As we head toward the end of 2025, you can still make charitable donations, contribute to your retirement plan, or make gifts to loved ones before the end of the year. Below is a summary of those strategies and how the new tax bill can potentially adjust your planning for this year and beyond. As always, we are here to help you sort through all these strategies for your situation.

Charitable Giving Strategies

• If you are older than 70.5, consider making Qualified Charitable Distributions (QCDs) from your IRA

A distribution from your IRA directly to charity is not taxable. If you must take required minimum distributions (RMDs) from your IRA, a qualified charitable distribution can help satisfy the RMD and lower your taxable income. This can be beneficial in not only lowering your tax bill but also potentially lowering your Medicare Part B and D premiums.

• Consider “bunching” charitable contributions to maximize itemizing in 2025

By “bunching” charitable gifts into one year, it is easier to exceed the standard deduction and get more benefit from your itemized charitable gifts.

• Use a Donor-Advised Fund (DAF) to help with the “bunching” strategy

A DAF can help with the “bunching” strategy if you don’t want to give all those funds to charity immediately. By contributing to a DAF, you still get the charitable deduction up-front, but you can give away those funds over several years to your favorite charities.

• Gift highly appreciated stocks for a “double” tax benefit

The best assets to gift to charity are usually highly appreciated ones, including stock. Not only can you receive a charitable deduction, but you also avoid recognizing the tax on the sale of the asset which results in a “double” tax benefit.

 Retirement Account Strategies

• Max out your retirement plan contributions if you are able

A great way to save taxes and for retirement is to maximize the contributions to your retirement plan. If you have a 401(k), the maximum employee contribution is $23,500 plus an additional $7,500 if you are older than 50 in 2025. If you are self-employed, you can consider contributions into a SEP IRA or set up a solo 401(k) plan, and those contributions are typically limited to 25% of your net earnings.

• Make a “backdoor” Roth contribution or a “mega backdoor” Roth conversion

If you earn more than $150,000 as an individual or $236,000 as a couple, you start to be phased out of being able to contribute to a Roth IRA. However, you can still make the contribution by first contributing to a non-deductible IRA and then converting those funds into a Roth IRA. The maximum contribution is $7,000 per person (plus an additional $1,000 if you are older than 50) and is a great supplemental savings vehicle to provide tax-free income in retirement.

If you have significant excess cash flow, you can consider making a “mega backdoor” Roth conversion inside of your 401(k) plan. Once you have maxed out your pre-tax 401(k) contributions, you can make non-deductible contributions if the combined employer and employee contributions do not exceed $70,000. You can then convert those non-deductible contributions into the Roth component of the 401(k) plan or to a Roth IRA if your plan allows for it. This is a very powerful way to provide additional savings for retirement.

• Consider Roth conversions

If you have money in a Traditional IRA and are currently in a relatively low tax bracket, consider converting some of those funds to a Roth IRA. The conversion will be a taxable event, but those funds can grow tax-free inside of a Roth IRA and then be withdrawn tax-free in the future when you are possibly in a higher tax bracket.

Family Gifts

• Consider giving monetary gifts to family members before year-end

If you are in generous spirits this holiday season, consider gifting funds to your family members. You can gift up to $19,000 per recipient so as a couple you could gift up to $38,000 per recipient without having to file a gift tax return.

• Consider contributing to your child’s or grandchild’s 529 Education Plan

If you would like to make gifts toward your child’s or grandchild’s education costs, a 529 is still likely the best option. The 529 funds grow in a tax-sheltered account, and the funds can be withdrawn tax-free if used for education. In Iowa and several other states, you can also receive a state tax deduction for making contributions. In Iowa, you can deduct up to $5,800 per beneficiary into a 529 plan account and you can contribute up to the gifting limit ($19,000) without filing a gift tax return.

 Key New Tax Law (OBBB) Planning Items

• Consider how the higher SALT deduction cap can benefit you

One of the biggest changes to itemized deductions was the higher limit on state and local tax (SALT) deductions. For 2025 through 2029, individuals and couples can deduct up to $40,000 of their state taxes and property taxes up from the previous limit of $10,000. This higher limit starts to phase out once you earn more than $500,000. The higher SALT deduction will make it easier to exceed the standard deduction and get more benefit from your other itemized deductions including charitable contributions, medical expenses, and mortgage interest.

• The estate tax exemption was permanently raised ($15M per person and $30M per couple in 2026), which won’t affect most people

Most people will not need to worry about paying estate taxes upon their deaths with these higher limits. There was a lot of uncertainty of where these limits would fall but the higher limits mean that most Americans will not need to implement complex estate strategies to avoid paying tax.

For 2026 Planning:

• Consider that your charitable deductions will be lowered for the first 0.5% of adjusted gross income for itemizers

Beginning next year, there is a “floor” on your itemized charitable deductions. Only charitable contributions that exceed 0.5% of your adjusted gross income (AGI) will be deductible. This means that you could consider front-loading some charitable contributions into 2025 to avoid this floor.

• Know that you can benefit from a new $1,000/$2,000 charitable deduction even if you don’t itemize your deductions

On the bright side, even if you don’t itemize your deductions, you can still benefit from taking an “above the line” deduction on your charitable contributions up to $1,000 for single filers and $2,000 for married filers starting in 2026.  

• Consider that your charitable deductions will be capped at a max of 35% tax benefit

For high income earners in the top 37% tax bracket, the tax benefit from your charitable donations will be limited to 35%. This could make you lean toward front-loading some of your charitable gifts into 2025 to get more tax benefit.

 General Year-End Financial To-Do’s

• Review your tax withholdings and estimated taxes to avoid a surprise or penalty at tax time.
• Confirm that your required minimum distributions (RMDs) are completed before year-end to avoid a big penalty.
• Review your employee benefits to make sure you are taking full advantage of them in 2026.
• Set financial goals for 2026 for saving, giving, and debt-reduction. Or even better, consider hiring a financial planner! 

If you have questions about any of the topics mentioned above, or want to talk through your unique financial situation, you can contact us online or by calling (515) 225-6000.