What you should know:
Key Takeaways:
- Accelerating contributions in 2025 may yield greater tax savings
- Consider making a cash contribution if you do not itemize to take advantage of new above the line deductions in 2026
Permanent Tax Cuts
The One Big Beautiful Bill Act (OBBBA) makes all of the
lower tax rates and brackets permanent from the Tax Cuts and Jobs Act of 2017
(TCJA). The standard deduction increases are permanent and will be increased
in 2025.
New Senior Deduction
There is an additional $6,000 increase to the standard
deduction for taxpayers 65 and older. The $6,000 increase is for tax years 2025
through 2028. The increased standard deduction will start to phase out for
single taxpayers with $75,000 in income and married couples with $150,000 in
income. The new Senior Deduction is in addition to the existing additional
deduction for taxpayers over age 65.
Charitable Deductions — New charitable contribution rules:
- In 2026, there is a nonitemizer charitable deduction of $1,000 ($2,000
for married couples) that may be taken in addition to the standard
deduction. This provision is not indexed for inflation and is made
permanent. Gifts to donor advised funds (DAFs) are excluded for this
deduction. - For itemizers, a new 0.5% floor on charitable deductions starting in
2026. - In 2026, top bracket taxpayers are limited to 35% (rather than 37%) for
itemized deductions. - Cash gifts can offset up to 60% of a donor’s adjusted gross income
(AGI), which was made permanent in the OBBBA. - Charitable contributions of up to $1,700 per taxpayer to a qualified
scholarship-granting organization are eligible for a tax credit starting
in 2027. - Corporation charitable deductions have a floor of 1%, while the 10%
taxable income cap remains in place.
Kline Galland does not provide legal or tax advice – please consult with your advisors to better understand the new laws.
