If giving generously is part of your financial strategy, 2025 may be the year to give differently. The One Big Beautiful Bill Act (OBBBA) changed key rules governing charitable contributions. As a result, you may want to accelerate charitable gifts this year to make the most of current deduction opportunities. Don’t worry — there’s still time to make gifts this year. Below are more details, and other reminders, to consider before the end of 2025:

Navigating new limits on charitable deductions 

Starting in 2026, a federal tax law change will make it less advantageous for high net worth individuals to claim charitable deductions. Two key provisions will affect how much you can deduct.

First, the tax benefit of all itemized deductions will be capped at 35%. This means that even if you’re in the highest federal tax bracket (currently 37%), starting in 2026, you’ll only save 35 cents in taxes for every dollar you deduct, rather than 37 cents.

Second, a new “floor” will apply to itemized charitable deductions. This means you’ll only be able to deduct the portion of your charitable gifts that exceeds 0.5% of your adjusted gross income (AGI). Thus, if your AGI is $1 million, the first $5,000 of charitable giving won’t be deductible — only amounts above that threshold will count. If your AGI is $10 million, the floor rises to $50,000. In short, as your income increases, so does the minimum amount you must give before you can start claiming a deduction.

To see how this might work in practice, consider the following example. If you were to make a $100,000 charitable gift and your AGI was $1 million, in 2025 you could deduct the full amount at your top rate, saving $37,000 in taxes. In 2026, you will only be able to deduct $95,000 after the imposition of the new floor, and your tax savings would be capped at $33,250.

Accelerating deductions in 2025 and frontloading charitable giving, such as funding donor-advised funds (DAFs) for future giving, can help mitigate the impact.

Don’t forget that individuals 70 1/2 and older can contribute up to $108,000 (for 2025) directly from traditional individual retirement accounts (IRAs) to qualified charities. These qualified charitable distributions (QCDs) are not included in taxable income and count toward an individual’s requirement minimum distributions. QCDs may be especially advantageous in light of changes made under the OBBBA. Unlike itemized deductions, QCDs bypass the new 0.5% floor on charitable deductions as well as the new 35% cap for high-income taxpayers taking effect in 2026.

OBBBA changes to state and local tax (SALT) deductions

Additionally, the SALT deduction increases for individuals and married couples filing jointly to $40,000 in 2025 through 2029 ($20,000 for married individuals filing separately) — up from the current limit of $10,000 ($5,000 for married individuals filing separately) — but is reduced for those with modified AGI exceeding $500,000 ($250,000 for married filing separately). This year, consider working with your tax advisor to see if you can reduce your modified AGI. For example, you may choose to contribute more to a pre-tax 401(k) or delay exercising stock options, if applicable to your situation.

Your Private Wealth Advisor can work with you and your tax advisor to navigate these changes taking effect. 

Family gifting and estate planning

In 2025, the annual gift exclusion increased to $19,000 per person, while the lifetime gift and estate tax exemption is $13.99 million. In 2026, the lifetime gift and estate tax exemption will increase to $15 million, indexed for inflation. It’s important to review gifting strategies and estate plans to see if it makes sense in your situation to make full use of these thresholds. 

Additionally, the generation-skipping transfer (GST) tax exemption is increasing, offering more flexibility for multigenerational wealth transfers.

Retirement planning: SECURE 2.0 Act and Roth strategies

To maximize retirement savings, make all 401(k) and IRA contributions by December 31. For 2025, the 401(k) contribution limit is $23,500, with higher catch-up contributions for people aged 50 and above. IRA limits are set at $7,000, with an additional $1,000 catch-up for those over 50.

Starting January 1, 2026, a new rule under the SECURE 2.0 Act will impact how higher paid employees can make catch up contributions to their retirement plans. If you’re turning 50 or older in 2026 and your total 2025 FICA wages were over $145,000 (indexed annually), any catch-up contributions you make in 2026 must be made as after-tax Roth contributions. If your retirement plan does not offer a Roth option, you will not be able to make catch-up contributions. Your Private Wealth Advisor can help you understand how this change may affect your retirement strategy.

It’s valuable to review your plan options to make effective use of tax-deferred growth. Strategic Roth conversions during low-income years or periods of market volatility can also be a powerful tool for tax-efficient retirement planning. Your Private Wealth Advisor can provide guidance on optimizing your retirement investments to pursue long-term goals.

Perennial reminders

It’s easy to lose track of the little details in investing, especially if you have complex holdings. Each year, we help clients think through and complete several tasks, in addition to making gifts and retirement planning. 

As part of your year-end review with your Private Wealth Advisor, please discuss your anticipated cash flow needs for next year.

Additionally, we suggest working with your Private Wealth Advisor to perform an estate plan review to check that your assets are optimally titled for your estate and legacy goals. Another helpful step is to update beneficiary designations on retirement accounts, life insurance policies and transfer-on-death registrations to reflect any family or life changes.

Reviewing your insurance annually to confirm you are adequately covered and your insurance is aligned with your liquidity needs is another important assessment with which your Private Wealth Advisor can assist. 

Please reach out to your Private Wealth Advisor if you have questions on any of these topics.