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With year-end approaching, now is the time to finalize your tax planning before 2025 comes to a close. The One Big Beautiful Bill Act (OBBBA) introduced and modified several provisions that can significantly affect your tax liability for 2025 and forward. Key changes include a higher cap on state and local tax (SALT) deductions, new charitable giving rules, among others.

Take Advantage of the Higher SALT Cap

The OBBBA temporarily quadruples the SALT deduction limit. From 2025 through 2029, itemizers can deduct up to $40,000 ($20,000 if married filing separately), increasing by 1% each year ($40,400 in 2026, and so on).

Deductible SALT expenses include property taxes (on homes, vehicles, and boats) and either income or sales tax, but not both. The cap is scheduled to revert to $10,000 ($5,000 separate) in 2030.

The deduction phases out by 30% of the amount your modified adjusted gross income (MAGI) exceeds $500,000 ($250,000 separate). Once MAGI reaches $600,000 ($300,000 separate), the full $10,000 cap applies. This steep drop-off can substantially increase a taxpayer’s effective rate within the phasedown range.

Planning tip: If your SALT deductions exceed the old $10,000 limit, consider “bunching” payments into 2025. Paying your 2026 property tax bill before year-end could allow both years’ taxes to be deducted this year, then take the standard deduction in 2026 and repeat later.

Be mindful, however, that Alternative Minimum Tax (AMT) exposure can reduce or eliminate this benefit.

Plan Ahead for Charitable Giving

Charitable donations remain an important year-end strategy, but starting in 2026, the OBBBA introduces a 0.5% of AGI “floor” on charitable deductions. That means only contributions above that threshold (e.g., above $500 on $100,000 of AGI) are deductible.

While this change may not materially affect most taxpayers, those with higher levels of income or a pending liquidity event such as a business sale, should plan carefully.
To maximize your deduction, consider bunching 2026 contributions into 2025, or donating appreciated stock to avoid capital gains and deduct the property’s fair market value. You might also contribute to a donor-advised fund (DAF) in 2025 to secure the deduction now and distribute funds to charities over future years.

If you don’t itemize, note that beginning in 2026, the OBBBA provides a permanent above-the-line deduction for cash gifts up to $1,000 for individuals and $2,000 for joint filers (excluding private foundations and DAFs).

Manage Your MAGI

Your MAGI drives many phaseouts and thresholds under the OBBBA. The new temporary $6,000 “senior deduction” (for taxpayers age 65+) begins to phase out at $75,000 MAGI ($150,000 joint). The enhanced SALT deduction, Child Tax Credit, and new deductions for tips, overtime pay, and auto loan interest are all MAGI-sensitive. MAGI also determines liability for the 3.8% Net Investment Income Tax (NIIT).

To manage MAGI effectively:

•    Spread Roth conversions over multiple years.
•    Maximize contributions to traditional retirement plans and Health Savings Accounts (HSAs).

•    If you’re age 70½ or older, consider qualified charitable distributions (QCDs) from your IRA. Although QCDs don’t generate a charitable deduction, they reduce MAGI and can satisfy required minimum distributions—often yielding a better overall tax result.

Plan Now

With year-end approaching, now is a good time to revisit whether you’ll itemize deductions or claim the standard deduction for 2025. The OBBBA increased the standard deduction again, $31,500 for joint filers, $23,625 for heads of household, and $15,750 for single filers, and don’t forget that taxpayers age 65 or older or blind are eligible for an additional standard deduction of $2,000 or, for joint filers, $1,600 per spouse. 

However, expanded SALT and charitable deductions could make itemizing worthwhile this year, especially for higher earners who may face new limits starting in 2026. Beginning in 2026, the OBBBA limits the value of itemized deductions for top-bracket taxpayers, reducing the benefit from 37 cents to 35 cents per dollar. High earners may want to accelerate deductions into 2025 to capture their full value before this change takes effect.

Don’t miss out on both new and traditional planning opportunities to reduce your 2025 tax liability. The best strategies will depend on your unique situation, but timely action can help you make the most of your available options. Your Sisterson team is available to assist you with any year-end tax planning items!