Key Takeaways
As 2025 draws to a close, attentions shift to year-end financial planning strategies designed to optimize your tax position, strengthen your investments, and set a solid foundation for the year ahead. From retirement contributions and harvesting tax losses to reviewing charitable giving opportunities and assessing cash flows, these actions can help you make the most of available deductions and credits while aligning your financial goals with changing market and tax conditions. This year’s review includes the potential tax impacts made by the One Big Beautiful Bill Act, signed into law on July 4th, 2025. A thoughtful year-end review ensures your financial plan remains resilient and ready for 2026.
Key Financial Planning Impacts of One Big Beautiful Bill Act (OBBBA)
Federal Tax Brackets
OBBBA makes permanent the 2017 Tax Cuts and Jobs Act (TCJA) Income Tax Brackets, with the highest marginal rate remaining at 37% for individuals, estates and trusts. The corporate tax rate remains unchanged at 21%.
Estate
Permanently raises the Federal Estate, Gift, and Generation-Skipping Transfer (GST) tax exemptions to $15 million per individual beginning in 2026 (adjusted for inflation thereafter). The 2025 Federal Estate Exemption amount remains at $13.99 million per person.
Tax Deductions
State and Local Tax (SALT) Deduction - is increased from $10,000 to $40,000 for the 2025 tax year. The deduction amount increases by an additional 1% each year from 2026 - 2029. There are income limits for phase out between $500,000 - $600,000 of Modified Adjusted Gross Income (MAGI). Taxpayers with incomes above this level are subject to the previous $10,000 SALT deduction cap. The SALT deduction cap will revert to $10,000 beginning in 2030.
Enhanced Deduction for Seniors - a new $6,000 deduction for Single tax filers who attain the age of 65, or older, before the close of the taxable year. The deduction is $12,000 for those Married Filing Joint (MFJ). The deduction is only available in tax years 2025-2028 and is not indexed for inflation. Income limitations apply as the phase out begins at $150,000 MAGI for those MFJ (phased out completely at $250,000 MAGI for MFJ), or $75,000 MAGI for all other taxpayer filing statuses (phased out completely at $175,000 MAGI for Single filer). The deduction is available whether a taxpayer takes the standard deduction or itemizes their deductions.
New Limitations on Deduction of Mortgage Interest – Indebtedness is limited to $750k for mortgage interest to be deductible. HELOC interest is not deductible unless used to build or improve property. In addition, mortgage insurance premiums are eligible for deduction starting in 2026 for itemizers.
Auto Loan Interest Deduction – OBBBA allows up to a maximum $10,000 deduction for interest paid on auto loans for U.S. assembled, personal use vehicles purchased between 2025 – 2028. Phase-out begins at $100,000 MAGI for single filers ($200,000 MAGI for MFJ) and applies to non-itemizers who have either taken out new loans or refinanced after December 31, 2024.
Charitable Deduction for Non-Itemizers - Beginning in 2026, taxpayers who elect not to itemize can deduct up to $1,000 for single tax filers ($2,000 MFJ) for qualified charitable contributions annually.
Business Planning
Section 199A Deduction for Qualified Business Income - commonly referred to as the “QBI deduction”, is made permanent for pass-through entities such as sole proprietorships, partnerships, and S-Corporations. The deduction rate will remain at 20%. The phase out begins at $75,000 for single filers and $150,000 for MFJ.
Section 1202 Qualified Small Business Stock (QSBS) Gain Exclusion – OBBBA introduces a higher $15MM gain exclusion cap, tiered phase-in of gain exclusion for holding periods of less than 5 years (with benefits starting at 3 years), and a higher gross asset limit of $75MM. The exclusion cap and gross asset limit are indexed for inflation. Please note, the new rules only apply to QSBS acquired after the date of enactment July 4th, 2025 (if acquired beforehand then subject to previous rules).
Retirement Account Distributions
As many taxpayers are aware, changes made by the SECURE Act of 2019 and the SECURE 2.0 Act of 2022, will require certain beneficiaries to take annual required minimum distributions (RMDs) from an Inherited IRA, while also being required to deplete the entire Inherited IRA within 10 years following the original IRA owner’s year of death. This rule would impact beneficiaries of deceased IRA owners who pass away on/after the required beginning date (the original owner began taking their RMD’s prior to death) and who are considered “Non-Eligible Designated Beneficiaries”.
