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With the doubling of the standard deduction made permanent by the One Big Beautiful Bill Act (OBBBA), the number of taxpayers who itemize deductions will continue to be limited. In 2017, approximately 30% of taxpayers itemized. With the increased standard deduction, approximately 10% of taxpayers will itemize this year.
The standard deduction doubled in 2018 to $24,000 for married couples and $12,000 for individuals. The standard deduction for married couples filing jointly is increasing to $31,500 in 2025 and $32,200 in 2026. The standard deduction for individuals in 2025 and 2026 are $15,750 and $16,100, respectively. Taxpayers ages 65 and older are eligible to receive the existing senior deduction of $2,000 for individual filers or $1,600 per qualifying spouse.
For tax years 2025 to 2028, seniors will receive an enhanced deduction of $6,000. The $6,000 deduction phases out at a rate of 6% of the excess amount for single persons with incomes over $75,000 and married couples with incomes over $150,000. The deduction is fully phased out for single persons with incomes over $175,000 and married couples with incomes over $250,000. For tax year 2025, a single senior would have a standard deduction of $15,750, the existing $2,000 senior deduction and an additional $6,000, for a total deduction of $23,750.
What tax planning strategy might benefit generous taxpayers who know there is a large standard deduction and still desire to help a favorite charity? Let us consider the options for two generous families: 1) John and Mary and 2) Harry and Susan.
Both couples pay $8,000 in state and local taxes and $7,000 in home mortgage interest. They give $12,000 to favorite charities each year. Their total itemized deductions are $27,000 per year.
Because the standard deduction is larger than the $27,000 in itemized deductions, John and Mary plan to take the $31,500 standard deduction in 2025 and $32,200 in 2026. Their total deductions over two years equal $63,700.
Harry and Susan decide to “bunch” their charitable deductions. They gave $24,000 in 2025 and plan to give nothing in 2026. Because their 2025 itemized deductions of $39,000 are more than the standard deduction, they elect to itemize their deductions. In 2026, they take the standard deduction of $32,200. Their total deductions are $71,200.
Bunching Charitable Deductions
|
Comparison of Deductions for 2025 and 2026 |
|
|
Bunching Charitable Gifts: Harry and Susan |
$71,200 |
|
Standard Deduction: John and Mary |
$63,700 |
|
Benefit of Charitable Bunching |
$7,500 |
By “bunching” their deductions, Harry and Susan increase their tax savings from their charitable gifts. The $7,500 increased deductions may save $2,100 in their 28% federal and state income tax brackets.
Editor’s Note: If your combined state and local tax, home mortgage interest and charitable gift deductions are close to the married or individual standard deductions, it may be beneficial to visit with a tax advisor about “bunching” your charitable gifts. Making larger charitable gifts every other year could be an excellent tax-saving strategy.
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