As the year winds down, it’s time to look for last-minute opportunities to trim your federal income tax bill. This year’s planning is especially important because the One Big Beautiful Bill Act (OBBBA) introduces sweeping tax law changes that could significantly impact your 2025 return. Here are four key strategies to consider before December 31.
Strategy #1. Reevaluate the Standard Deduction
Taxpayers can either itemize deductions or claim the standard deduction, whichever provides the greater tax benefit. The OBBBA increases standard deductions for 2025 as follows:
- $15,750 for single filers and married individuals filing separately
- $23,625 for heads of household
- $31,500 for married couples filing jointly
Taxpayers age 65 or older – or blind – can claim an additional deduction of $2,000 per person ($1,600 per spouse if filing jointly).
However, other OBBBA provisions may make itemizing worthwhile again. For example, the expanded state and local tax (SALT) deduction could push your itemized total above the standard deduction threshold (see Strategy #2 below). If so, you might benefit by accelerating deductible expenses into 2025, such as:
- Qualified medical and dental expenses exceeding 7.5% of adjusted gross income (AGI)
- Home mortgage interest (generally on up to $750,000 of eligible debt)
- Casualty losses from federally declared disasters
- Charitable contributions (see Strategy #3 below)
If you’re in the top tax bracket (37%), note that beginning in 2026, the value of itemized deductions will be capped at 35 cents per dollar. Consider accelerating itemized deductions into 2025 while the full benefit still applies.
Strategy #2. Maximize the Expanded SALT Deduction
The OBBBA temporarily quadruples the SALT deduction cap to $40,000 ($20,000 for separate filers) from 2025 through 2029, with 1% annual increases. This deduction covers property taxes (on homes, vehicles, and boats) and either income or sales taxes, but not both.
Starting in 2030, the cap reverts to $10,000 ($5,000 for separate filers).
There are income phaseouts: the allowable deduction is reduced by 30% of the amount your modified adjusted gross income (MAGI) exceeds $500,000 ($250,000 for separate filers). Once MAGI reaches $600,000 ($300,000 for separate filers), the $10,000 cap applies again.
Tip: If your 2025 SALT expenses exceed $10,000 but you’d still fall below the standard deduction, consider “bunching” expenses. For instance, if you receive your 2026 property tax bill before year-end, pay it in 2025 to deduct both years’ taxes. Similarly, you could prepay estimated state or local income taxes (if applicable).
In 2026, return to taking the standard deduction, then bunch again in 2027.
Strategy #3. Plan Ahead for Charitable Giving Changes
Charitable donations remain one of the most flexible tax-saving tools, but the rules are changing. Beginning in 2026, the OBBBA imposes a 0.5% of AGI “floor” on charitable deductions. That means only donations above 0.5% of your AGI will be deductible. For example, if your AGI is $100,000, the first $500 of contributions won’t be deductible.
To maximize the current rules:
- Consider “bunching” your 2026 donations into 2025 to avoid the new floor.
- Donate appreciated stock instead of cash to avoid capital gains tax and still deduct the stock’s fair market value.
If you don’t itemize, you may prefer to delay donations until 2026, when a new permanent non-itemizer deduction begins: up to $1,000 for individuals and $2,000 for married couples filing jointly. Note that this applies only to cash contributions to public charities (not private foundations or donor-advised funds).
Strategy #4. Manage Your Modified Adjusted Gross Income (MAGI)
MAGI determines eligibility and phaseouts for many tax benefits, including several new ones under the OBBBA.
For example, taxpayers age 65 or older can claim a new temporary “senior deduction” of $6,000, on top of the standard or itemized deduction. However, this begins to phase out at MAGI above $75,000 ($150,000 for joint filers).
Other provisions – such as the enhanced SALT deduction, the Child Tax Credit, and new temporary deductions for qualified tips, overtime pay, and car loan interest – are also tied to MAGI limits.
To reduce your MAGI, you might:
- Spread Roth IRA conversions over multiple years
- Maximize contributions to traditional retirement plans and Health Savings Accounts (HSAs)
- If age 70½ or older, make qualified charitable distributions (QCDs) directly from your IRA, which count toward your required minimum distribution but are excluded from MAGI
Don’t Wait to Plan
Year-end tax planning can have a big impact, especially under the new OBBBA rules. The best strategies depend on your income, deductions, and personal goals.
At Slattery & Holman, P.C., we can help you identify and implement year-end opportunities to reduce your 2025 tax bill.
Contact us today to schedule a personalized planning session.
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