Eligible Designated Beneficiary – Surviving spouse, disabled persons, chronically ill persons, persons not more than 10 years younger than the decedent, minor children, some see-through trusts
Non-Eligible Designated Beneficiary – most non-spouse beneficiaries, some see through trusts
Non-Designated Beneficiary – charities, estates, non-see-through trusts
Consult your tax advisor if you have questions about whether you should take a required distribution from your Inherited IRA before the end of 2025 and annually thereafter.
The required beginning date (RBD) for distributions from non-Roth IRAs and qualified plans is determined as the following table shows:
Retirement Account Contributions
The maximum contribution to your retirement plans – e.g., 401(k), 403(b), Roth 401(k), Roth 403(b),– for 2025 is $23,500 if you are under 50 years of age. If you are age 50 or over, you can take advantage of the catchup contribution allowing you to contribute additional $7,500. Maximum contributions for 2026 will increase to $24,500 and catch-up contributions will increase to $8,000.
Beginning in 2026, individuals earning more than $145,000 in the prior year must make catch-up contributions on a Roth basis. This rule applies to 401(k), 403(b), and governmental 457(b) plans, but not to SEP or Simple IRA’s.
| Birthdate | Required Beginning Date |
| Before July 1, 1949 | April 1 following year in which you attain 70 1/2 |
| Between July 1, 1949, and December 31, 1950 | April 1 following year in which you attain 72 |
| Between January 1, 1951, and December 31, 1959 | April 1 following year in which you attain 73 |
| January 1, 1960, or later | April 1 following year in which you attain 75 |
The required beginning date (RBD) for distributions from non-Roth IRAs and qualified plans is determined as this table shows.
The annual contribution limit for traditional or Roth IRAs is $7,000 for 2025, with an additional $1,000 catch-up if you are age 50 or over. IRA contribution limits will increase to $7,500 in 2026 while the catchup contribution for those age 50 and over will increase to $1,100. Contributions are subject to income limitations, as well as earned income eligibility.
“Super Catch-Up” Contribution
For tax year 2025, participants between the ages of 60-63 will have the opportunity to take advantage of additional contributions through their defined contribution retirement plan. Individuals who turn 60, 61, 62, or 63 in 2025 may use an alternate increased amount of $11,250, giving the ability to contribute an additional $3,750 to their employer sponsored plan for a total of $34,750.
Roth Conversions
With the passing of OBBBA in July 2025, federal income tax brackets will remain unchanged going into 2026. This stability is especially helpful when considering Roth conversions, which involve transferring funds from a pre-tax retirement account to a post-tax Roth IRA and paying taxes on the converted amount. If you expect to be in a higher tax bracket in retirement, perhaps due to RMDs, converting some of your pre-tax assets now may reduce future tax liability.
Roth assets are also tax-free to heirs, making Roth conversions a possible wealth transfer tool. We strongly recommend discussing the impact with your tax advisor before committing to any strategy.
Newborn Accounts per OBBBA 2025 (Trump Accounts)
OBBBA also introduces a new tax-efficient savings vehicle for children born 2025-2028, who can opt-in and receive a $1,000 one-time deposit into their Trump Account from the federal government. There is a $5,000 annual post-tax contribution limit (indexed to inflation). Contributions can continue until the child reaches age 18. Employers can contribute up to $2,500 each year until the child reaches age 18. However, this $2,500 employer contribution counts towards the $5,000 annual limit. Qualifying distributions can begin once the child reaches age 18, at long-term capital gains rates. Only the earnings portion of the account is taxed, with withdrawals being pro-rata (principal and earnings proportionally). Investments are limited to funds that track a U.S. equity index, do not use leverage, and have fees of no more than 0.1%/year.
Please note, these accounts are not expected to be funded from the Federal government until June 2026 or later, and accounts cannot yet be opened. RMDs and the 10-year rule likely apply but more guidance from the IRS is needed.
Health Savings Account (HSA)
If you are currently enrolled in a high-deductible health insurance plan, you qualify for an HSA. An HSA is a tax-deductible savings vehicle established to set aside funds to pay for healthcare expenses. Unlike flexible spending accounts (FSA), unused funds roll over and accumulate for use in future years. Instead of using your HSA as a conduit account for qualified health expenses, consider leveraging it as another long-term investment tool.
An HSA offers multiple tax benefits in the upfront tax deduction and tax-free distributions for qualified health expenses. Many Health Savings Accounts allow you to invest a portion of your HSA funds allowing for tax-deferred growth of the account balance. The funds can be used at any time for qualified medical expenses. Contribution limits vary based on coverage, the 2025 annual limits on deductible contributions are $4,300 for single coverage and $8,550 for family coverage. The catch-up contribution for an HSA is $1,000 if you are age 55 or older. In 2026, HSA contribution limits will increase to $4,400 for single coverage and $8,750 for family coverage.
