Government Shutdown Ending, Funding Bill Signed

President Trump signed a bill on November 12 to reopen and fund the federal government after the longest shutdown in U.S. history, which lasted 43 days and affected millions of Americans. The stopgap measure extends most government funding through January 2026 and provides full-year appropriations for specific agencies. The bill also reverses prior layoffs, guarantees back pay for federal employees, and includes protections to prevent further job losses.

Congress now faces renewed budget negotiations early next year, with nine additional appropriations bills still pending, including a legislation to extend Affordable Care Act (ACA) premium tax credits, which are set to expire at the end of 2025.  For taxpayers and businesses, the end of the shutdown brings welcome stability—for now—but ongoing fiscal planning could shape government funding and economic conditions heading into 2026.

 

Charitable Contributions Update: Key Tax Changes for 2025 and Beyond

As we approach the holiday season and season of giving, we want to highlight important updates on the deductibility of charitable contributions. Recent changes will impact both the timing and amount of donations, making strategic planning essential for 2025 and beyond.

1. Charitable Deduction for Nonitemizers
Starting January 1, 2026, taxpayers who take the standard deduction can deduct up to $1,000 ($2,000 for married couples) in cash contributions to qualified charities annually, even if they do not itemize.

2. New Floor for Charitable Deductions by Itemizers
The One Big Beautiful Bill Act (OBBBA) introduces a new 0.5% of adjusted gross income (AGI) floor for charitable contributions by itemizers, effective January 1, 2026. This is similar to the existing floor for medical expenses. Previously, no floor applied to charitable contributions.

3. Ceiling on Itemized Deductions for High-Income Taxpayers
Beginning January 1, 2026, the benefit of itemized deductions, including charitable contributions, will be capped at 35% for taxpayers in the highest tax bracket (37%). For 2025, the 37% tax bracket applies to incomes over $626,351 (single) and $751,601 (married). High-income taxpayers may want to accelerate charitable contributions before this ceiling takes effect.

4. Planning Strategies to Maximize Tax Benefits
To mitigate the impact of these changes, consider these strategies:

  • Donor-Advised Funds (DAFs): DAFs provide flexibility for charitable giving while allowing tax-free growth. Contributing to a DAF in 2025 can offer an immediate tax deduction, with distributions made in future years.
  • Charitable Bunching: By consolidating donations into one year, taxpayers may exceed the standard deduction threshold and maximize tax benefits. Bunching contributions in 2025 could help avoid the 2026 floor and ceiling rules.
  • Qualified Charitable Distributions (QCDs): For those over age 70½, QCDs allow donations directly from IRAs to charities, reducing taxable income without triggering the new deductibility limits. For 2025, the annual QCD limit is $108,000 per individual.

5. Planning Ahead for Future Charitable Giving
As tax rules evolve, careful planning is essential, especially for those who itemize or are in higher tax brackets. We can help navigate these changes by identifying the most tax-efficient giving strategies, ensuring your charitable contributions continue to provide meaningful tax benefits.

 

Treasury to Suspend IRS Direct File

The Treasury Department has officially decided to suspend the IRS Direct File program, reversing its previous plan to make it permanent. Despite receiving positive feedback during its pilot phase, the program proved costly and underused, with the 2024 filing season costing $41 million to process just 296,531 returns—an average of $138 per return. Participation was also low, with Direct File accounting for less than 0.5% of all individual returns filed. The decision to halt the program marks a shift away from a government-run tax filing service, and instead, the Treasury will focus on strengthening the existing IRS Free File program, which has struggled with low usage.

The Free File program, which partners with commercial tax software providers, currently serves only 2.7 million out of an estimated 98 million eligible taxpayers. The Treasury plans to address this gap by conducting surveys to better understand taxpayer needs and holding a summit with industry leaders to improve awareness and access. While some lawmakers celebrated the suspension of Direct File as a win for taxpayers, critics argued that the decision undermines a much-needed, cost-effective filing option and favors the commercial tax prep industry. The Treasury’s shift aims to provide a more sustainable, cost-efficient solution for taxpayers in the future.

For more information: https://bit.ly/3LFsmQL 

 

IRS Introduces Safe Harbor for Trusts Staking Digital Assets

The IRS has released Revenue Procedure 2025-31, establishing a safe harbor for trusts that qualify as either investment trusts under Reg. 301.7701-4(c) or grantor trusts. This new provision allows such trusts to stake digital assets without jeopardizing their status for federal income tax purposes. To benefit from the safe harbor, trusts must meet the 14 criteria outlined in Section 6.02 of the revenue procedure.

Existing trusts will have the opportunity to amend their governing instruments to incorporate these safe harbor requirements within a nine-month window, beginning November 10, 2025. It’s important to note that the guidance explicitly clarifies that it does not address tax implications beyond the scope of this revenue procedure, including those related to forks and airdrops. Rev. Proc. 2025-31 is effective for tax years ending on or after November 10, 2025.