As we welcome the month of December, we wanted to share a few thoughts about tax-related items that may impact your 2025 tax situation:
Could you “Itemize” in 2025?
With the 2025 standard deduction amounts set at $31,500 for joint filers, $23,625 for heads of households, and $15,750 for all other filers, itemizing may not be beneficial for all taxpayers. However, due to the One Big Beautiful Bill Act (OBBBA), itemizing could be advantageous for many in 2025. Here are two key itemized deduction changes to consider:
1) State and Local Tax (SALT) Deduction
For tax years beginning in 2025, the cap on the deduction of state and local income taxes (SALT) is temporarily increased from $10,000 to $40,000 under OBBBA. As a result, taxpayers with higher state income and/or property tax rates may find itemizing beneficial for 2025, while those with lower SALT may want to consider “bunching” their taxes into 2025 to take advantage of the increased limits.
Key SALT features for 2025 include:
- New deduction limits
- $20,000 for Married Filing Separately (MFS)
- $40,000 for all other filing statuses
- Phaseout thresholds (30% phaseout for AGI above):
- $250,000 for MFS
- $500,000 for all others
- Minimum deduction amounts (cannot phasedown below):
- $5,000 for MFS
- $10,000 for all others
2) Charitable Giving Deduction
For tax years beginning in 2026, OBBBA makes significant changes to the charitable giving deduction. These changes may affect your planning for 2025.
- For itemizers, a 0.5% of AGI “floor” will be in effect – deductible charitable contributions will be reduced by this “floor”.
- For itemizers, OBBBA brought back a limit on itemized deductions for higher income taxpayers – for taxpayers in the 37% tax bracket, a taxpayer’s itemized deductions are reduced by 2/37 of the lesser of the itemized deductions or taxable income that exceeds the dollar amount at which the 37% tax bracket begins with respect to the taxpayer.
- For itemizers, the 60% “ceiling” for cash contributions to public charities will be made permanent.
- For non-itemizers, an “above-the-line” deduction will be available for cash contributions made to public charities, limited to $1,000 for singles and $2,000 for married filing jointly, in addition to the standard deduction.
Itemizers should carefully consider the timing and amounts of their charitable donations, as well as strategies—such as bunching, donor-advised funds (DAFs), and the use of cash versus non-cash contributions—to maximize their deductions. Donors in higher tax brackets who are considering significant charitable contributions in the next few years should consider accelerating their giving to 2025 to maximize their deduction under current law, before the new OBBBA floor and cap go into effect.
Key changes to §199A
The 20% Qualified Business Income (QBI) deduction, originally set to expire after 2025, has been made permanent by the OBBBA.
The phase-in ranges have been expanded, allowing more taxpayers to qualify for a full or partial deduction.
A new minimum deduction of $400 is allowed for taxpayers with at least $1,000 of QBI from an active trade or business in which they materially participate.
Key changes to §1202 Gain of Qualified Small Business Stock (QSBS)
Under the OBBBA, for QSBS acquired after July 4, 2025, and held for at least 3 years:
- 50% of the gain is excluded if the QSBS has been held for 3 years
- 75% of the gain is excluded if the QSBS has been held for 4 years
- 100% of the gain is excluded if the QSBS has been held for 5 years or more
Under the OBBBA, for QSBS acquired after July 4, 2025, the per-issuer gain exclusion cap was increased from $10 million to $15 million.
Under the OBBBA, for QSBS issued after July 4, 2025, the aggregate gross assets limit is increased from $50 million to $75 million.
As always, Fiske Advisory, a Springline company, is here to help with any questions or planning related to these changes. For more detailed information or additional questions, please visit our website.
| The tax guidance shared here reflects the most up-to-date information available at the time of writing. Because tax laws and regulations can change, we encourage you to verify with your tax advisor that these details are still current before making any decisions. |