How the new OBBB SALT and charitable deductions may change your tax strategy
With the passage of the One Big Beautiful Bill Act (OBBB), individuals face a changing landscape around deductions, especially the state and local tax (SALT) and standard deductions. These provisions can significantly impact the planning and filing strategies for many taxpayers, including those who live in high-tax states or have itemized deductions.
Here’s what the OBBB SALT deduction cap increase and the changes to the standard deduction mean, and how to make the most of the new provisions.
OBBB SALT deduction cap increased to $40,000
One of the more headline-grabbing components of the OBBB is the increase of the SALT deduction cap from $10,000 to $40,000, effective for tax years 2025 through 2029. However, the expanded cap phases out for taxpayers with modified adjusted gross income (MAGI) above $500,000.
For individuals and families in high-tax states like California, New York, Minnesota, New Jersey and Illinois, this change offers meaningful relief. It can also be paired with strategic charitable giving and mortgage interest deductions.
Previously, the $10,000 cap significantly limited itemization benefits for high-income earners in these states, often pushing them into taking the standard deduction instead.
OBBB charitable contribution floor introduced
The One Big Beautiful Bill Act introduces a new 0.5% adjusted gross income (AGI) floor for itemized charitable deductions, effective beginning in 2026. This means taxpayers can only deduct charitable contributions that exceed 0.5% of their AGI — e.g., for someone with a $200,000 AGI, only donations above $1,000 are deductible.
The floor applies in addition to existing percentage caps, such as the 60% AGI limit for cash gifts to public charities, which OBBB makes permanent. This change encourages more substantial giving while limiting deductions for smaller contributions.
Standard deduction still has a role
While the increased SALT cap reopens the door to itemizing for many, the One Big Beautiful Bill standard deduction changes remain a factor.
The OBBB continues to offer a base level of deduction ($30,000 in 2025 for married couples filing jointly) that may still be more favorable for taxpayers with limited mortgage interest or charitable giving.
Individuals with significant passive income and few deductible expenses may still find themselves taking the new standard deduction. However, itemizing may once again become the optimal strategy for those with a mix of mortgage interest, property taxes, state income tax and charitable giving.
For individuals who don’t itemize, the OBBB offers a charitable deduction on qualifying contributions of up to $2,000 for married couples filing jointly and up to $1,000 for all other filers.
Strategic tax planning opportunities
Here are some strategic ways you can respond to the new OBBB tax provisions:
- Charitable bunching: OBBB charitable deductions provide a valuable opportunity for itemized deductions. Individuals can bunch charitable contributions in alternating years to maximize itemized deductions in some years while claiming the standard deduction in others.
- Residency and domicile planning: With more deductibility available, individuals may reevaluate their choice of domicile. While the increase in the SALT cap offers relief, relocating to a no-income-tax state may still provide a larger long-term benefit.
- Income timing: In years where MAGI is close to the $500,000 threshold, taxpayers may benefit from income deferral strategies (e.g., delaying capital gains realizations, stock option exercises or ROTH conversions) to remain under the phaseout limit.
Your next steps
Individuals and their advisors should begin preparing now for the implications of the SALT and charitable contribution deduction changes:
- Evaluate current-year AGI and assess whether income deferral or acceleration strategies make sense given the phase-out thresholds.
- Review current itemized deduction patterns and explore charitable bunching strategies.
- Consider the timing of large charitable contributions, property tax payments or state estimated tax payments.
- Consider the planning impact for incentive stock options and alternative minimum tax (AMT) income-generating items. The larger SALT deduction under regular tax rules increases the spread between regular taxable income and AMT income, making it more likely to trigger AMT.
- Reexamine your residency and domicile documentation if your tax savings depend on state-level exposure.
How Wipfli can help
Wipfli specializes in integrating tax strategy with estate planning, business succession and wealth preservation. Reach out today to talk to our advisors about how the OBBB updates may apply to your unique financial picture. You can also get the latest OBBB news on our policy updates page.
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Register for our upcoming webinar, What the One Big Beautiful Bill means for you, to learn more about critical OBBB tax changes and how you can maximize new opportunities.
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