2025 Year End Tax Tips and Charitable Considerations

As we approach the end of 2025, there are several key tax-planning strategies to consider and potential action items to address:

• Maximize retirement contributions
• Harvest tax losses:  sell investments at a loss to offset capital gains and up to $3,000 of ordinary income.  
• Take your IRA required minimum distributions (RMD) to avoid penalties.  Better yet, if you are age 70.5 or older (even if you haven’t reached the age to start taking RMDs), you can take advantage of a Qualified Charitable Distribution (QCD) from your IRA directly to a charity of up to $108,000 per person, and these distributions are excluded from taxable income.
• Fund your Health Savings Account (HSA) and Flexible Savings Accounts (FSA)- maximize contributions or use FSA dollars by the deadline.  
• Manage medical expenses – if your qualified medical expenses exceed 7.5% of your Adjusted Gross Income (AGI), prepaying expenses before year-end can help meet this threshold.  
• Avoid paying capital gains on long-term appreciated marketable securities by donating to a charity or to your Donor Advised Fund.  

2025 versus 2026 – charitable giving strategies

• 2026 -based on the One Big Beautiful Bill Act (OBBBA) signed into law on July 4, 2025
  • Taxpayers who itemize must navigate two new limitations
    • Only charitable contributions that exceed 0.5% of the taxpayers adjusted gross income (AGI) will be deductible. However, any “lost” charitable contribution can be carried forward for use for up to 5 years, but it would be subject to the 0.5% AGI floor each year.  
    • For any taxpayer in the 37% bracket, itemized deductions are capped at 35%.  Example:  if you gave $1,000 to charity, rather than getting a $370 tax benefit, you would now only receive $350 tax benefit and the extra $20 is lost.  
  • Starting in the 2026 tax year, taxpayers who do not itemize can still claim an above-the-line deduction for cash charitable gifts of $1,000 for singles and $2,000 for married filing jointly.  Cash contributions to a Donor Advised Fund do not qualify.  
  • State and local tax (SALT) deduction cap for itemizers increased to $40,000 in 2025, up from $10,000 in 2024.  Income limits apply and the deduction will phase out for households with modified AGI above $500,000 (married filing jointly). If your income is below $500,000, the higher cap may help you increase your itemized deductions and potentially boost the value of your charitable deductions.  
• 2025
  • Consider accelerating charitable contributions in 2025 versus 2026, as larger gifts today are not subject to the new AGI floors or ceilings.  
  • Bunching deductions – If your itemized deductions are close to your standard deduction amounts, consider “bunching” expenses (such as making accelerated charitable contributions) in 2025 to exceed the standard deduction threshold and itemize, then take the standard deduction in 2026.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal or accounting advice.  You should consult your own tax, legal or accounting advisors for further discussion.