By Jordan Taylor, March 10, 2026

Avlaw Aviation Consulting Website

Introduction to Key Tax Planning Strategies for 2025

The ‘One Big Beautiful Bill Act’ (OBBBA), signed into law on July 4, 2025, introduces a variety of adjustments to the previous tax landscape established by the Tax Cuts and Jobs Act (TCJA). While many provisions reinforce the structure of tax planning established in recent years, OBBBA offers several opportunities for strategic adaptations ahead of the transition to 2026. Advisors must equip themselves with an understanding of these changes to foster effective tax planning for their clients.

The upcoming changes significantly impact specific taxpayer demographics, particularly clients nearing or falling into higher income categories. These nuances provoke a shift in strategic focus to avoid unnecessary tax burdens. One key topic of focus for tax advisors is managing charitable contributions and deductions, as well as optimizing the exercise of Incentive Stock Options (ISOs) given the anticipated increase in Alternative Minimum Tax (AMT) exposures in 2026.

Make Charitable Contributions in 2025 to Avoid the New Tax Burdens

One of the most pivotal shifts in tax law brought forth by OBBBA is the alteration of how charitable contributions affect itemized deductions. Beginning in 2026, an important change involves the establishment of a floor of 0.5% of Adjusted Gross Income (AGI) that must be exceeded before charitable contributions can be deducted when itemizing. For instance, if a taxpayer has an AGI of $100,000, only donations exceeding $500 would be deductible. This is particularly significant for high-income earners, who may find themselves benefitting more from contributing in 2025 rather than waiting for subsequent years. By moving contributions forward to 2025, taxpayers can take advantage of full deductibility without worrying about the new limitations effective in 2026.

Moreover, high-income taxpayers in the highest bracket will also encounter a reduction of 2/37 on their itemized deductions. As such, planning charitable contributions in 2025 maximizes the dollar-for-dollar impact as opposed to the diminished future potential. For those in the 37% tax bracket, a simple delay in such contributions might actually cost more in future tax savings.

Strategically utilizing the Avlaw Aviation Consulting Website’s insights can further enable taxpayers to secure their financial future while still meeting charitable goals. Ultimately, a careful restructuring around charitable contributions sets a crucial precedent for maximizing tax efficiency ahead of the transformative legislative changes.

Collect Deductions: Lump Other Expenses into 2025

The introduction of a non-itemizer charitable deduction will take effect in 2026, allowing taxpayers who take the standard deduction to deduct $1,000 (single) or $2,000 (joint filers) in cash charitable contributions. This new form of deduction presents an avenue for further structuring beyond traditional itemization.

For clients teetering on the edge of itemizing, the 0.5%-AGI deduction floor could pose a challenge, compelling some to bunch charitable contributions strategically in specific years. This could mean electing to pile expenses that may not exceed the limits in one year, resulting in a larger overall tax benefit over time. For example, if a taxpayer regularly itemizes but faces a year where charitable contributions are lower than the standard deduction, it can be beneficial to wait for a ‘lumping’ year for cash donations to maximize overall deductions.

Furthermore, this new non-itemizer deduction could lead some taxpayers to diligently track smaller contributions, anticipating their eventual tax impact under this adjusted system. Thus, ensuring clients maintain proper documentation of their charitable efforts becomes essential.

Exercise Incentive Stock Options (ISOs) to Mitigate AMT Exposure

For individuals possessing Incentive Stock Options (ISOs), careful timing of exercises is paramount due to the impending changes to AMT protocols established in OBBBA. Starting in 2026, the thresholds associated with AMT exemption will drop, increasing the chances of higher-income earners facing adverse tax implications through significant ISO exercises. This upcoming phaseout necessitates the urgency in exercising ISOs before the more stringent limits are imposed.

For instance, a taxpayer’s exercise of ISOs may thrust them into a higher AMT liability if managed improperly. Strategic advisors can guide clients to exercise ISOs by the end of 2025, alleviating potential high tax rates associated with the ‘bump zone’ engulfing certain income brackets in 2026. When approaching these scenarios, clients must be well-informed about their potential income profiles and the associated tax impacts of ISO exercises.

Utilize 529 Plans for Educational Expenses

The OBBBA further enhances the 529 plan structure by permitting reimbursements for qualified expenses incurred in 2025 for distributions post-enactment, regardless of the timing of the initial expense. This new allowance includes essential educational costs such as tuition for private K-12 institutions and fees associated with obtaining industry-recognized credentials, including CFP certification.

Families with unspent 529 plan balances should consider strategizing immediate distributions before the end of tax year 2025 to reclaim eligible educational expenses. Clients with children or dependents in educational programs are presented with unique advantages under these adjustments, allowing for greater flexibility concerning the funding of quality education.

Adapting Withdrawals to Maximize Deductions

The multiple new deductions introduced by OBBBA, if utilized effectively, could create substantial tax savings while simultaneously posing challenges regarding income thresholds and MAGI levels. Advisors should analyze the myriad of available below-the-line deductions to optimize tax outcomes for their clients. Taxpayers should evaluate how distributions from pre-tax accounts affect AGI, adjusting them strategically to minimize exposure to phased-out deductions.

Adjusting withdrawals from these accounts allows for maximization of deductions, leading clients to pay less taxes overall while still fulfilling their financial obligations. A clear understanding of expected income flows will aid clients in making proactive decisions that optimize their tax situations during the 2025-2028 timeframe.

Expediting Income Recognition for Specified Service Trades or Businesses (SSTBs)

The provisions set forth under OBBBA will see expanded phaseout ranges related to the Qualified Business Income (QBI) deduction, especially for higher-income SSTB owners. Knowing when to defer or accelerate income can dramatically affect optimized tax planning decisions. For higher-income owners, it may be wise to defer income into 2026; conversely, those anticipating falling within the new wider 2026 phaseout may benefit from accelerating income into 2025 to maintain lower marginal tax rates.

Efficiently managing income shifts within this context greatly aids in minimizing tax exposure, illustrating why financial advisors must stay agile in their planning discussions with clients.

Conclusion

The years leading up to the changes set in motion by OBBBA present an unprecedented opportunity for taxpayers to engage in effective tax planning. By strategically navigating the nuances of charitable contributions, leveraging ISOs effectively, and taking advantage of newly adapted controls over educational funding and withdrawal planning, clients can maximize their overall tax efficiency.

As we approach the transition into 2026, advisors must cultivate detailed strategies to navigate this shifting landscape. Proper guidance around timing and strategy will become indispensable for clients seeking meaningful enhancements to their financial outcomes amidst evolving regulations.

Disclaimer: This article discusses topics that may relate to financial and tax planning. It should not be construed as financial advice. Individuals are encouraged to seek advice from qualified tax professionals regarding personal tax matters.