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5 It's important to contemplate additional planning, such as cash management (lending/borrowing), annual gifts, completing charitable plans, integrating life insurance, reviewing current trusts, or considering new trusts. If Americans experience a lower tax bill, many will be given an opportunity to save more for retirement, future goals, or charity. The OBBBA laws may impact Roth conversion decisions. And finally, remember, tax-loss harvesting is a year-round process because long-term capital gains continue to have a top tax rate of 23.8%. Plan to match capital gains with capital losses to shield your capital gains tax exposure. Find ways to reduce net investment income (i.e., offset margin interest with short-term capital gains). Charitable deductions The allowable deductions of up to 60% of AGI for cash donations and 30% for non-cash donations to public charity remain. But a new charitable deduction floor of 0.5% of AGI and deduction caps creates new wrinkles. The OBBBA also introduces a new above-the-line deduction for cash gifts direct to charity of up to $1,000 per individual/$2,000 MFJ, along with a new $1,700 scholarship credit for contributions to qualified scholarship-granting organizations. WH AT IT M E A N S If charitably inclined, planning opportunities exist. Deductions are available even for the most modest givers. High earners will be negatively impacted on the new AGI floor and deduction caps, though bunching charitable donations into the current year could help overcome the AGI floor. Qualified charitable distributions (QCDs) from IRAs and other charitable planning techniques, such as donations of appreciated stock, charitable trusts, donor-advised funds, private foundations, and gifts of vehicles after useful life, are still powerful concepts. Family and education provisions It was expected that key provisions like the child tax credit, child/dependent care credit, and dependent care FSA would be locked by the OBBBA. In all cases, there are increases to annual limits and/or MAGI phaseouts. The expansion to 529 plans, both in the categories of broader use of funds and maximum annual distribution for K-12 expenses (from $10,000 to $20,000), was good to see. There is buzz around "Trump Accounts," the new tax-exempt youth retirement vehicle for children under 18 years old. This allows parents to make annual contributions of $5,000 (with a $1,000 newborn credit match for children born 2025-2028), which converts to a traditional IRA at age 18. WH AT IT M E A N S Overall, for the credits that previously existed, the increase to limits will allow for greater benefit to many taxpayers, particularly lower- to middle-income families. Expansion to 529 plans will help higher earners provide tax-efficient support to children and family members to offset the extreme costs of education. With the Trump Accounts, there is a wait-and-see viewpoint as contributions cannot begin until July 2026, and financial institutions have yet to create a process or ability to sign up and support them.

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