Tax rates made permanent: OBBBA permanently extends several key provisions, including the individual income tax brackets (10% to 37%), the increased standard deduction and the elimination of personal and dependent exemptions.

State and Local Tax (SALT) deduction increased: The SALT deduction cap temporarily increases to $40,000 for married couples filing jointly with a modified adjusted gross income below $500,000 effective for 2025, potentially enabling more individuals to itemize deductions, including for charitable contributions.

Charitable Deductions subject to floor and ceiling: Starting in 2026, only the portion of charitable gifts above 0.5% of your adjusted gross income will be deductible for those who itemize. In addition, the value of all itemized deductions, including charitable contributions, will be capped at a tax savings of 35% for those in the higher 37% bracket.

If your clients are contemplating a large gift to charity in 2026 or later, it may be beneficial to accelerate the gift before this year-end to avoid the application of the new floor or ceiling. Again, accelerating contributions to a Donor Advised Fund (DAF), including bunching several years’ worth of contributions before December 31, 2025, will avoid or minimize the impact of the new charitable deduction cutbacks. The Associated operates an easy and flexible donor advised fund program and we would be happy to assist your clients.  

INCENTIVE! Back again. For the first 50 DAFSs established with The Associated by December 31, 2025, The Associated will give a grant to the new DAF after the donor advisors recommend grants to The Associated, its agencies and programs, Baltimore synagogues and day schools and not-for-profits whose mission is to support Israel. For new funds with initial balances of $5,000 to $9,999, the matching grant will be $500; for new funds with initial balances of $10,000 or more, the matching grant will be $1,000.

Nonitemizers will be entitled to a charitable deduction for cash gifts: Starting in 2026, if you claim the standard deduction, you still will be entitled to a charitable contribution of up to $2,000 (married filing jointly) for cash contributions to public charities, but not DAFs. 

Keep in mind that traditional year-end charitable giving strategies can be even more beneficial after the enactment of OBBBA. Consider the following: 

Charitable gifts of appreciated assets remain best practice and with the rise in stock market values over the last several months, your clients may have experienced significant growth in their investment portfolio. Such gifts can provide a deduction for the full current value of the asset but also avoid the capital gains tax that would apply if you sold the assets and gifted the after-tax proceeds.

Utilize Qualified Charitable Distributions (QCDs) from IRAs: If you have clients over age 70 ½, so-called IRA rollovers or QCDs are an attractive option that permits the transfer up to $108,000 this year from each IRA account directly to a charity, free of any income tax.

As with any significant tax and charitable planning, you should always carefully consider potential changes in the context of your client’s complete financial profile. The Associated’s professionals are ready to work with you and your clients on ways to help maximize the financial and charitable benefits of any charitable planning strategies.