2025 vs. 2026: Tax Law Shifts That Could Change Your Strategy

Several tax rules are scheduled to evolve between 2025 and 2026, affecting charitable deductions, State and Local Tax (SALT) caps, electric vehicle (EV) credits, senior deductions, and how non itemizers can claim charitable giving. Understanding these changes now lets you capture benefits in 2025 and prepare for potential limitations in 2026.

Charitable Giving: The Coming Adjusted Gross Income (AGI) Floor and Deduction Cap

Starting in 2026, charitable contributions face two notable constraints^[1] compared to 2025:

1. AGI Floor: Like medical expenses, charitable gifts will be subject to a 0.5% of Adjusted Gross Income floor. Amounts below that threshold won’t be deductible.
2. Bracket Cap: Charitable deductions will be capped at the 35% tax bracket, even for taxpayers in the 37% bracket.

Why this matters: High‑income households accustomed to deducting the full value of large gifts at their marginal rate may see reduced tax benefits. That shifts the calculus for timing and structuring giving, especially for donors who use appreciated securities or donor‑advised funds (DAFs).

Example:
A married couple with $900,000 AGI plans to donate $100,000.

• In 2025: They receive an estimated $37,000 benefit at the 37% bracket.
• In 2026: The benefit falls to ~$33,425 after applying the 0.5% AGI floor ($4,500) and the 35% cap to the remainder ($95,500 × 35%).

Planning implication: If you expect to be in the 37% bracket and are considering large gifts, front‑loading charitable contributions in 2025 via DAFs can lock in higher deduction value while preserving flexibility to recommend grants over time.

SALT Deduction: A Larger Cap with Phaseouts

For tax years 2025 through 2029, the cap on SALT deductions increases to $40,000 for most filers (single or married filing jointly) and $20,000 for married filing separately. The full $40,000 deduction begins phasing out at $500,000 of Modified Adjusted Gross Income (MAGI) for joint filers, and by $600,000 MAGI the deduction drops back to $10,000.^[2]

What this means: Households with property taxes and state estimated payments often surpass the old $10,000 cap. The higher cap can materially improve itemized deductions—unless your income triggers the phaseout. If your MAGI sits below the phaseout threshold, you may want to consider accelerating SALT payments into 2025 to capitalize on the larger cap.

EV Credits

Federal credits of up to $7,500 for qualifying EVs expired on September 30, 2025. If you were counting on an EV purchase to contribute to tax savings in late 2025 or 2026, revisit your plan. Incentive landscapes can change at the federal and state level; without the federal credit, total ownership costs may shift, and timing decisions may warrant a pause or alternative efficiency upgrades.^[3]

New Senior Deduction

Beginning in 2025 and running through 2028, a Senior Deduction of up to $6,000 per person becomes available, subject to phaseouts at higher incomes. For couples where both spouses qualify, this can add up to a meaningful deduction stack when combined with itemized deductions or strategic charitable planning. Review eligibility and interaction with the standard deduction to gauge your best filing approach.^[4]

Above‑the‑Line Charitable Deduction for Non‑Itemizers

Starting in 2026, taxpayers who do not itemize can take an above‑the‑line deduction for cash charitable donations—$1,000 for single filers and $2,000 for joint filers. While modest, this provision lets non‑itemizers gain some tax benefit for consistent annual giving. It can also complement a larger, itemized giving year strategy where donors alternate between bunching deductions and taking the standard deduction in off years.

Strategic Timing Ideas

1. Front‑load major gifts in 2025. If you expect to be in the 37% bracket and plan sizable charitable contributions, consider a DAF this year to capture the higher deduction before the 35% cap applies in 2026.
2. Optimize SALT payments. If your 2025 MAGI is under $500,000 (joint), paying property taxes or fourth‑quarter state estimates in 2025 could help you reach the enhanced SALT cap. Confirm phaseout exposure before executing.
   
3. Coordinate with retirement moves. Roth conversions, bonuses, and capital gains can lift MAGI and potentially erode SALT benefits through phaseout. Model combined effects so one decision doesn’t inadvertently derail another.
4. Account for EV credit expiration. If you planned a late‑2025 EV purchase expecting a federal credit, reassess the cost‑benefit and consider other energy efficiency tax incentives where available.
5. Senior households: Layer the new Senior Deduction with charitable strategies and medical deductions to see whether itemizing or the standard deduction produces a better outcome.
   

Documentation and Execution

• Charitable acknowledgment letters: Secure them for each gift and confirm DAF contributions are processed before year‑end.
• SALT receipts: Keep property tax paid confirmations and state payment stubs.
• Income projections: Update them with final bonus numbers, realized gains/losses, and retirement plan contributions.
• Advisor collaboration: A short session in early December can finalize timing choices and resolve any custodian cut‑offs.

Bottom Line

The period spanning 2025 to 2026 presents a meaningful shift in how charitable deductions work, who benefits from a larger SALT cap, and which incentives—like EV credits—are available. The best strategy will vary based on your income, giving goals, and filing status, but one principle is constant: timing is a powerful lever. Use 2025’s rules to your advantage while preparing for 2026’s constraints.

Thinking about bunching gifts or maximizing SALT deductions? OnePoint BFG can help.