The 2025 tax year brings the most meaningful change to itemized deductions we’ve seen since 2017. Instead of being capped at $10K the SALT deduction limit becomes $40,000 ($20k MFS), with a phase-down if MAGI exceeds $500K. Also, beginning in 2026 itemized charitable deductions are allowed only to the extent total gifts exceed 0.5% of AGI. Additionally, year-end planning should be considered in light of significant changes to the catch-up contribution rules for 2025 and 2026.
How to plan for these changes?
Top off to the new cap. Remember the SALT deduction includes state income taxes along with real and personal property taxes paid during the tax year. Those projected to be under the cap in 2025 may consider accelerating SALT payments into the current year to “top off” their deductions. This can generally be done in two ways.
People making quarterly estimates for state income taxes should consider making their Q4 payment in December instead of January.
Making property tax payments in December instead of January. Keep in mind you can deduct prepaid property taxes only if your locality has assessed the tax, therefore if a 2026 bill is not yet assessed, paying it in 2025 won’t create a deduction.
Mind the AMT. SALT isn’t deductible for the Alternative Minimum Tax, so large SALT payments can provide little or no benefit if you’re in AMT.
Bunch multi‑year charitable gifts into 2025. If you plan to give over several years, consolidating those gifts into 2025 can avoid the 2026 floor/cap and may also push your total itemized deductions above the standard deduction in 2025. A donor‑advised fund (DAF) can be ideal for this strategy.
Combine the two: Coordinate SALT + charitable timing. With a higher SALT cap for 2025, pairing December state estimated‑tax payments and property‑tax payments (if assessed) with a bunched charitable gift can materially boost your total itemized deductions.
Max your pre-tax catch-up contribution by the end of the year. While the standard catch-up limit remains in place ($7,500 for those age 50+), the IRS, now allows even larger catch-up contributions to retirement accounts like 401(k)s and similar employer-sponsored plans for those between the ages of 60 and 63. The increased limit, sometimes referred to as the “super catch-up” allows participants to contribute 150% of the standard catch-up amount.
401(k), 403(b), 457(b) plans: $11,250 (150% of the $7,500 limit for 2025)
SIMPLE plans: $5,250 (150% of the $3,500 limit for 2025) These higher limits will receive cost-of-living adjustments
Eligible participants who want to take advantage of these increased limits should confirm whether they are on track to do so by the end of the year. Note, employer plans are not required to offer this increased contribution limit so it’s important to check eligibility.
Starting in 2026, if employees aged 50 and over had prior-year FICA wages from the employer sponsoring the plan above $145,000, then any catch-up contributions must be made on a Roth (after-tax) basis current tax year. This Roth requirement does not apply to SIMPLE IRA or SEP plans. It also does not apply to partners or sub-contractors with self-employment income.
Therefore, those earning over $145K in FICA wages who are looking to maximize their pre-tax retirement contributions will want to make sure they make the full catch-up contribution available this year.
Rialto Wealth Management is a fee-only, fiduciary, advisory firm based in Syracuse, NY. From financial planning to investment management, we help families across New York and beyond. We can be reached by phone at (315) 992-9129 or via email through our website’s secure and confidential contact page.
2025 Year End Tax Planning
November 30, 2025 by Mike Antonacci
The 2025 tax year brings the most meaningful change to itemized deductions we’ve seen since 2017. Instead of being capped at $10K the SALT deduction limit becomes $40,000 ($20k MFS), with a phase-down if MAGI exceeds $500K. Also, beginning in 2026 itemized charitable deductions are allowed only to the extent total gifts exceed 0.5% of AGI. Additionally, year-end planning should be considered in light of significant changes to the catch-up contribution rules for 2025 and 2026.
How to plan for these changes?
Top off to the new cap. Remember the SALT deduction includes state income taxes along with real and personal property taxes paid during the tax year. Those projected to be under the cap in 2025 may consider accelerating SALT payments into the current year to “top off” their deductions. This can generally be done in two ways.
Bunch multi‑year charitable gifts into 2025. If you plan to give over several years, consolidating those gifts into 2025 can avoid the 2026 floor/cap and may also push your total itemized deductions above the standard deduction in 2025. A donor‑advised fund (DAF) can be ideal for this strategy.
Combine the two: Coordinate SALT + charitable timing. With a higher SALT cap for 2025, pairing December state estimated‑tax payments and property‑tax payments (if assessed) with a bunched charitable gift can materially boost your total itemized deductions.
Max your pre-tax catch-up contribution by the end of the year. While the standard catch-up limit remains in place ($7,500 for those age 50+), the IRS, now allows even larger catch-up contributions to retirement accounts like 401(k)s and similar employer-sponsored plans for those between the ages of 60 and 63. The increased limit, sometimes referred to as the “super catch-up” allows participants to contribute 150% of the standard catch-up amount.
These higher limits will receive cost-of-living adjustments
Eligible participants who want to take advantage of these increased limits should confirm whether they are on track to do so by the end of the year. Note, employer plans are not required to offer this increased contribution limit so it’s important to check eligibility.
Starting in 2026, if employees aged 50 and over had prior-year FICA wages from the employer sponsoring the plan above $145,000, then any catch-up contributions must be made on a Roth (after-tax) basis current tax year. This Roth requirement does not apply to SIMPLE IRA or SEP plans. It also does not apply to partners or sub-contractors with self-employment income.
Therefore, those earning over $145K in FICA wages who are looking to maximize their pre-tax retirement contributions will want to make sure they make the full catch-up contribution available this year.
Rialto Wealth Management is a fee-only, fiduciary, advisory firm based in Syracuse, NY. From financial planning to investment management, we help families across New York and beyond. We can be reached by phone at (315) 992-9129 or via email through our website’s secure and confidential contact page.