Happy New Year!
As a new tax season begins, we’ve pulled together updates and resources you may find helpful to reference throughout the year.
Today, we discuss:
- The SALT deduction increase and why more families will likely itemize taxes this year.
- The new senior “bonus” deduction for individuals aged 65 and up.
- A catch-up curveball impacting high earners.
- The new $1,000 charitable deduction, even if you don’t itemize.
- Why early-year QCDs create a “double” impact.
- Deductions impacted by filing status.
- 2025 withholdings and strategically positioning yourself for 2026.
- Why January is a great time to adjust retirement contributions.
- Required Minimum Distributions (RMDs).
- Key financial facts for the 2025 and 2026 tax years, including standard deductions, retirement contribution limits, Social Security taxation, Medicare premiums and more. (2 handy handouts)
Reassess Itemizing Under the Expanded SALT Deduction
As a result of the One Big Beautiful Bill Act (OBBBA), the state and local tax (SALT) deduction cap has quadrupled to $40,000. For many, this makes itemizing a viable option again, offering potentially greater savings than the standard deduction.
(Note: This higher cap begins to phase down for households with a modified adjusted gross income (MAGI) over $500,000, eventually returning to the $10,000 limit for those earning over $600,000.)
If you:
- Pay High State & Local Taxes
- Own Your Home
- Make Regular Charitable Contributions
- Pay Mortgage Interest
…then itemizing may be a savings option for you.
EXAMPLE: See a side-by-side comparison of the standard deduction versus the new $40,000 SALT cap for married couples filing jointly in our recent post: 2025 Tax Changes: One Big Beautiful Bill Act (OBBBA)
Leverage the New Senior “Bonus” Deduction
Given the new OBBBA laws, those aged 65 and older can claim a new $6,000 senior bonus deduction ($12,000 for married couples).
This temporary benefit starts in 2025 and expires after December 31, 2028.
The full deduction is available to single filers with a MAGI up to $75,000 and married couples up to $150,000. It gradually phases out after, and is completely eliminated at incomes of $175,000 (single) and $250,000 (married).
This H&R Block article discusses the deduction in detail: New $6,000 deduction for seniors.1
Navigate the SECURE 2.0 Catch-Up Curveball
There’s a new twist for building your retirement nest egg starting in 2026.
If you earned more than $150,000 last year, the IRS now requires your “catch-up” contributions to be made as Roth (after-tax) instead of pre-tax.
While you won’t get the upfront tax break, the payoff is that this money will be tax-free when you retire, including any growth.
Finally, don’t forget about the “Super Catch-Up.” If you’re aged 60, 61, 62 or 63, you’ve hit a special four-year window that allows you to contribute a much higher limit of $11,250 to your 401(k) for tax year 2025.
RESOURCE: For a deep dive, Schwab has a great guide titled: Catch-Up Contributions 2025 and 2026. It breaks down these numbers and the new Roth requirement in detail.2
Claim the New $1,000 Charitable Deduction (No Itemizing Required)
You can deduct up to $1,000 (single filers) or $2,000 (married couples filing jointly) for cash donations to qualified charities, even if you take the standard deduction, starting in tax year 2026.
For tax purposes, “cash” includes donations made by check, credit card or electronic transfer—not property (e.g., clothing, furniture) or securities.
Accelerate Impact with Earlier QCDs
Qualified Charitable Distributions (QCDs) are an efficient way to manage RMD-related taxes.
By donating directly from your IRA, you can reduce taxable income, satisfy RMD requirements and support causes you care about.
However, timing matters.
Because of how the IRS applies annual distribution ordering, any IRA withdrawals taken before a QCD count as taxable income and are applied toward your RMD first. That leaves less room for a tax-free QCD later in the year.
For Example:
If your total RMD for the year is $150,000 and you withdraw $150,000 for personal use in February, this entire amount is taxable. Even if you make a $25,000 donation to charity in October, you cannot “swap” the two; the February cash has already satisfied your RMD with taxable dollars.
Instead, by prioritizing QCDs earlier in the year, you help ensure these first dollars go directly to charity, rather than accidentally triggering taxable income through personal withdrawals.
This approach also helps avoid year-end processing delays and gets your charitable dollars working sooner.
Verify Your Filing Status
Life changes often drive tax outcomes.
Marriage, divorce, the loss of a spouse, or a dependent aging out could impact your:
- Standard Deduction
- Tax Brackets
- Eligibility for Credits and Deductions
A solid understanding of your filing status is critical in order to optimize your tax situation.
Fine-Tune 2025 Withholdings for 2026
Your tax return doesn’t just close the books on 2025; it informs smarter decisions for 2026.
Reviewing withholdings now helps you:
- Avoid Surprises Next April
- Align Tax Payments with Actual Income
- Adjust for Bonuses, Side Income and Retirement Distributions
Overall, reviewing your withholdings now is especially important if your 2025 income fluctuated more than expected.
Optimize Retirement Contributions Early
January is the ideal time to revisit retirement contributions.
Increasing them early spreads savings evenly across the year, reduces decision fatigue and helps keep your financial plan on track automatically.
At the same time, if your income came in higher than expected in 2025, confirm you didn’t exceed contribution limits. Remember, over-contributions can trigger avoidable penalties, but they’re much easier to fix when caught early.
Prepare for Required Minimum Distributions (RMDs)
If you take RMDs—or will for the first time—this deserves early attention.
Taking RMDs increases your taxable income, which can:
- Push You into a Higher Tax Bracket
- Increase Medicare Premiums
- Trigger Social Security Benefits Taxation
Also, if this is your first RMD year, timing matters.
Delays can result in two RMDs landing in the same tax year, increasing taxable income.
Download 2025 & 2026 Key Financial Data (Handouts)
To make your life easier, we have two handy spreadsheets highlighting key numbers you’ll likely need throughout the year.
They include:
- Standard Deductions by Filing Status
- Retirement Plan Contribution Limits
- Educational Credits and Deductions
- Medicare-Related Thresholds
- Health Savings Account (HSA) Limits*
- Capital Gains and Dividend Tax Rates
- Social Security Taxation Thresholds
- Tax Deadlines
*When possible, max-out this contribution, given its triple tax benefit: tax-deductible contributions, tax-free growth, tax-free qualified withdrawals.
Here are the handouts:
2025 Key Financial Facts — What to Know This Tax Season
2026 Key Financial Facts — Planning Ahead
If you’d like hard copies, please let us know. We’re happy to mail them to you, or you’re welcome to stop in. We’d love to see you!
–David Bunker, Financial Advisor & Licensed Fiduciary
Before You Go
Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.
Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.
This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.
Sources:
1: H&R Block, New $6,000 deduction for seniors, hrblock.com/tax-center/irs/tax-law-and-policy/one-big-beautiful-bill-senior-tax-deduction
2: Charles Schwab, Catch-Up Contributions 2025 and 2026, https://www.schwab.com/learn/story/what-to-know-about-catch-up-contributions
Bay Colony Advisors, DBA Windsor Wealth Management, is not a Certified Public Accountant and does not provide tax, legal, or accounting advice. Any tax-related information provided is for general informational purposes only and should not be construed as legal or tax advice. Each individual’s tax situation is unique, and you should consult with your own tax, financial, or legal advisors before making any decisions. We strongly recommend seeking the advice of a qualified CPA or other professional for personalized tax advice.