On July 4, 2025, the President signed the One Big Beautiful Bill (OBBBA) into law, marking the most significant tax changes in nearly a decade. For advisors, the new rules bring both long-term stability and short-term windows of opportunity that require careful timing.
This guide breaks down what you need to know now, and where charitable strategies like donor-advised funds (DAFs) fit in.
Key takeaways
- Lower tax rates are here to stay. The 2017 brackets (10%–37%) are now permanent.
- Standard deduction remains high. Permanently set at $31,500 (married) / $15,750 (single).
- Estate & gift tax exemption is fixed at $15M per person (indexed for inflation).
- SALT deduction expands to $40K through 2029, before dropping back to $10K.
- Charitable deduction “floor” starts in 2026 — 2025 is the best year to accelerate giving.
- DAFs remain one of the most effective tools for bunching gifts, maximizing deductions, and planning around windfalls.
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Tax rates and standard deduction
Advisor takeaway: Permanent lower rates = stability for long-term planning. Seniors have a unique short-term deduction opportunity through 2028.
The OBBBA permanently sets individual brackets at 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The top bracket begins at $751,600 (married) and $626,350 (single).
The higher standard deduction introduced in 2017 is now permanent: $31,500 for married filers, $15,750 for singles. Seniors get an additional $1,600 (married, each) or $2,000 (single).
Temporary window: From 2025–2028, seniors also qualify for a $6,000 “bonus” deduction, phased out at $150K AGI (married) / $75K (single).
Client scenario
George and Louise are 70 years old in 2025. Their Standard Deduction plus the senior deduction will be $46,700 (31,500 + 1,600 + 1,600 + 6,000 + 6,000).
Assume George and Louise’s AGI significantly exceeds $150,000. Their Standard Deduction will be $34,700 (31,500 + 1,600 + 1,600), and they will not receive the senior deduction.
Estate and gift tax
Advisor takeaway: With the exemption set at $15M per person, estate planning is clearer. Charitable tools (DAFs, CRTs, CLTs) are essential above this threshold.
The OBBBA permanently sets the federal estate and gift tax exemption at $15M per individual, indexed for inflation. Married couples can combine exemptions for $30M, plus use DSUE (deceased spouse’s unused exemption).
Client scenario
Alex passes away in 2026. His late wife Elaine passed away in 2023, when the Federal estate tax exclusion was $12.92 million. Elaine’s estate used the unlimited marital deduction and did not use its exclusion. The Estate of Elaine’s DSUE is $12.92 million. The Estate of Alex’s Federal estate tax exclusion will be $27.92 million – Alex’s $15 million plus DSUE $12.92 million.
Advisor action: Encourage clients to revisit estate plans with charitable strategies integrated for assets above the $15M mark.
Itemized deductions
Advisor takeaway: SALT is back in play through 2029 — combine with charitable giving for bigger deductions.
Key changes:
- SALT deduction cap temporarily increases to $40K starting in 2025, rising slightly each year until 2029, then reverting to $10K.
- Mortgage interest deduction remains capped at $750K.
- Miscellaneous deductions (advisor fees, unreimbursed expenses) are eliminated permanently.
Client scenario
George and Martha are a high-income married couple living in a high-tax state. Since their primary income source is a W-2, Itemized Deductions were the primary means the couple used to lower Federal taxes prior to 2018. After the 2017 Tax Bill, their itemized deductions with the $10,000 SALT cap did not exceed the Standard Deduction. Bunching charitable deductions into one year was not a viable strategy because at most they can give about $10,000 annually.
