Maximizing Your Money:

Whatever you may think about the “One Big Beautiful Bill” that was passed by Congress earlier this year, it created a number of profound changes to our tax law. For example:

• A 2017 tax law raised the Lifetime Gift and Estate Tax Exemption from $5.6 million per person and $11.2 million per married couple to $13,990,000 per person and $27,980,000 for married couples in 2025. These exemptions were scheduled to revert to their previous lower levels in 2026. The Big Beautiful Bill, however, not only increases the exemption to $15,000 per person in 2026, but raises it annually to account for inflation.
  
  
• Income tax rates will also not revert to 2017 levels. The top tax rate will continue to be 37%, instead of the previous 39.6%.
  
  
• The standard deduction, which was increased significantly in 2017, is currently $15,000 for individuals and $30,000 for married couples filing jointly. Under the new law, this increase is permanent. What’s more, taxpayers over age 65 can add an additional $1,600 to their standard deduction.
  
  
• Deductibility of state and local taxes has been limited to $10,000 annually – not such good news for residents of high tax states like New York and New Jersey. The cap has now been raised to $40,000 with a 1% increase each year until 2029 when it is scheduled to revert to $10,000.
  
  
• Deductibility of charitable contributions was only available to taxpayers who itemized, instead of using the standard deduction. In 2026, however, non-itemizers will be able to deduct a modest amount, while itemizers will be allowed to deduct cash contributions as long as they do not exceed 60% of their adjusted gross income.

Recognize that the environment is changing and that to take full advantage of it, you might have to consider changing strategies you’ve employed in the past. For example:

• Itemizing on your tax return, instead of taking the standard deduction
  Despite a meaningful increase in the standard deduction, increased deductibility of state and local taxes may enable you to reduce your tax liability by itemizing expenses on your return. If you do itemize, you will be able to deduct any state and local taxes you pay, as well as any charitable contributions you make, subject to the rules listed above.

• Considering strategies to maximize your charitable contributions
  Bunching charitable contributions you plan to make in a Donor-Advised Fund can help high income donors contribute several years’ worth of charitable donations all at once for tax planning purposes. Other strategies for reducing tax liability while supporting your favorite non-profits include:
• Donating appreciated stock instead of cash
  By doing so, you avoid capital gains tax on the sale of your stock, while gaining a tax deduction for your contribution.
• Making qualified charitable distributions from your IRA
  If you’re age 70 ½ or older, you can make qualified charitable distributions of up to $108,000 this year from your IRA or inherited IRA. You will not receive a tax deduction for your contribution, but if you’re age 73 or older, you will reduce the taxability of the Required Minimum Distributions (RMDs) you are obligated to take.

These strategies may enable you to increase deductible expenses to a point where they exceed the standard deduction and enable you to itemize on your tax return.

• Revisit your estate plan…or not
  Chances are, you’ve already worked with your attorney and accountant to develop an estate plan. What’s more, the fact that the Lifetime Gift and Estate Tax Exemption did not revert to pre-2017 levels probably gives you confidence that your plan protects you from unnecessary taxation. Or does it?

Depending on where you live, you may be subject to estate and/or inheritance tax at the state level. New York, for example, imposes a tax on estates valued at more than $6.94 million. Illinois’ threshold for estate tax is only $4 million. Ten other states impose estate tax with exemptions that may or may not equal the newly increased federal exemption.

One way to reduce the size of your taxable estate is to gift assets to heirs while you’re still alive. In 2025, you can give up to $19,000 per recipient ($38,000 for married couples) without incurring gift tax. Gifts above that amount are subtracted from your lifetime gift and estate tax exemption. In addition to reducing the size of your estate, this strategy enables you leave a legacy to loved ones while you’re still alive to see them enjoy it.

Probate is a legal process that states employ to settle the estates of their deceased citizens. Generally, assets are transferred according to the terms of your will, provided you have a will and that the court determines it’s valid.

The problem arises when assets are held in accounts that are not held jointly. Even checking accounts owned by a husband or wife can be held for months before they are approved to be transferred to heirs.

To avoid these delays, consider establishing what is called a living trust to hold your assets. With this approach, you appoint a trustee to manage assets for the benefit of your beneficiaries. Assets in these trusts pass directly to beneficiaries without passing through the probate process. In addition, these trusts are portable. In other words, they are transferred to surviving spouses upon the passing of the original grantor.