As 2025 draws to a close, recent tax law changes under the One Big Beautiful Bill Act (OBBBA) create unique planning opportunities you may want to act on before December 31. Below are time-sensitive strategies to consider:
1. Itemize Charitable Contributions – No AGI Floor in 2025
- For this year only, charitable contributions can be fully itemized without the new 0.50% AGI floor effective 2026.
- Consider accelerating donations to qualified charities or a donor-advised fund (DAF) before year-end to maximize deductions.
- Tip: Donating appreciated securities can increase your deduction and re-balance your portfolio without triggering capital gains tax.
2. Maximize Retirement Contributions
- 401(k): Contribute up to $23,500 (or $31,000 if age 50+).
- Traditional/Roth IRA: Up to $7,000 (or $8,000 if age 50+).
- These contributions reduce AGI, which can help you qualify for expanded SALT deductions and/or the senior bonus deduction.
3. Health Savings Account (HSA) Contributions
- Contribute up to $4,300 (individual) or $8,550 (family), plus $1,000 catch-up if age 55+ for those enrolled in a high-deductible health insurance plan.
- HSAs offer triple-tax benefits: deductible contributions, tax-free growth, and tax-free withdrawals for qualified expenses.
- Tip: Contributions made through payroll avoid FICA taxes (Social Security & Medicare), making HSAs quadruple tax-free!
4. Expanded SALT Deduction for AGI $500,000 and Under
- If your Adjusted Gross Income is $500,000 or less, you may qualify for expanded state and local tax deductions, up to $40,000, if you itemize deductions.
- The deduction reduces by 30% until fully phased down to $10,000 with AGI in excess of $600,000..
- Shifting Q4 estimated state and property tax bills into 2025 can help optimize this deduction.
5. Senior Bonus Deduction – $12,000 for MFJ Filers with AGI $150,000 and Under
- This is available for any senior (65+) regardless of employment, filing Social Security or not, and where they itemize or claim the standard deduction.
- Married couples filing jointly with AGI under $150,000 can claim $12,000. This is in addition to their itemized or standard deduction ($31,500) and existing senior deduction ($3,200).
- Single filers with AGI under $75,000 can qualify for $6,000. This is on top of their itemized or standard deduction ($15,750) and existing senior deduction ($2,000).
6. Tax-Loss Harvesting
- Review your portfolio for opportunities to offset capital gains by realizing losses.
- This can reduce taxable income and potentially improve overall tax efficiency.
7. RMDs and the Power of QCDs
- If you’re age 73 or older, ensure Required Minimum Distributions are completed to avoid penalties.
- Consider Qualified Charitable Distributions (QCDs):
- You can donate up to $108,000 directly from your IRA to a qualified charity in 2025.
- QCDs reduce AGI dollar-for-dollar, making them more powerful than ever for unlocking expanded deductions like SALT and the senior bonus deduction noted above.
Additional Planning Opportunities
- Roth Conversions: Converting traditional IRA assets to Roth can lock in current tax rates and provide future tax-free growth. This is especially attractive if you expect higher tax rates later or want to reduce future RMDs for yourself, spouse or heirs.
- Annual Gifting: You can gift up to $19,000 per recipient in 2025 without triggering gift tax. This is a great way to reduce your taxable estate and support loved ones.
These strategies are most effective when implemented before December 31. If you’d like to review which options fit your situation, let’s schedule a year-end planning session. Please email us at clientservices@avodahadvisors.com.
Looking Ahead to 2026?
Freshly updated: Below is our comprehensive summary of all key 2026 planning limits—including retirement contributions, health savings accounts, tax brackets, credits, and other thresholds—now reflecting the latest IRS changes with OBBBA provisions. This is a chart to keep!
The information herein is for educational purposes. This information does not constitute advice in the area of legal or tax advice. It is your responsibility to seek guidance and advice of your own legal and tax professionals before making any decisions. Tax laws are subject to change.