We hope that everyone had a nice Thanksgiving holiday. As we near the end of 2025, we want to make you aware of some of the provisions of the One Big Beautiful Bill Act (OBBBA). Some of these provisions may affect the timing of paying property taxes and charitable contributions.
State and Local Tax Deduction
The OBBBA increases the state and local tax deduction to $40,000 beginning in tax year 2025 and increases by 1% each year until 2030 when it reverts back to $10,000. The increased state and local tax deduction is decreased by 30% of the amount a taxpayer’s modified gross income (MAGI) exceeds threshold amounts. The $40,000 cap applies to all taxpayers other than married taxpayers filing separately, whose deduction will be limited to $20,000. The state and local tax deductions for 2025 and 2026 are listed below.
| Potential Deduction | Phasedown MAGI | |||
| Tax Year | MFJ, Single, HOH | MFS | MFJ, Single, HOH | MFS |
| 2025 | $40,000 | $20,000 | $500,000 – $600,000 | $250,000 – $300,000 |
| 2026 | $40,400 | $20,200 | $505,000 – $606,333 | $252,000 – $303,167 |
Because the OBBBA made the $10,000 state and local tax deduction permanent, a taxpayer’s deduction will not be phased down below $10,000 if they otherwise qualify for the deduction on Schedule A Itemized Deductions.
Charitable Contribution Deduction
Good news: Beginning with the 2026 tax year, non-itemizers may claim a charitable contribution deduction of $1,000 or, if married filing jointly, a deduction of $2,000, provided the contribution is in cash and made to a charitable contribution other than a supporting organization as defined in IRC 509(a)(3) or a donor advised fund.
The increased 60% contribution limitation for cash gifts made to qualified charities has been made permanent. It was scheduled to expire at the end of 2026, reverting to 50%.
Bad news: Beginning with the 2026 tax year, the charitable contribution deduction for individual taxpayers who itemize deductions is only available if all of the taxpayer’s contributions in the aggregate exceeds 0.5% of the taxpayer’s adjusted gross income (computed without regard to the charitable deduction) for the taxable year. Carryover contributions made prior to 2026 are not subject to the 0.5% floor. Any contributions made during 2026 that are carried forward to future years will be subject to the 0.5% limitation.
Taxpayers that will be able to itemize deductions on Schedule A during 2025 may want to consider moving deductions originally planned for 2026 into the 2025 tax year.