Open Enrollment for Health Benefits
Open enrollment is a great time to re-evaluate and adjust your health insurance and other benefits for the upcoming year. During the enrollment window, you should review your current coverage, paying close attention to the Annual Notice of Change (ANOC) to understand any changes to premiums, deductibles, or benefits. If there are changes to family dynamics or health, you may consider enrolling in new plans, switching between plan types, or adding/removing dependents.
Annually Review Your Beneficiary Designations
Each year brings the possibility of going through family and/or monetary changes that may warrant a review of your beneficiary designations. For example, a divorce, birth, or death in the family, receiving an inheritance or retiring are pivotal moments to review the beneficiaries of your financial accounts.
Keep in mind, beneficiary designations supersede other estate planning documents regarding the transfer of financial assets. So, it is extremely important to confirm all designations are current to ensure your wishes are met after you pass away. Take the time to review beneficiaries on employer retirement accounts, personal retirement accounts (Traditional IRA’s and Roth IRA’s), Health Savings Accounts, and both personal and employer offered life insurance policies. In some cases, non-retirement investment accounts may also have a beneficiary designation known as “TOD” or transfer-on-death. Similarly, bank accounts may have a “POD” or payable-on-death designation.
Estate Planning
Establishing and updating your Estate Plan will ensure assets are distributed according to your wishes after you pass away or become incapacitated. A properly executed Estate Plan can simplify the process for beneficiaries while providing clarity & reassurance for the Donor. At a minimum, a basic Estate Plan should include a Will, a Health Care Proxy & Medical Directive, and a durable power of attorney. In many cases, a Revocable Trust may provide an additional level of customization for the disposition of assets at death.
An annual review of your estate plan should confirm if documents are still relevant given the previous year’s events. Confirm if changes are needed regarding family dynamics or changes to tax law.
Transfer Wealth Purposefully
Many wealthy families wish to gift more than just monetary benefits, they want to transfer values and purpose as well. In doing so, they create intergenerational common ground to collaborate and fulfill potential, creating an emotional bridge between wealth, purpose, and society. Consider these additional documents to help illustrate personal and family values.
Statement of Wealth Transfer Intent – a non-legally binding document that accompanies estate planning documents like a will or trust to explain the grantor’s values, goals, and reasoning for their decisions. It helps communicate the grantor’s vision to beneficiaries and fiduciaries, potentially preventing future misunderstandings or conflicts by providing context on the family’s history and the purpose behind the plan.
Cornerstone Statement - a family’s foundational document that articulates their shared values, vision, and goals for their wealth, including how it should benefit the family and community. It’s a tool to align generations and create a common purpose, serving as a guide for wealth transfer and future decision-making, and is distinct from a grantor- specific Statement of Wealth Transfer Intent.
New Hampshire Trust Advantage
New Hampshire continues to be a favorable location for establishing and administering trusts. The state’s progressive trust code allows for divided and directed trusts, so trust management duties can be allocated among multiple trustees. Other key advantages of NH Trusts include:
No State Taxes on Income, Interest, or Dividends - One of the biggest advantages of a New Hampshire trust is that the state does not tax trust income or capital gains. In 2025, New Hampshire repealed the interest and dividends tax.
Dynasty Trusts: Protecting Wealth for Generations – Another big advantage of New Hampshire trust law is the allowance for dynasty trusts, which can last indefinitely as they’re not subject to the rule against perpetuities. This can be a powerful tool for families who want to pass down wealth through multiple generations while protecting from creditors and being estate tax efficient.
Flexibility - In many states, making changes to an irrevocable trust can be prohibitively complicated. However, New Hampshire has one of the most flexible legal frameworks for modifying trust terms. This means your trust can be adapted to changing needs over time.
Quiet Trusts - New Hampshire allows for the creation of a trust without notifying the beneficiaries immediately. This can be helpful for those who want to postpone informing beneficiaries until they reach a certain level of maturity.
Gifting Strategies
Beginning in 2026, taxpayers who itemize will be subject to a 0.5% of AGI (adjusted gross income) floor on charitable deductions. The deduction only applies to the portion of the charitable contribution exceeding the 0.5% of the taxpayer’s AGI. Previous AGI limits (upper bound) remain unchanged.
