Tax

Do you contribute to charitable organizations? If so, recent legislation—the One Big Beautiful Bill Act (OBBBA)—includes significant changes to the tax treatment of charitable donations, starting in 2026. Some are helpful, others less so, depending on your income and filing status.

Good News for Non-Itemizers

Currently, taxpayers who take the standard deduction (i.e., don’t itemize) generally cannot deduct charitable contributions. That will change in 2026.

Beginning in 2026, non-itemizers will be allowed to deduct cash donations to charity up to

• $1,000 per year for single filers, or
• $2,000 per year for married couples filing jointly.

Note. Contributions to donor-advised funds are excluded.

New Limits for Itemizers and High-Income Donors

If you itemize your deductions and make substantial charitable donations, take note: starting in 2026, your ability to deduct those donations will be reduced.

In 2026, you may deduct charitable contributions to the extent they exceed 0.5 percent of your adjusted gross income (AGI). Here’s how this new floor works:

Example. If your AGI in 2026 is $200,000 and you donate $10,000 to charity, only the amount over $1,000 (0.5 percent of AGI) is deductible. Your allowed deduction is $9,000.

You cannot carry forward the disallowed $1,000 unless your total charitable contributions for the year exceed one of the limits, such as 60 percent or more of your AGI for cash donations.

Changes for C Corporations

Regular C corporations are also affected. Beginning in 2026,

• charitable contributions are deductible to the extent they exceed 1 percent of a corporation’s taxable income; and
• the disallowed portion can be carried forward for up to five years if the total donations for the year exceed 10 percent of the corporation’s taxable income.

Planning Opportunities Before the Rules Change

Because the new limitations won’t take effect until January 1, 2026, you have a valuable opportunity to maximize deductions under the current rules in 2025:

• If you itemize, consider accelerating your charitable giving before year-end.
• You might double your planned donations in 2025 and scale back in 2026.

This strategy allows you to deduct the full amount of your contributions without the new 0.5 percent AGI floor.

Bunching Donations Going Forward

Once the new rules are in place, both individuals and corporations may benefit from a “bunching” strategy:

• Combine multiple years of charitable giving into one year to exceed the new deduction thresholds.
• For example, you could donate two years’ worth of contributions in 2026 (and itemize), then take the standard deduction in 2027 while making little or no donations that year.

If you want to discuss charitable giving, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• August 27, 2025

If the $10,000 cap on state and local tax (SALT) deductions limits your write-offs, here’s good news: the One Big Beautiful Bill Act (OBBBA) temporarily increases the cap starting in 2025.

From 2025 through 2029, you may deduct up to

• $40,000 if married filing jointly, or
• $20,000 if married filing separately.

The limits adjust annually for inflation beginning in 2026. But unless extended by Congress, the cap returns to $10,000/$5,000 in 2030.

There’s a catch. The increased deduction phases out if your modified adjusted gross income (MAGI) exceeds

• $500,000 (joint filers), or
• $250,000 (married filing separately).

The phaseout reduces your SALT deduction by 30 percent of MAGI in excess of the threshold, with a floor of $10,000 or $5,000. For example, if your MAGI is $550,000, you can deduct only $25,000 of your SALT, not the full $40,000.

You can still choose to deduct sales taxes instead of income taxes—useful if your income taxes are low but sales or property taxes are high.

Importantly, state-level SALT deduction workarounds for pass-through entities (such as S corporations, partnerships, or LLCs) remain in place. These allow business entities to pay SALT at the entity level and pass through the deduction to owners—effectively bypassing the federal cap.

To maximize your deduction, consider managing your MAGI by

• spreading capital gains over multiple years;
• staging Roth IRA conversions; or
• leveraging your state’s SALT workaround, if available.

If you want to discuss the SALT cap, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• August 22, 2025

If you will be age 65 or older on December 31, 2025, you have a new opportunity for tax savings.

The One Big Beautiful Bill Act (OBBBA) created a new bonus tax deduction—available for seniors beginning this year (2025). You can claim this deduction whether or not you itemize.

How Much Can You Deduct?

If you qualify, you may be eligible for a bonus deduction of up to $6,000 per person. For married couples filing jointly—where both spouses are age 65 or older—the total potential deduction is $12,000.

Important. If married, you must file a joint return to benefit even when only one spouse qualifies; filing separately disqualifies you.

This bonus deduction is in addition to

• the regular standard deduction, and
• the existing age-based additional deduction.

Income Limits Apply

The deduction phases out at higher income levels:

• For singles: begins at $75,000 modified adjusted gross income (MAGI); fully phased out at $175,000
• For joint filers: begins at $150,000; fully phased out at $250,000

MAGI includes AGI plus certain rarely seen tax-free foreign income.

Planning Opportunity

To maximize this deduction, consider strategies to keep MAGI below (or not far above) the phaseout thresholds:

• Spread capital gains over multiple years
• Break up Roth IRA conversions over time
• Make additional business deductions or retirement plan contributions

If you want to discuss the new seniors’ deduction, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• August 19, 2025