In last month newsletter we spoke about the new Tax Law. This month’ we want to speak about what to do to make the most of current tax rules before major changes arrive in 2026. Below are key strategies to consider.
Charitable Giving and Itemized Deductions
With higher standard deductions it is hard to use your itemized deductions and specifically deduct your charitable donations. This will be harder next year, since starting in January 1, 2026, taxpayers in the 37% bracket will have itemized deductions capped at 35%. In addition, all itemized deductions face a cap of 0.5% of the AGI-floor.
Consider: If you’re in a higher bracket, consider frontloading charitable gifts in 2025, possibly through a Donor-Advised Fund (DAF). You can put it in a DAF this year and donate over the coming years.
Consider: Put a few shares of stock with highly appreciated value this year in the DAF. That will give you a tax deduction and you lock in some nice capital gains (without paying tax on the gain).
Starting in 2026, NON-itemizers can claim a new Charitable deduction of up to $1,000 (single) or $2,000 (joint). If possible, it might make sense to accelerate some itemized deductions to 2025.
Required Minimum Distributions (RMDs)
If you are retired, check your RMDs, have you taken them from your IRA or from 401ks, and inherited IRAs and Inherited Roth IRAs (inherited after January 1, 2020)? Missing them triggers a penalty.
Charitable Donations from your IRA
You can avoid taxes on all or part of your RMD by donating it directly to charity as a Qualified Charitable Distribution (QCD). Your donation will not be taxed and can count towards the total amount of your RMD. The rules:
- You must be 70½ or older.
- You can donate up to $108,000 per year per person ($216,000 per couple).
Eligible accounts: All types of IRA accounts (not 401ks). - If you want it to count towards your RMD, it must be donated before you take the total RMD.
Retirement Contributions
Review whether you maximized your retirement contributions:
- 401(k)/403(b): Up to $23,000, plus $7,500 catch-up (age 50+) plus possible Employer Match.
- IRA: Up to $7,000, plus $1,000 catch-up (age 50+).
- Solo 401(k): Ideal for self-employed individuals seeking higher tax-deferred savings. You can put in an Employee contribution plus an Employer contribution up to ($70,000), depending on your earnings. Be aware that if you want to put in a contribution for 2025 that you open the account before Year-End 2025. You have till April 15, 2026 to make a contribution.
Roth Conversion Planning
A Roth IRA offers tax-free growth and no withdrawal requirement and no tax on withdrawals. We recommend reviewing each year whether a Roth IRA Conversion makes sense. Several temporary (2025-2028) deductions for seniors, tip earners, overtime workers, and auto loan interest creates a new layer of complexity for Roth conversion and withdrawal strategies between 2025 and 2028. We can help you model conversions to optimize your tax outcome.
Expanded 529 Plan Benefits
529 Plans grow tax-free, and unused funds can now roll over to a Roth IRA for the beneficiary. Plus, over 30 states offer a tax deduction or credit for contributions.
In 2025, 529 Plans gain more flexibility:
- Up to $20,000 can go toward K–12 expenses (up from $10,000).
- Funds now cover books, online learning, and tutoring.
- More post-secondary programs (including credential or continuing education fees) qualify.
529 Plans grow tax-free, and unused funds can now roll over to a Roth IRA for the beneficiary. Plus, over 30 states offer a tax deduction or credit for contributions.
Stock Options and AMT Planning
For employees with Incentive Stock Options (ISOs), 2025 may be the last optimal year to exercise. In 2026, a lower AMT exemption threshold and higher SALT cap ($40,000) may increase AMT exposure. Exercising ISOs in 2025 could help avoid steep marginal AMT rates of up to 42%.
Gift and Energy Credits
Gifting: In 2025, you can gift $19,000 per recipient — in cash or appreciated stock.
Energy Credits: The new bill accelerates the expiration of energy credits introduced in the Inflation Reduction Act. There’s still time before December 31, 2025, to complete qualifying energy-efficient home improvements and receive up to $3,200 in tax credits. Smaller projects like new doors or windows – and even scheduling a home energy audit –may still be feasible within this narrow timeframe and can help you reduce both your taxes and utility costs.
