By Yishai Kabaker, CPA and Partner at Gursey Schneider LLP.
The holiday season inspires many joyous annual rituals – from meals with friends and family, to exchanging gifts with loved ones, to, of course, tax planning. This year, Congress passed the One Big Beautiful Bill Act (OBBBA), and upcoming changes to the 2026 tax year have added additional layers of complexity to traditional year-end planning for advisors and clients.
Historically, two of the most favored year-end tax strategies have been A.) charitable contributions to donor-advised funds (DAF) using appreciated stock and B.) tax loss harvesting. Essentially, these are two sides of the same coin. An investment portfolio where any one stock has appreciated dramatically over the original purchase is the perfect candidate for a contribution to a charitable organization or a DAF.
It would receive the double benefit of the ordinary income deduction at fair market value, while forgoing the realized gain recognition on the appreciation of the stock. On the other hand, positions that are underwater are great candidates to consider selling to harvest the losses. Just make sure sellers wait the requisite 30 days before repurchasing into the same position.
This year, charitable giving through a DAF is especially significant because of the changes introduced in the OBBBA. Ultimately, those who itemize may find it advantageous to ramp up their giving in 2025, as they may find that in 2026 there are reductions in the amounts they can deduct. This is because one of the ways that Congress sought to pay for the various perks embedded in the OBBBA is to increase a shadow tax through limitations on itemized deductions. These limitations will primarily affect high-income earners (or those who itemize).
Prior to the introduction of the 2017 Tax Cuts and Jobs Act (TCJA), high-income taxpayers were subject to the Pease limitation, which required that all itemized deductions exceed 3% of Adjusted Gross Income. The TCJA suspended Pease, creating additional benefits for high-income taxpayers who would have been limited in their itemized deductions. Though the suspension was due to sunset with the TCJA in 2025, the OBBBA repealed the Pease limitation but replaced it with a new limitation in two parts:
- First, all itemized deductions can only offset income up to 35%, while the highest tax bracket is 37%. This creates an inherent 2% tax on all of an individual’s itemized deductions.
- Additionally, there is a further .5% hurdle applied specifically to charitable donations starting in the 2026 tax year.
This means that, beginning in 2026, taxpayers will see less of a benefit from charitable giving, making 2025 the perfect year to consider accelerating charitable gifts. The use of a DAF allows taxpayers to frontload the deduction while maintaining control over the disbursements to charitable organizations over time. Taxpayers can maximize their contributions to 30% when using non-cash assets or 60% when donating with cash. If the limit is exceeded, the excess amount will carry forward for five years. However, the carryover deductions will be subject to the new rules in 2026.
As we settle into the holiday season, now is the perfect time to have these conversations with clients to ensure that they are taking the greatest advantage of current rules before the new tax law comes into effect. Once in effect, taxpayers who itemize and their advisors will need to reconsider their approach to giving and employ new strategies to maximize tax benefits. This may mean revisiting the size and timing of gifts or analyzing the benefit of gifts in cash versus those in non-cash. Proper consideration will ensure that charitable planning is still an important part of year end planning in the years to come, but for now the focus should be on taking advantage of the final days of 2025.
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Yishai Kabaker, CPA, partner at Gursey Schneider in Los Angeles, provides tailored tax planning, compliance, and advisory services to high-net-worth individuals, families, entrepreneurs, and family offices. He has been with the firm for more than 10 years and has a background in business management, enabling him to guide clients through complex tax matters with clarity, precision, and discretion.
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