000.
You may consider these strategies to help keep your income below these thresholds:
- Accelerating business expenses
- Maximizing pre-tax retirement contributions
- Utilizing QCDs if qualified
- Delaying receipt of income
In addition, if you are experiencing an abnormally low-income year, these strategies might be beneficial:
- Roth conversions to fill lower tax brackets
- Capital gain harvesting at potentially favorable rates
We’re Here to Help
The Silver Oak advisory team is available to discuss these tax changes and ideas with you, and to collaborate with your tax professional to determine and help you implement the most beneficial year-end tax strategies. We look forward to connecting with you and wish you a successful year-end.