The S&P 500 set another record high last week, buoyed by a new trade deal with Japan. While the potential for short-term volatility is always present, corporate earnings remain strong. This week about a third of the S&P will report earnings, and the Federal Reserve Bank’s Board of Governors will meet. While the market still expects a rate cut - or two - this year, Chairman Powell has continued to push a wait-and-see approach as another tariff deadline looms in August.
The latest tax law has also changed some rules around charitable donations. While many of the changes, like the SALT, or state and local tax, cap go into effect this year, the law won’t change for charity deductions until 2026.
As more people are claiming the standard deduction, the ability to write off donations has declined. Starting in 2026, taxpayers who claim the standard deduction will be able to deduct charitable donations of up to $1,000 for singles or $2,000 for a married couple. This is in addition to the standard deduction.
For folks who itemize, the amount of the deduction is reduced by 0.5% of their adjusted gross income. So for every $100,000 of income, the deduction for charitable donations will be reduced by $500.
For earners in the highest bracket, at 37%, donations will only receive a 35% deduction. A high level, round number example is that if you made $1 million and donated $100,000, in 2025, you would deduct the full amount and save $37,000 in taxes. In 2026, you would only save $32,500.
If you’re fortunate enough to be in that bracket and charitably inclined, some tax planning using a Donor Advised Fund may be worthwhile. If you expect to start itemizing again due to the increased SALT cap, you may want to clean out your house to make thrift store donations before the 0.5% floor kicks in.
Your action item this week is to update your passwords. Consider using a password keeper to generate and store strong passwords.
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CovingtonAlsina is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.