The final months of the year often bring a flurry of activity and an opportunity to pause and take stock of your financial picture. Recent updates under the One Big Beautiful Bill Act (OBBBA) and upcoming tax changes for 2026 make this a good time to revisit your financial plan and consider whether any adjustments may be beneficial before year-end. A thoughtful review can help ensure your strategies remain aligned with your goals, reflect current legislation, and are positioned to adapt as the tax landscape continues to evolve.
1. Maximize Charitable Giving
Beginning in 2026, only charitable contributions exceeding 0.5% of a taxpayer’s adjusted gross income (AGI) will be deductible. For example, a couple with an AGI of $400,000 could only deduct charitable contributions above $2,000. This new floor effectively limits the value of smaller charitable gifts for those who itemize deductions.
Also starting in 2026, individuals in the top 37% tax bracket will see the benefit from all itemized deductions capped at a 35% rate. That means a top earner who donates $10,000 would receive a $3,500 tax reduction instead of $3,700 under current law. This subtle change reduces the overall tax advantage of charitable giving for high-income households.
Tax Savings with Bunching
2025 | 2026 | 2027 | Bunched Year 1 | |
Charitable Donation | $15,000 | $15,000 | $15,000 | $45,000 |
0.5 AGI Floor |
| $-2,500 | $-2,500 | |
Mortgage Interest | $10,000 | $10,000 | $10,000 | $10,000 |
SALT Taxes | $15,000 | $15,000 | $15,000 | $15,000 |
Total Itemized Deductions | $40,000 | $37,500 | $37,500 | $70,000 |
Estimated Tax Savings Over Standard Deduction $6,560 | Estimated Tax Savings Over Standard Deduction $12,230 |
*32% federal income tax bracket and a 2025 standard deduction of $31,500 for married filing jointly, AGI $500,000.
2. Revisit SALT Deduction Opportunities
Beginning in 2025, the One Big Beautiful Bill Act (OBBBA) increases the state and local tax (SALT) deduction cap from $10,000 to $40,000, and indexes it by 1% annually through 2029. The increased limit begins to phase out for higher income earners, reducing the deduction by 30% of modified adjusted gross income (MAGI) above $500,000 until it returns to $10,000 for incomes over $600,000. The higher limit applies to all filing statuses except married filing separately.
This change gives taxpayers, particularly those in high-tax states such as Oregon and California, an opportunity to review whether itemizing deductions may now provide greater benefit than claiming the standard deduction.
SALT Cap Schedule 2025-2030
Year | SALT Deduction Limit | Income Threshold at Which SALT Cap Begins Phasing Down |
2025 | $40,000.00 | $500,000.00 |
2026 | $40,400.00 | $505,000.00 |
2027 | $40,804.00 | $510,050.00 |
2028 | $41,212.00 | $515,151.00 |
2029 | $41,624.00 | $520,302.00 |
2030 and later | $10,000.00 | N/A |
Planning Tip: As year-end approaches, it may be beneficial to evaluate the timing of certain state tax payments, such as fourth-quarter estimates, to determine whether paying them before December 31st could help maximize the federal deduction within the new limit.
3. Review Expanded Uses for 529 Plans
Beginning July 4, 2025, qualified K–12 education expenses expanded beyond tuition to include curriculum, tutoring (subject to eligibility requirements), standardized testing fees, and other related expenses.
Starting in 2026, the annual withdrawal limit for K–12 education expenses will also increase from $10,000 to $20,000 per child, giving families greater flexibility to leverage the benefits of a 529 plan to support their children’s education. Keep in mind that state laws vary, and not all states conform to federal 529 plan rules, so it’s important to verify how your state treats these withdrawals.
Planning Tip: If you anticipate using 529 plan funds for K-12 expenses, consider adjusting your contribution strategy to take advantage of the higher withdrawal limits and expanded eligible expenses in the coming years.
4. Maximize Retirement Contributions
Setting aside money for retirement on a regular basis is one of the most effective ways to strengthen your long-term financial foundation while also providing meaningful tax advantages. Contributions to traditional and Roth IRAs can be made until April 15, 2026, while 401(k) and other employer plan contributions must generally be made by December 31, 2025.
Beginning in 2025, individuals ages 60 through 63 also have the opportunity to make a new catch-up contribution of up to $11,250 to their employer-sponsored retirement plans. This enhanced limit provides additional flexibility for those nearing retirement to accelerate savings during their peak earning years.
Planning Tip: Review your year-to-date contributions to ensure you’re maximizing available savings opportunities. If you haven’t reached the annual limit, consider increasing your final paycheck deferral before year end.
5. Roth Conversion Opportunities
A Roth conversion allows funds to grow tax-free, and qualified withdrawals are not subject to income tax in retirement. Paying tax on the converted amount now can potentially reduce future required minimum distributions (RMDs) and create more flexibility in managing taxable income later in life.
A Roth conversion may be most effective for taxpayers who expect to be in the same or a higher tax bracket in retirement, or for those looking to leave tax-free assets to heirs. However, since conversions increase current-year taxable income, it is important to carefully evaluate how much to convert in a given year. Higher income from a conversion can also affect Medicare premiums, which are based on a taxpayer’s income from two years prior.
Planning Tip: Work with your CPA to project your 2025 income and determine an optimal conversion amount. Spreading conversions over multiple years can help smooth out the tax impact and avoid pushing income into a higher bracket.
As 2025 draws to a close, reviewing your financial plan can help you take advantage of current opportunities while preparing for what lies ahead. If you’d like to explore how these strategies apply to your situation, please reach out to your Aldrich team. We’re here to help you plan thoughtfully for today’s opportunities and tomorrow’s changes.
Disclosure: This article is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