The new SALT cap under the 2025 Tax Bill increases their itemized deductions to $50,000 before the charitable deduction. The opportunity exists to create a five-year charitable giving program starting 2025 designed to minimize Federal income tax using the charitable deduction. Working with a tax advisor, they predicted a 3% annual increase to AGI. Martha will also be awarded non-qualified stock options in 2027. The advisor suggests increasing charitable contributions by 3% per year. In 2027, the year of the windfall event, the advisor proposed an additional $5,000 contribution:
| Year | AGI | SALT+Other | Charitable* | Total* | Tax Savings^ |
|---|---|---|---|---|---|
| 2025 | $275,000 | $50,000 | $10,000 | $60,000 | $14,400 |
| 2026 | $283,000 | $50,400 | $10,300 | $60,700 | $14,600 |
| 2027 | $330,000 | $50,800 | $15,600 | $66,400 | $15,900 |
| 2028 | $300,000 | $51,200 | $10,900 | $62,100 | $14,900 |
| 2029 | $309,000 | $51,600 | $11,300 | $62,900 | $15,000 |
*Charitable and total deductions in this example are not adjusted for limits imposed by the 2025 Tax Bill
^Marginal tax rate is 24%
At the 24% rate, a 2025 Standard Deduction would yield $7,500 tax savings. If George and Martha implement their advisor’s Itemized Deduction plan, their tax savings could double!
Charitable deduction changes
Advisor takeaway: 2025 is the “sweet spot” year — gifts made before 2026 avoid the 0.5% floor.
Starting in 2026, charitable deductions face a 0.5% AGI floor. Contributions below that threshold won’t be deductible but can carry forward for five years.
Client scenario
Paul contributes $40,000 cash and stock worth $5,000 to a public charity in 2026. His AGI is $65,000. His charitable deduction will be $39,000 calculated as follows:
- The floor is applied against the stock gift first since it is in the 30% category: 5,000 – ($65,000 x .005) = 4,675
- The 60% AGI limit is applied against the cash gift: (65,000 x .60) = 39,000.
- Using the charitable deduction worksheet in IRS Publication 526, $4,675 charitable deduction for the stock gift will be disallowed because Paul reached the AGI limit in the 60% category.
- Carryforwards to next year will be $1,000 excluded in the 60% category and $5,000 excluded in the 30% category. The $5,000 carryover consists of $325 excluded by the floor and $4,675 excluded by AGI limitations.
Advisor action: Consider accelerating charitable giving into 2025 and use DAFs to bunch contributions for multi-year planning.
Alternative Minimum Tax (AMT)
Advisor takeaway: Higher exemptions protect many, but ISOs and high SALT deductions can trigger AMT starting in 2026.
- AMT exemption in 2025: $137K (married), $88K (single), indexed.
- SALT add-back + faster phaseouts mean more high earners could face AMT after 2026.
[Dropdown/callout: Example with Bruce exercising ISOs in 2025 vs. 2026, showing AMT impact.]
Bruce is married and has the choice to exercise his ISOs in either 2025 or 2026. The ISO adjustment will make AMTI in either year about $1.4 million. How will AMTI be affected?
| 2025 | 2026 | |
|---|---|---|
| Tentative AMTI | 1,400,000 | 1,400,000 |
| Exemption | (100,175) | NONE |
| AMTI | 1,299,825 | 1,400,000 |
Bruce will have $100,000 additional AMTI if he exercises his ISOs in 2026. The lowered exemption and faster phaseout will eliminate the AMT exemption in 2026.
New credits and deductions
Advisor takeaway: Niche opportunities, but not core to most planning.
- Car loan interest deduction (2025–2028): up to $10K.
- Charitable deduction for non-itemizers (from 2026): up to $1,000 ($2,000 married). DAFs do not qualify.
- Tax credit for scholarship-granting orgs (from 2027): up to $1,700.
Charitable planning opportunities
Advisor takeaway: Pair generosity with timing to capture every available advantage.
- Accelerate 2025 giving to maximize deductions before the 0.5% floor and itemized cap take effect.
- Use DAFs for bunching in windfall years, then grant over time.
- Leverage the SALT window by combining deductions strategically through 2029.
- Incorporate charitable vehicles in estate planning for estates above $15M.
Download the 2-page advisor cheat sheet
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