New Tax Law Shakes Up 2025 Deductions: What High-Earners Need to Know About SALT and Charity

The Wall Street Journal and CNBC contributed to this report.

If you’re doing year-end tax planning, buckle up — because last summer’s massive “megabill” quietly rewrote the rules on two of the biggest deductions wealthy Americans rely on: SALT (state and local taxes) and charitable contributions.

Millions of higher-income filers will feel the impact in 2025 and 2026. And the strategies many taxpayers have relied on for years? Some are now outdated.

Here’s a simplified guide to what’s changing, what’s at stake, and what savvy taxpayers should consider now.

The megabill threw a lifeline to residents of high-tax states.

What’s new for 2025–2029

• SALT cap increases from $10,000 to $40,000;
• Applies to both single and joint filers;
• Full $40K cap available only for adjusted gross income (AGI) up to $500,000;
• Phases down between $500K and $600K;
• Above $600K, the cap drops back to $10,000.

The catch?
You only get the benefit if you itemize.

Because of this change, experts expect about five million more itemizers in 2025 — reversing the trend since 2017, when the standard deduction nearly doubled and itemizers plunged below 10% of filers.

Standard deduction also increased

• $31,500 for married couples;
• $15,750 for singles;
• Extra $1,600–$2,000 for seniors 65+.

Plus, seniors get a brand-new standalone deduction in 2025:

• $6,000 (single);
• $12,000 (joint);
• No itemizing required.

Because of the higher standard deduction, people with SALT bills between $10K and $40K will need to run the math to determine whether itemizing pays off.

Maybe — but tax pros say be very careful.

You can only deduct taxes that are:

• Formally assessed, AND;
• Actually due, not estimates or escrow deposits.

Prepaying property taxes just to hit the $40K SALT cap may not work if your locality hasn’t issued the formal bill yet.

Beginning in 2026:

• Workers 50+ earning more than $150,000 must make “catch-up” contributions to a Roth (after-tax) account;
• These contributions will not reduce taxable income.

This could wipe out up to $22,500 in deductions for some dual-earner couples ages 60–63.

For some, not prepaying certain taxes in 2025 may help offset that income loss.

Even though the new rules don’t kick in until 2026, 2025 giving strategies may need adjusting now.

Good news for non-itemizers

Starting in 2026:

• Non-itemizers can deduct up to $1,000 (single) or $2,000 (joint);
• Cash donations only;
• No donor-advised funds;
• No stock or property gifts.

If you typically don’t itemize, delaying part of your 2025 cash giving into 2026 may make sense.

The bad news for itemizers

Beginning in 2026:

• High-income filers lose 0.5% of AGI from their charitable deduction;

  • Example: A couple with AGI of $200,000 loses the first $1,000 of deductions.

• The top tax benefit for itemizers drops from 37% to 35%.

Translation: wealthy donors get less tax bang for their buck.

Tax pros say this could significantly reduce major gifts — and nonprofits are worried.

DAFs allow donors to:

• Make a big gift now;
• Take the full deduction this year;
• Decide later how and when to distribute the funds.

Because of the upcoming deduction limits in 2026, many high-income filers may choose to accelerate multiple years of planned giving into 2025.

DAFs are especially useful for donating appreciated stock, avoiding capital gains while boosting itemized deductions.

Economists say yes.

• Top earners will lose part of their deduction;
• Their effective deduction rate drops from 37% → 35%;
• The Lilly Family School of Philanthropy expects a $4.1B to $6.1B drop in giving;
• Smaller donors probably can’t fill the gap.

Still, the new universal $1,000 deduction for non-itemizers could widen the donor base — even if it doesn’t match what wealthy donors historically give.

If you itemize or donate large amounts:

• Consider accelerating 2026–2028 contributions into 2025;
• Use a donor-advised fund if you’re not ready to pick charities;
• Donate appreciated stock to offset this year’s gains;
• Evaluate whether prepaying some taxes boosts your deduction strategy;
• Seniors 70½+ with IRAs should look at Qualified Charitable Distributions (QCDs) — untouched by the megabill and often the most tax-efficient option.

If you normally take the standard deduction:

• Delay some cash gifts to 2026, when you can deduct up to $1,000 or $2,000 without itemizing

High earners age 73+:

• You can reduce AGI directly by donating your required minimum distribution (RMD);
• This can also help you qualify for the enhanced $40K SALT deduction.

The megabill didn’t just raise or lower a few numbers — it reshaped how millions of Americans will approach charitable giving and SALT deductions.

If you want to maximize tax benefits in 2025 and beyond, your strategy may need a full overhaul. And with several rules still awaiting IRS clarification, the smartest move now is to start planning early — before the new landscape takes full effect.