have never done QCDs before are definitely going to be more apt to entertain them,” Ruger says.
Advisors should clarify for their clients that these distributions cannot be directed to a donor-advised fund, private foundation, or certain other vehicles, says Leighton Regis, the director of tax strategies at Cassaday & Company Inc. in McLean, Va. Clients who have already taken their required minimum distribution for the year and want to make a charitable distribution now should know that it won’ t reduce their 2025 taxable income.“ It’ s a common mistake,” Regis says. Business owners with pass-through entities may have the greatest opportunity to rightsize their income. As usual, they will be able to choose whether to invoice customers and pay bills this year or next. Spe- cial for 2025, they’ ll be permitted by new bonus depreciation rules to write off 100 % of the cost of equipment placed in service after January 19, 2025, or they can elect to write off 40 %, and that will lower the business profit they report on their personal return accordingly.( Qualifying property placed in service earlier in the year is allowed 40 % bonus depreciation only.)
Taxpayers can also fully write off a new category of non-residential real estate, dubbed qualified production property, when the property is used in U. S.-based manufacturing, notes Kevin Gehrmann, a CPA and tax partner at Wiss & Company in Florham Park, N. J.
These business deductions, as well as one for either half or all of unamortized research and experimental costs incurred in 2022 through 2024, could create a net operating loss, resulting in no tax this year and potentially less tax down the road. However, any loss carried to future years“ can only offset up to 80 % of income in a given year,” Gehrmann warns. The remaining profit will be taxed.
More Clients Itemizing
The higher SALT deduction will let more clients itemize this year, especially if they pay fourth-quarter state estimated tax and give to charity by New Year’ s Eve, or if they prepay 2026 property tax. These strategies can be particularly rewarding for clients in the top 37 % ordinary bracket, because beginning next year the tax savings from itemized deductions is limited to 35 %.
Beneficent itemizers have additional motivation for accelerating their donations into 2025. Starting next year, itemized charitable gifts will be trimmed by 0.5 % of the client’ s adjusted gross income.
“ I think you are going to see more giving in 2025, especially for the philanthropic high earners,” says Lance Campbell, partner-in-charge of the Rochester, Minn., office of Hawkins Ash CPAs. Contributing to donor-advised funds will be popular, he predicts. Clients can contribute this year and get a current itemized deduction, then distribute the money to charities over time. Non-itemizers could benefit by deferring donations until 2026 when they’ ll be able to deduct $ 1,000 of cash contributions if they’ re single, or $ 2,000 if they’ re filing jointly, without itemizing.“ I’ ll be recommending holding off giving in’ 25 to get the deduction in’ 26” to these clients, says Campbell. He reminds them to save their receipts. But unfortunately, contributions to donor-advised funds and private non-operating foundations don’ t qualify for this new break. Nor do non-cash gifts.
Goals Win Out
Ultimately, your clients’ long-term objectives should dictate their moves, not any quick tax savings, says Laura Bereiter, the director of tax and financial planning at White Oaks Wealth Advisors in Minneapolis.
Beneficent itemizers have additional motivation for accelerating their donations into 2025. Starting next year, itemized charitable gifts will be trimmed by 0.5 % of the client’ s adjusted gross income.
She takes the case of a retired couple she advises to prove the point. Needing cash for a six-figure kitchen remodel, these clients took taxable withdrawals from their traditional retirement account rather than tax-free distributions from the Roth they’ ve been building for heirs, even though this will wipe out most of that nice new senior deduction.
“ The clients are willing to pay taxes themselves to give their children a better inheritance,” Bereiter explains.
A final thought. Many folks might turn to ChatGPT for tax information these days. Ruger decided to test whether it was accurate.
“ On a large scale, not,” he reports. It can’ t distinguish between the rules in effect at the start of 2025 and those in play now under the recent legislation.
But a savvy advisor can.
NOVEMBER 2025 | FINANCIAL ADVISOR MAGAZINE | 45