Tax Considerations for the Upcoming Filing Season

As the tax filing deadline approaches, individuals and families are navigating a shifting landscape shaped by recent legislative changes and ongoing IRS capacity challenges. Understanding these developments and preparing early can help make the filing process more manageable. 

Gathering Tax Information: The Importance of Charitable Receipts

One of the most important steps in tax preparation is gathering relevant documentation well in advance. This includes W‑2s, 1099s, K‑1s, and records of charitable contributions. 

Under the One Big Beautiful Bill Act (OBBBA), the rules for deducting charitable contributions have changed substantially. Beginning in 2026, individuals may only deduct charitable contributions that exceed 0.5% of their adjusted gross income (AGI), while corporations face a 1% floor based on taxable income. This means that only the portion of your charitable giving above these thresholds is deductible. 

The IRS requires contemporaneous written acknowledgment for any single donation of $250 or more. These letters must specify the amount and date of the donation, whether any goods or services were provided, and the organization’s tax-exempt status. Without these letters, the IRS can disallow the deduction, even if it was legitimate.  

Above-the-Line Charitable Deduction for Non-Itemizers 

A notable OBBBA change for 2026 is the introduction of a permanent above-the-line charitable deduction for non-itemizers. Taxpayers who claim the standard deduction can now deduct up to $1,000 ($2,000 for joint filers) in cash contributions to qualified charities, even if they do not itemize.  

Given these new OBBBA changes, we highly recommend maintaining detailed receipts for all charitable contributions, regardless of whether you itemize or take the standard deduction. 

IRS Resource Constraints: Why Electronic Filing Matters 

The IRS continues to experience significant resource constraints, including budget cuts and staffing shortages. These challenges have led to slower processing times, especially for paper returns and notice responses.  

To combat this, it is crucial to pay and file taxes electronically. The IRS has also officially phased out paper refund checks, making direct deposit the standard for receiving refunds. Ensure your bank account information is accurate and up to date to avoid delays or issues with payments and refunds. 

Key OBBBA Changes to Keep in Mind 

The OBBBA introduces several other provisions that you should be aware of. Below is a brief summary of a few key items: 

• Overall Limitation on Itemized Deductions: The act reinstates a cap on itemized deductions for high-income taxpayers, reducing the value of deductions for taxpayers in the highest bracket from 37% to 35%. 

• Charitable Giving: Use of Donor-Advised Funds (DAFs) or private foundations to make large, tax-deductible donations of appreciated securities, avoiding capital gains taxes. Individuals older than 70½ can use Qualified Charitable Distributions (QCDs) from IRAs as well to reduce taxable income and navigate around the new limitations. 

• Estate and Gift Tax Exemption: The OBBBA permanently increases the estate and gift tax exemption, allowing for greater opportunities to transfer wealth. Leverage the annual gift tax exclusion ($19,000 per recipient in 2026) to reduce your taxable estate. 

• Alternative Minimum Tax (AMT) Adjustments: The AMT exemption and phase-out thresholds have increased, potentially reducing exposure for some high-income filers. 

 What else did the OBBBA include? You can read our overview here. 

 To discuss how these tax developments may impact you, please contact your advisor.