Tax Deductions Archives - Good Life Wealth Management

The One Big Beautiful Bill Act (OBBBA) — signed into law in 2025 — made several significant changes to the U.S. tax code that create new planning opportunities for investors and retirees. While much of the legislation continues provisions from the 2017 Tax Cuts and Jobs Act, OBBBA also introduces new deductions and alters key rules that can impact how you manage income, donations, and deductions in retirement.

In this article, we focus on practical planning strategies for individual taxpayers, especially those preparing for or living in retirement, and how to think about these changes in the context of broader tax and retirement planning.

What the OBBBA Changed for Individual Taxpayers

The OBBBA made a number of tax changes that affect how retirees and near-retirees should approach income, deductions, and planning. These changes include:

Higher Standard Deduction (Permanent through 2026)

The standard deduction has been increased and is indexed for inflation. For many taxpayers, this change reduces taxable income without requiring itemizing.

Expanded SALT Deduction Cap

The deduction for state and local taxes (SALT) increased from the prior $10,000 cap to $40,000 for taxpayers who itemize. High-tax state residents — such as those in California, New York, or New Jersey — may benefit if they have enough deductions to exceed the standard deduction.

New Charitable Deduction Rules

Starting in 2026:

You can deduct up to $1,000 (single) or $2,000 (married filing jointly) of cash charitable contributions above the line without itemizing.

Itemized deductions for charitable cash gifts above these amounts are subject to a new floor based on a percentage of Adjusted Gross Income (AGI). Qualified Charitable Distributions (QCDs) from IRAs age 70½+ remain unchanged and continue to count toward RMDs while excluding the amount from taxable income.

Key Planning Opportunities Under OBBBA

1. Evaluate Itemizing vs. Standard Deduction

The expanded SALT cap and higher standard deduction mean that retirees should regularly reassess whether bunching deductions makes sense.

Example strategy:
If you usually take the standard deduction, you might:

“Bunch” two years of property tax payments plus charitable donations into one year to exceed the standard deduction, then take the standard deduction the next year.
This technique can boost deductions when combined with the higher SALT cap, especially if you have substantial state tax and mortgage interest.

This works well with broader planning, including charitable giving strategies and Qualified Charitable Distributions (QCDs) when you reach age 70 1/2 (see How to Reduce IRMAA and 9 Ways to Manage Capital Gains).

2. Leverage Above-the-Line Charitable Cash Deductions

For 2026 and beyond, you can deduct a modest amount of cash donations without itemizing.

Up to $1,000 (single)
$2,000 (married filing jointly)

Planning tip:
If your cash contributions would otherwise be below your total standard deduction, timing donations to maximize this deduction can improve your tax efficiency.

Note that donations of appreciated securities may still be more advantageous for reducing capital gains elsewhere — consider that when coordinating with 9 Ways to Manage Capital Gains and broader wealth planning.

3. Coordinate SALT Planning with Your Retirement Income

The expanded SALT deduction is a temporary windfall — it is scheduled to revert to the old $10,000 limit after tax year 2029.

This means:

If you routinely pay significant state and local taxes (property, income, etc.), consider whether timing deductions around years with higher retirement income (e.g., years you take IRA withdrawals or Roth conversions) could reduce your overall federal tax burden.

This interacts with other planning topics like:

4. Make Qualified Charitable Distributions (QCDs)

For investors age 70½ and older, QCDs remain a highly tax-efficient way to give to charity — and they continue to count toward RMDs without increasing your taxable income.

Because a QCD reduces taxable income, it can also help:

Avoid higher Medicare IRMAA surcharges
Reduce taxation of Social Security benefits
Improve tax efficiency during years of planned income spikes

For more on the income sequencing side, see:

5. Understand Credits and Deduction Expirations

Some popular tax incentives not directly part of OBBBA — such as clean energy tax credits — are expiring by the end of 2025.
If you were planning:

Solar or energy efficiency upgrades
Clean vehicle purchases for tax credits

Then 2025 may be your last year to benefit under prior rules.

While these credits may not directly impact your retirement accounts, they are part of a holistic tax plan that should be coordinated with your broader income and spending decisions.

How This Fits Into Your Retirement Tax Strategy

OBBBA changes are just one part of the evolving tax landscape for retirees. Tax planning remains about coordination, not isolated deductions. The tax code interacts with income sequencing, retirement distributions, Roth conversions, Medicare premiums, and charitable planning.

For example:

Timing larger IRA conversions during years when you can benefit from expanded SALT or senior deductions (such as a new $6,000 senior deduction) can produce real tax savings — particularly when coordinated with income years that avoid high Medicare IRMAA or Social Security taxation.
Meanwhile, beneficiaries may still benefit from step-up in basis rules on inherited assets, which affect capital gains planning (see 9 Ways to Manage Capital Gains).

Legislative changes like OBBBA reinforce the importance of ongoing tax planning for retirees, rather than reacting to tax law changes one year at a time.

Practical Action Steps for Retirees (2026)

Here are practical steps retirees and pre-retirees can take in light of the OBBBA:

Revisit your itemized vs. standard deduction strategy annually.
Evaluate the timing of charitable contributions (especially cash vs. appreciated assets).
Coordinate SALT planning with other income events like Roth conversions.
Continue using QCDs once eligible.
Complete any energy or credit-related projects before scheduled expirations.
Work income planning into RMD and Social Security timing decisions.

These should all fit into a broader tax planning framework rather than being treated as one-off tactics.

