Year-End Tax Planning Under OBBBA

“A smooth sea never made a skilled sailor.”

– Franklin D. Roosevelt

Fall isn’t just about Pumpkin Spice Lattes and football. It is also a time for tax planning.  The One Big Beautiful Bill Act (OBBBA) changed the tax landscape. Here are some thoughts to consider before December 31st.

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1. Car Loan Interest Deduction (2025–2028)

For the first time, personal auto-loan interest can be deductible—up to $10,000 per year—even if you don’t itemize.

Here’s what qualifies:

• Loan originated after December 31, 2024
• Vehicle must be new and assembled in the U.S.
• Loan must be secured by the vehicle
• For personal use only (not business)
• VIN must be listed on your tax return
• Phaseout starts at $100,000 MAGI (single) / $200,000 (married filing jointly)
• Leases don’t qualify
  
  

This is an above-the-line deduction, which means it reduces your Adjusted Gross Income (AGI). A lower AGI can help you:

• Stay under key Medicare IRMAA thresholds
• Qualify for 0% capital gains rates
• Create extra room for Roth conversions
  
  

Planning move:
 If you were already planning to buy a U.S.-assembled car, consider financing part of it to capture this deduction through 2028. But do the math—your loan rate, income level, and tax bracket all matter.

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2. New “Senior Deduction” (2025–2028)

Starting with the 2025 tax year, taxpayers age 65 or older can take an extra $6,000 deduction per person (so $12,000 per couple if both qualify).

Key details:

• Available whether you itemize or not
• Phases out at $75,000 MAGI (single) / $150,000 (married filing jointly)
• Stacks on top of the standard age-65 deduction
  
  

Why it matters:
 That extra deduction effectively lowers your taxable income, which could:

• Keep you in the same tax bracket even with a small Roth conversion
• Create more room under IRMAA thresholds
• Help offset investment income or taxes on RMDs
  
  

Example: A couple age 67 could convert an additional $12,000 to a Roth IRA and still owe roughly the same in taxes as the year before.

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3. Gift, Estate, and Legacy — The New High Water Mark

OBBBA permanently raised the tide for estate and gift planning.

Here’s what changed:

• The federal estate and gift tax exemption rises to $15 million per person starting January 1, 2026 (indexed for inflation). That’s $30 million per couple.
• The generation-skipping transfer (GST) exemption is aligned with that same amount.
• The step-up in cost basis for inherited assets remains intact, meaning heirs can reset the value of inherited property to current market value. Here is a YouTube video we did on the topic.
  
  

Why it matters:
 With this larger exemption, fewer families will face federal estate taxes. This shifts focus from estate-tax avoidance to income-tax optimization — things like Roth conversions, capital-gains harvesting, and charitable giving.

Planning move:

• High-net-worth families should review older estate plans that relied on trusts or gifting strategies to stay under old limits. Many of those may no longer be necessary—or could even create extra complexity.
• Moderate-wealth families can prioritize flexibility and simplicity. If you were planning large gifts before 2026 “to use up” the old exemption, there’s less urgency now.
• Charitable legacy planning (DAFs, CRTs, endowments) may play an even bigger role, especially since income-tax savings are now more impactful than estate-tax avoidance.
  
  

Bottom line: The new high-water mark gives families breathing room. Use it to focus on what truly matters—passing on values, not just valuables.

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4. 2026 401(k), IRA, and Super Catch-Up Limits

While the IRS hasn’t released the official 2026 limits yet, here’s what’s expected based on inflation projections:

• 401(k), 403(b), 457 elective deferral: $24,500 (up from $23,500 in 2025)
• Age-50+ catch-up: $8,000 (up from $7,500)
• Age 60–63 “Super Catch-Up”: 150% of the regular catch-up (projected around $12,000)
• IRA contribution limit: $7,500 (plus $1,100 catch-up)
  
  

So, someone aged 60–63 in 2026 could potentially defer $36,500 into their 401(k) (24,500 + 12,000), if their plan allows it.

Adjust your contributions accordingly to make the most of what your plan has to offer.

Important reminders:

• The Super Catch-Up rule took effect in 2025 under SECURE 2.0.
• High earners (those with prior-year wages above $145,000, indexed) may be required to make catch-up contributions as a Roth beginning in 2026.
  
  

Planning move:
 If you’ll be 60–63 in 2026, check with HR to confirm your plan allows the Super Catch-Up and that your payroll system can handle Roth catch-ups. Combining these larger contributions with Roth conversions can open up powerful long-term tax savings.

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5. 2026 Above-the-Line Charitable Deduction

Starting in 2026, taxpayers who do not itemize can still deduct up to $1,000 (single) or $2,000 (married filing jointly) in cash donations to qualified public charities.

Key details:

• Must be cash gifts (not property)
• Must go directly to a 501(c)(3) public charity
• Not eligible for donor-advised funds or private foundations
  
  

For itemizers, beginning in 2026, charitable deductions will also be subject to a new 0.5% of AGI floor—meaning only the portion above that floor counts toward deductions.

Planning move:
 If you typically take the standard deduction, consider timing your regular giving for January 2026 to claim this new above-the-line write-off. It reduces AGI, which can also expand your Roth-conversion or 0% capital-gain room.
 If you itemize, consider “bunching” donations into 2025 before that 0.5% floor takes effect.

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6. Your Year-End Checklist

As we head into the final stretch of 2025, here are your next steps:

✅ Update your withholding or estimated payments.
 Include new deductions (car-loan interest, senior deduction, tip/overtime deductions) to avoid over- or under-paying.

✅ Model your MAGI.
 Coordinate Roth conversions, capital gains, and charitable gifts to stay under key tax and Medicare thresholds. To the clients reading this, we help you do this.

✅ Confirm retirement plan settings.
 If you’re 60–63 in 2026, verify your plan supports the Super Catch-Up and Roth catch-up rules.

✅ Plan your giving.
 Itemizers: consider donating before December 31, 2025.
 Non-itemizers: plan January 2026 donations for the new $1,000/$2,000 above-the-line deduction.

✅ Keep good records.
 For the car-loan deduction, retain your loan documents, VIN, and proof of U.S. final assembly.

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Final Thoughts:

Use the next six to eight weeks to coordinate with your CPA or tax preparer. Fine-tune your Roth conversions. Review your giving strategy.
 A few small adjustments today can lead to significant gains in the years to come.

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Jeremy Finger, Founder

Jeremy grew up in Nichols, South Carolina, where fishing with his dad sparked a lifelong interest in how money shapes our lives. Since becoming a financial advisor in 1996, he’s helped people navigate life’s biggest moments—and today, with Riverbend, he offers a calm, personal approach that helps clients focus on what matters.

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