In 2025, the annual exclusion for gifts is $19,000 and the lifetime exemption for gifts is $13.99 million per individual. In 2026, the annual exclusion amount will remain at $19,000 and the lifetime exemption amount will increase to $15 million per individual.
Gifting Low Cost-Basis Assets - Gifting highly appreciated assets to a registered 501(c)(3) charity of your choosing is an effective way to reduce your potential capital gains tax liability. The charitable deduction for cash donations in 2025 is limited to 60% of the Donor’s AGI (adjusted gross income), or 30% of the Donor’s AGI if donating appreciated assets.
Qualified Charitable Distribution (QCD) - Investors who are concerned about paying taxes on their RMDs may consider a Qualified Charitable Distribution. A QCD allows you to distribute up to $108,000 (in 2025) to qualified charities without including the distribution in your gross income. The charity receives a tax-free donation, and the donor can reduce their income tax liability as well as lowering the overall value of their estate. While the RBD for taking RMDs has risen over the years, QCD eligibility age has remained at 70 ½. Please note, QCD’s are not impacted by the new 0.5% AGI floor on charitable deductions for itemizers.
Donor-Advised Fund (DAF) - A Donor-Advised- Fund is a charitable giving vehicle that allows you to contribute multiple years of donations into the fund in a single year and take the tax deduction in that year. A DAF offers the Donor flexibility in deciding on the timing of when assets are distributed from the DAF to the charity in subsequent years. Speak to your tax advisor about the potential to make a larger charitable gift in 2025 prior to the 0.5% AGI floor going into effect in 2026.
529 Plans
One way to make annual exclusion gifts for young beneficiaries is through a 529 college savings plan. A taxpayer can “front-load” a 529 plan by making a gift of up to 5 years’ worth of annual exclusion gifts at once. This can accelerate the tax-free growth in the account. Note that this does require filing a gift tax return even though no tax is due. In 2025, taxpayers can frontload 529 plans up to $95,000 for a single person or $190,000 for couples splitting gifts. In certain states, donors may benefit from a limited state income tax deduction on the gift.
OBBBA expands K-12 expenses (including tuition) that can be paid from 529 Plans to include the following for public, private, or homeschool expenses: (aggregate limit of $10k/year in 2025, increasing to $20k/year in 2026).
Tax
Tax-Loss Harvesting – Taxpayers may consider strategically realizing losses in portfolios to offset realized gains. With strong equity market performance over the last 2 ½ years, finding losses to harvest may prove more difficult than in years past (a great problem to have!) This requires close attention to both long-term and short-term holding periods for securities as well as a thorough understanding of the impact to your overall portfolio allocation. We strongly suggest working with your CPA and Investment Team to coordinate strategies.
Credit Monitoring
If you haven’t done so already, we recommend you take some time to check the accuracy of your credit report. To obtain a copy of your credit report, contact: Equifax Consumer Information Services Inc, Experian, or TransUnion LLC. Everyone is entitled to a free credit report once a year. If there are inaccuracies, we recommend you work with your creditor to ensure the accounts listed are in fact your own, and not fraudulently opened.
Identity theft can cause loss of financial assets, ruin your credit and be a major drain to your time and resources. Preventing it should be a priority. Consider the following best practices to help prevent identity theft:
Obtain Identity Theft Protection - There are many identity theft protection services available to individuals. By taking advantage of one of these services you have an additional line of monitoring of your identity and credit.
Consider a Digital, Secure Document Vault - A digital vault is a secure online platform where you can store important digital documents in one place, including a password manager to store digital footprint in one place. In the event of death or disability, you can assign access to specific family members or a power of attorney as you see fit.
Review Annual Credit Card Statements - Verify all the transactions are legitimate. Review your statements for subscription services for which you are unaware you’re still being charged or may no longer want.
For more insights on any of the topics mentioned above, contact your Cambridge Trust Wealth Management team today.
This article has been sourced from the following websites as of November 1, 2025:
Views are as of November 2025 and are subject to change based on market conditions and other factors. The opinions expressed herein are those of the author(s), and do not necessarily reflect those of Eastern Bankshares, Inc., Eastern Bank or any affiliated entities. Views and opinions expressed are current as of the date appearing on this material; all views and opinions herein are subject to change without notice based on market conditions and other factors. These views and opinions should not be construed as a recommendation for any specific security or sector. This material is for your private information, and we are not soliciting any action based on it. The information in this report has been obtained from sources believed to be reliable but its accuracy is not guaranteed. There is neither representation nor warranty as to the accuracy of, nor liability for any decisions made based on such information. Past performance does not guarantee future performance. Eastern Bank does not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.