By Jeffrey R. Wolfe, Senior Vice President and Manager, Wealth Planning Strategies
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The world continues to be an interesting place. War remains in Ukraine while a delicate peace is being sought in the Middle East. Markets continue to chug, and for the time being we have settled the fluctuating tax system with the passage of the One Big Beautiful Bill Act (OBBBA) on July 4, 2025. With passage of the OBBBA, decisions on taking or deferring gains and deductions in one particular year or another are more stable than in the past, except for this tax season.
Traditionally, a good first step to resolving this concern is to start by reviewing your portfolio and your other investments, along with your projected income, to see where you may find yourself on the tax-bracket spectrum. Once you’ve estimated where you are, work with your tax advisor to see whether you should take or defer certain gains or deductions in this year or the next.
For example, you may be able to take a gain on an investment this year or postpone it until January. If you think your tax rate will be lower next year, it may make sense to postpone the gain until 2026. If you pay state estimated taxes, you could make your last quarterly payment in December rather than January to take the deduction this year. Ultimately, if you can control when to take a gain or deduction, choosing the appropriate time to take such actions can help you control your potential tax liability year over year.
With the OBBBA in place, high standard deductions will continue. The standard deductions for 2025 have moved up slightly per the OBBBA: $15,750 single/$31,500 married.[1] For 2026, those deductions increase to $16,100 single/$32,200 married. However, while itemized deductions remain limited under the new law, there are a few twists to consider this tax year. For example, charitable gifts, mortgage interest, and state and local taxes (SALT) comprise most itemized deductions. However, there are changes to charitable rules and SALT deductions to consider this year:
- Charitable Changes: For 2025, charitable deduction rules remain the same. However, in 2026, for those who do not itemize, you can deduct up to $1,000 single/$2,000 married in charitable contributions “above the line,” meaning the deduction lowers your taxable income dollar for dollar before applying the standard deduction.
For those who do itemize, the new charitable rules for 2026 add some complexity. The qualifying requirements to take a charitable deduction remain, but the deduction is only allowed for contributions exceeding 0.5% of your modified adjusted gross income (MAGI). What this means is that gifts in 2025 for those who itemize will typically mean a larger deduction than one in 2026. This adds some extra algebra if you are planning a charitable deduction. Accordingly, if you are considering making a charitable donation and you expect your income (and tax rate) to be lower in one year or the other, you would typically take the deduction in the higher tax year. With this OBBBA change, however, you may want to work with your tax professional to make sure that logic still applies.
- SALT Changes: Beginning in 2025 the OBBBA increases the SALT deduction to a temporary cap of $40,000. This could affect whether you itemize or not depending on your SALT levels. Note, though, that the deduction starts to phase out with MAGI that exceeds $500,000, regardless of filing status. The phase-out “ends” at $10,000, meaning everyone who itemizes can deduct SALT up to $10,000. This deduction could again affect the math on whether to take or defer a gain based on whether the increased SALT deduction helps move you up or down in the tax brackets.
To take or defer deductions is always a complicated and time-sensitive decision. With the uniqueness of laws changing between 2025 and 2026, that decision becomes more difficult. Please remember, Benjamin F. Edwards does not provide tax advice, so it is important to consult with your tax professional for guidance tailored to your specific situation. Doing so may lessen the tax blow for this year and years to come.
IMPORTANT DISCLOSURES: The information provided is based on internal and external sources that are considered reliable; however, the accuracy of this information is not guaranteed. This piece is intended to provide accurate information regarding the subject matter discussed. It is made available with the understanding that Benjamin F. Edwards is not engaged in rendering legal, accounting or tax preparation services. Specific questions on taxes or legal matters as they relate to your individual situation should be directed to your tax or legal professional.
[1] For the purposes of this article, “married” taxpayers will mean married taxpayers that file jointly.