Now is the time of year when many taxpayers look for last-minute tax-saving strategies to lower their federal income tax liability. This year brings an added layer of complexity with the recently enacted One Big Beautiful Bill Act (OBBBA), which introduced sweeping updates across multiple areas of the tax code.
To help you make informed decisions before year-end, we’ve outlined several tax-reduction opportunities to consider as you plan for your 2025 taxes.
Reevaluate the standard deduction
Taxpayers can choose to itemize deductions or take the standard deduction based on their filing status. You save tax by itemizing only when your total itemized deductions exceed the standard deduction. After the Tax Cuts and Jobs Act (TCJA) nearly doubled the standard deduction, far fewer taxpayers have itemized. The OBBBA increases the standard deduction even further. For 2025, the standard deduction is:
- $15,750 for single filers and married individuals filing separately
- $23,625 for heads of households
- $31,500 for married couples filing jointly
Taxpayers 65 years of age or older or blind can claim an additional standard deduction of $2,000, or $1,600 per eligible spouse for joint filers. Taxpayers who are both 65 or older and blind can double the deduction.
However, several OBBBA changes may make itemizing more beneficial again. For example, if you have taken the standard deduction in recent years, the expanded state and local tax (SALT) deduction could cause your itemized deductions to exceed the standard deduction in 2025. If that happens, consider accelerating other itemized deductions into 2025. Common itemized deductions include:
- Qualified medical and dental expenses that exceed 7.5% of adjusted gross income (AGI)
- Home mortgage interest (generally on up to $750,000 of mortgage debt on principal residence and a second home)
- Casualty losses from federally declared disasters
- Charitable contributions
Beginning in 2026, higher earners will face a new limit on itemized deductions. The OBBBA effectively caps the value of itemized deductions for taxpayers in the highest tax bracket (37%) at 35 cents per dollar, compared with 37 cents per dollar this year. If you fall into this group, consider accelerating itemized deductions into 2025 to maximize their full value.
Maximize your salt deduction
The One Big Beautiful Bill Act (OBBBA) delivers one of its most significant benefits through a temporary expansion of the SALT cap deduction. From 2025 to 2029, taxpayers who itemize can claim up to $40,000 in state and local tax (SALT) deductions ($20,000 for separate filers), with the cap increasing by 1% each year—rising to $40,400 in 2026, $40,804 in 2027, and so on. Read more about the OBBBA’s tax provisions.
How the Increased SALT Cap May Benefit You
The expanded limit can significantly increase your tax savings depending on your SALT total and your modified adjusted gross income (MAGI). Under the OBBBA rules:
- Your allowable deduction decreases by 30% of the amount your MAGI exceeds $500,000 ($250,000 for separate filers).
- Once MAGI reaches $600,000 ($300,000 for separate filers), the deduction reverts to the $10,000/$5,000 cap, regardless of actual SALT expenses.
For example, a married couple with $45,000 in SALT expenses and a MAGI of $550,000 would see their $40,000 SALT cap deduction reduced by 30% of the $50,000 excess, leaving them with a $25,000 deduction.
Consider “bunching” to Maximize Your Deduction
If your 2025 SALT expenses exceed the prior $10,000 cap, but your total itemized deductions still fall below the standard deduction, a bunching strategy can help you fully leverage the higher limit.
For example, if your 2026 property tax bill arrives before December 31, you can pay it in 2025 and deduct both your 2025 and 2026 property taxes on your 2025 return. You may further increase your deduction by accelerating estimated state or local income tax payments into 2025, when applicable. You can also bunch other itemized deductions into the same tax year. IRS rules may limit prepayment of future-year income taxes, so confirm compliance before acting.
Prepare for Changes to Charitable Giving Rules
Charitable donations offer a valuable and flexible way to reduce your year-end tax bill. When you give to a qualified public charity and properly substantiate your gift, you can usually claim a deduction if you itemize.
How the One Big Beautiful Bill Act Affects Charitable Contributions
Starting in 2026, the OBBBA imposes a 0.5% floor on charitable contribution deductions based on adjusted gross income (AGI). This rule allows you to deduct only the portion of your donations that exceeds 0.5% of your AGI. For example, if you earn $100,000, you cannot deduct the first $500 of your annual charitable giving.
If you can afford it, shift charitable donations you planned for 2026 to 2025 to avoid the new floor. However, if you expect to move into a higher tax bracket next year, the deductions may still provide greater value in 2026.
You can also maximize your tax benefits by donating appreciated stock instead of cash. This strategy lets you avoid long-term capital gains tax on the appreciation while still claiming a deduction for the stock’s fair market value.
If you decide not to itemize your deductions, you may want to delay your 2025 charitable gifts until 2026. Beginning that year, OBBBA created a permanent above-the-line deduction for cash contributions, up to $1,000 for individuals and $2,000 for married couples filing jointly. This deduction applies only to gifts to public charities, not foundations or donor-advised funds.
Manage your magi
Your modified adjusted gross income (MAGI) triggers certain additional taxes and can phase out many tax breaks, including some of the newest deductions. For example, the OBBBA introduces a temporary “senior” deduction of $6,000 for taxpayers age 65 or older, which you can claim in addition to the standard deduction or itemized deductions. However, the deduction begins to phase out when MAGI exceeds $150,000 ($75,000 for separate filers).
Other deductions and credits that phase out based on MAGI include:
- Enhanced SALT deduction
- Child Tax Credit
- Temporary deductions for qualified tips, overtime pay, and car loan interest
- Liability for the 3.8% net investment income tax
You can actively reduce your MAGI to maximize tax benefits. Some strategies include:
- Spreading a Roth conversion over multiple years
- Maximizing contributions made to traditional retirement accounts and Health Savings Accounts (HSAs)
- Using qualified charitable distributions (QCDs) from a traditional IRA if you’re age 70 ½ or older.
- QCDs don’t count toward MAGI, yet they can satisfy required minimum distributions (RMDs), helping lower your tax liability.
begin planning now
Utilize new and traditional tax-saving strategies to reduce your 2025 taxes effectively. To make the most informed choices, you need personalized guidance, and Boulay is ready to support you through every step. Reach out today and make your year-end tax planning a priority.