As we get set to celebrate Thanksgiving with family and friends, the new year will be upon us quickly. With year-end approaching, we want to again remind you of key planning items to consider (to the extent we have not already discussed these together.)
Charitable planning is of particular significance this year given changes coming in 2026 under the One Big Beautiful Bill Act (“OBBBA”)
As we discussed last month, beginning next year, if you typically itemize deductions on your tax return, you will only be able to deduct your charitable contributions that exceed 0.5% of your adjusted gross income. If you fall into this category and commonly make charitable contributions of at least $5,000/year, “bunching” contributions (most likely into a donor advised fund) this year may make sense for you. If you don’t itemize deductions, you will receive an additional deduction of $1,000/individual starting next year for cash contributions to charity. In this case, it may make sense to defer charitable contributions into early 2026.
- Please let us know if you have questions on how this change may impact your charitable planning.
Annual Gifting/529 Plan Contributions
Under the annual gift-tax exclusion, you can gift up to $19,000 this year to any person (a married couple can gift $38,000) with no gift/estate tax implications. Gifts can be made as direct gifts, gifts to trusts, and contributions to 529 plans. Leveraging annual gifting can have significant benefit to you and your heirs over the long term.
- Please let us know if you would like to discuss if/how you should make such gifts this year.
Major Gifting
The lifetime federal estate and gift tax exemption, which currently is $13.99 million per person, will be increased to $15 million next year. Under the OBBBA, this amount was made “permanent” and subject to inflation increases. (In this case, permanence lasts until it may be changed under future administrations.)
- Let us know if you are considering making any additional significant gifts either before year end or in early 2026 so we can discuss any potential implications of doing so.
Managing Income/Expenses
Based on taxable income for this year, evaluate whether you can/should accelerate the realization of income or deductions in the coming weeks.
Retirement Plan Contributions
For those that participate in a 401(k) or similar retirement plan, make sure to contribute the maximum allowable (or affordable) amount for the year. The current contribution limit is $23,500 for those under 50 years old and $31,000 for those older than 50.
- For those of you that own closely-held businesses, the contribution limits may depend on the plan type and/or economic performance of the business entity in 2025.
- People aged 60-63 may be eligible for increased contributions of up to $34,750 to their traditional retirement plans.
- Beginning in 2026, the “catch-up” contributions for people over 50 will need to be made to Roth 401(k) accounts if you earn more than $145,000/year.
Cash Management
With uncertainty remaining around future rate cuts by the Federal Reserve, it’s important to have a strategy for managing any excess cash (typically beyond ~6-9 months of annual living expenses).
- Please let us know if you are currently holding such excess cash so we can discuss an appropriate strategy.
- If you manage a business: a number of clients have leveraged us in managing the cash they hold in their business. They have found it quite helpful in coordinating the long-term planning in and amongst their personal and business investments.