How a Fiduciary Advisor Can Help

OBBBA tax changes add complexity — and opportunity — but they also interact with many other retirement planning domains. A fiduciary advisor helps by:

Modeling tax outcomes over multiple years
Coordinating deductions, timing, and distributions
Integrating charitable and income planning
Reducing the risk of unintended consequences on Medicare or Social Security taxes

You don’t need to execute all strategies yourself — but knowing which ones matter for your situation can preserve more of your wealth.

Frequently Asked Questions

What is the expanded SALT deduction under OBBBA?
Under OBBBA, the SALT deduction cap increased to $40,000 for taxpayers who itemize, though it reverts to $10,000 after 2029.

Can I still use Qualified Charitable Distributions (QCDs)?
Yes. QCDs remain a valuable way for those age 70½+ to satisfy RMDs while excluding taxable income.

What changed for charitable deductions in 2026?
OBBBA added an above-the-line deduction for up to $1,000 (single) or $2,000 (married) in cash donations without needing to itemize.

Starting in 2018, it is going to be much more difficult to deduct your Charitable Donations. That’s because the standard deduction will rise from $6,350 (single) and $12,700 (married) in 2017 to $12,000 and $24,000 in 2018. You will need to exceed this much higher threshold to deduct your charitable gifts.

It will be even more difficult to reach those levels because the Tax Cuts and Jobs Act (TCJA) is also capping your state and local taxes (property, income, and sales) to $10,000. And they completely eliminated your ability to deduct “miscellaneous” expenses including unreimbursed employee expenses, home office expenses, tax preparation, and investment advisory fees.

Let’s take a look at a hypothetical scenario for a married couple:

In 2017, a typical year, let’s say you have $12,000 in local taxes, $4,000 in mortgage interest, $10,000 in charitable donations, $5,000 in unreimbursed employee expenses, and $6,000 in investment and tax preparation fees. (Let’s assume these miscellaneous amounts are the amounts above the 2% of AGI threshold.) Your total itemized tax deduction would be $37,000 for 2017. That’s well above the standard deduction of $12,700.

In 2018, you spend exactly the same amounts. However, under the TCJA, your local tax deduction is capped at $10,000. You keep the mortgage interest deduction of $4,000 and the $10,000 in charitable donations. The $5,000 in unreimbursed employee expenses and the $6,000 in investment and tax preparation fees are both disregarded. Your new tax deduction would be $24,000.

$24,000 is also the amount of the standard deduction for a married couple, so you are in effect getting no tax benefit for any of your spending, relative to someone who had ZERO local taxes, mortgage interest, or charitable donations. That doesn’t sound like a very good deal to me. The IRS expects that the number of taxpayers who itemize will fall from around 33% to 10%.

That poses a problem for charitable giving, because many people will in effect no longer be able to get any tax benefit at all. For people who do regularly give, it’s discouraging. Nonprofit organizations worry that this might reduce how much people are able to give.

We can help you potentially get more of a tax deduction if you can plan ahead for your charitable giving. Here’s how: by using a Donor Advised Fund (DAF). A DAF is a non-profit entity which will hold an account for you, to give grants to charities of your choosing when you instruct them. When you make a deposit into a DAF, you receive a tax deduction that year, even if the funds are not distributed until later years.

Let’s go back to our original scenario and imagine that you plan to give $10,000 a year to charity for the next five years.

Original scenario: You have $24,000 in total deductions each year, same as the standard deduction. Total over 5 years: $120,000, same as every other married couple.

Scenario Two, with a DAF: In year one, you make a $50,000 donation to the Donor Advised Fund and then give out $10,000 a year to your charities as planned. Your total itemized deduction in year one is $64,000. In the following years, you only have $14,000 in itemized deductions, so elect to take the standard deduction of $24,000 (years 2-5). Total over 5 years: $160,000. That’s $40,000 more than the first scenario, even though you still donated the same $10,000 a year to charity. If you are in the 33% tax bracket, you’d save $13,200 in taxes by establishing a DAF in this example.

With a DAF, your gift is irrevocable, however, you can change which charities receive the money and when. Or you can leave the money in the account to invest and grow for later. If you pass away, the DAF is excluded from your taxable estate, and you designate successors such as your spouse or children, who can decide on when and how to distribute money to charities.

If you risk losing your ability to deduct your charitable donations under the TCJA, let’s talk more about the Donor Advised Fund and how it might work in your situation. You can also gift appreciated securities, such as stock or mutual funds, to the DAF and not have to pay capital gains tax on those assets when you fund the DAF. That can give you a double tax benefit.

As your Financial Advisor, I can help you establish a Donor Advised Fund that will be held at our custodian, TD Ameritrade, using the Renaissance Charitable Foundation. This means your account will still be held with your other accounts and professionally managed to your objectives. While a DAF is clearly more cost effective than establishing a Private Foundation with under $1 million in assets, even many ultra-wealthy families find that a DAF can accomplish their philanthropic goals with less expense, compliance headaches, and time commitment.

One other option to get a tax benefit on your charitable donations: If you are over age 70 1/2, you can make a charitable donation directly from your IRA in place of your Required Minimum Distribution. See my previous article on the Qualified Charitable Distribution. The QCD reduces your above-the-line income, so you do not have to itemize to receive a tax benefit for your donation.

Charitable giving is near and dear to our hearts at Good Life Wealth Management. We donate 10% of our gross profits annually to charity and will continue to do so as we grow. Charitable giving is never just about the tax deduction, of course. But if we can stretch those dollars further, we have an opportunity to make an even bigger impact with the donations we make.

Tax Strategies Under the OBBBA