With the tax season quickly approaching, The Hechtman Group would like to remind you of some essential tax opportunities for 2025 that may impact your return. This year, taxpayers should also keep in mind the substantial changes introduced by the One Big Beautiful Bill Act (OBBBA). For a comprehensive overview of how the OBBBA impacts individual taxpayers, see our previous blog.
Standard vs. Itemized Deductions
The standard tax deduction is a flat amount that reduces the amount of income subject to tax. For the 2025 tax year, the standard deduction is:
- $15,750 for single filers
- $31,500 for married couples filing jointly
- $23,625 for head of household
Itemized deductions, on the other hand, are specific expenses that you can claim on your tax return to reduce your taxable income. Common itemized deductions include charitable donations, medical expenses, mortgage interest, and state and local taxes (SALT).
The decision to claim the standard deduction or itemize your deductions depends on which option will give you the lower tax bill. If your total itemized deductions are less than the standard deduction, you should claim the standard deduction. If they are more, you should itemize.
With that in mind, it may be advisable to make additional expenditures before year-end to exceed the standard deduction amount. For instance, “loading up” on your charitable contributions (known as “bunching”) allows you to take higher itemized deductions for that tax year. This is particularly helpful when your itemized deductions are near the standard deduction amounts.
New Deductions and Changes Under OBBBA
The OBBBA introduces several new or enhanced deduction opportunities for 2025 that affect both itemizers and non-itemizers:
- Expanded SALT Cap: For high-tax states, the itemized deduction limit for State and Local Taxes (SALT) is temporarily raised from $10,000 to $40,000 for married couples filing jointly (subject to income phase-outs). This massive increase could push many taxpayers back into itemizing.
- Senior Bonus Deduction: Taxpayers age 65 and older can claim an additional $6,000 deduction ($12,000 for qualifying joint filers) on top of the standard deduction. This is available even if you do not itemize (subject to income limits).
- Car Loan Interest Deduction: You may be able to deduct up to $10,000 in interest paid on a loan for a new, U.S.-assembled vehicle purchased after December 31, 2024. This is another deduction available to taxpayers who do not itemize (subject to income and vehicle criteria).
Benefits of a Donor Advised Fund (DAF)
A donor-advised fund (DAF) allows you to make an irrevocable charitable donation, receive an immediate tax deduction in the year you fund the account, and then distribute grants to charities over time as the funds grow tax-free.
Year-end 2025 is critical for charitable planning, especially for itemizers, due to pending OBBBA changes. Starting in 2026, a 0.5% AGI floor will apply to itemized charitable deductions, meaning only contributions exceeding this threshold will be deductible. To maximize your deduction before this new floor takes effect, taxpayers should consider front-loading several years’ worth of donations into a DAF in 2025. For non-itemizers, a universal charitable deduction of up to $1,000 (Single) / $2,000 (Married Filing Jointly) starts in 2026, but this new deduction explicitly excludes DAF contributions.
Giving to Loved Ones
Gifting to loved ones can have potential tax benefits. For tax year 2025, the federal gift tax annual exclusion increases from $18,000 to $19,000 per recipient. This means you can give up to $19,000 to any individual without incurring a gift tax or reporting the gift to the IRS. Married couples can share their exemptions, doubling the annual gift tax exclusion to $38,000.
The transfer of other assets, such as long-term appreciated stock, to a family member can also be beneficial, as they are commonly subject to a lower tax rate upon liquidation than you would be.
Harvesting Losses
When you sell an investment at a loss, you can use that loss to offset capital gains you’ve realized in the same tax year. This can help to reduce the overall amount of tax you owe. Losses in excess of current year gains can be carried forward to future tax years.
The Capital Loss Deduction limit remains in effect for 2025: the IRS allows up to $3,000 in capital losses to be deducted from a taxpayer’s ordinary income for Single and Married taxpayers filing jointly, and $1,500 for Married taxpayers filing separately.
Donations from IRAs
You can now donate to organizations using savings directly from your IRA fund. For taxpayers 70 ½ or older, a Qualified Charitable Distribution (QCD) of up to $108,000 can be taken out of their IRA and gifted to a public, IRS-approved charity.
These contributions are not subject to an income tax and can also be used to satisfy a Required Minimum Distribution (RMD) requirement (which, for most, begins at age 73).
New OBBBA Feature: Taxpayers can now make a one-time, inflation-indexed QCD of up to $54,000 to fund a split-interest entity, such as a Charitable Remainder Trust or Charitable Gift Annuity. This provides a new, powerful planning tool for legacy giving.
529 Contributions
The guidelines of a 529 plan, or qualified tuition plan, continue to offer substantial benefits. For the state of Illinois, contributions to a 529 plan remain tax-deductible up to $10,000 per year if you are filing individually and $20,000 if you are married and filing jointly.
New Flexibility (OBBBA/SECURE 2.0): Taxpayers now have the option to roll over a lifetime maximum of $35,000 in unused 529 funds into the beneficiary’s Roth IRA. This rule is subject to annual contribution limits and requires the account to have been open for at least 15 years, but it provides powerful new flexibility for unused education savings.
Navigating 2025 Tax Changes
Whether you are seeking to maximize your 2025 deductions or start preparing for the changes taking effect in 2026, The Hechtman Group is here to help. Contact us today to learn more about our team and how we can serve you during this critical year-end tax season and throughout 2026.