January 30, 2026 - Achieving your financial goals can feel like climbing a mountain, requiring hard work, diligence and cautious risk taking. The complex U.S. tax code can make that ascent even more arduous, providing both helpful footholds (such as exemptions and credits) to seek and hidden hazards (such as cliffs and phaseouts) to avoid. And the trail map you used last year may not guide you well this year, because the tax code constantly evolves.

Fortunately, savvy financial advisors (and maybe even reading a helpful blog or two) can point out the footholds and help you steer clear of hazardous terrain. Here, we’ll discuss the many new or altered cliffs that have emerged out of the mountain mist of recent tax legislation that may affect your charitable giving in 2026.

Income Tax Basics

The U.S. income tax method divides an individual’s income into brackets, with lower income brackets taxed at a lower rate and each progressively higher bracket taxed at a higher rate. For instance, consider Phil, a single filer earning $220,000 a year. According to the U.S. progressive tax method, Phil’s income would be taxed as follows:

• The first $12,400 would be taxed at 10%
• The next $38,000 would be taxed at 12%
• The next $55,300 would be taxed at 22%
• The next $96,075 would be taxed at 24%
• Only the last $18,225 would be taxed at 32%

The highest taxation rate Phil faces is known as his federal marginal tax rate. The average tax rate that he pays is known as his effective tax rate.

Tax Cliffs and Phaseouts

Unlike the progressive bracket system, a tax cliff leads to an immediate penalty, higher rate, or loss of a deduction based on the sum of a person’s income. Cliffs aren’t new when it comes to federal law; for instance, Medicare cliffs have long imposed sharp premium jumps for individuals earning even a dollar more than a given threshold.

A phaseout is gentler than a cliff—think of Phil tumbling down a steep hill instead of plunging off a sheer rock face—but phaseouts still penalize taxpayers for reaching a given income amount. The U.S. estate tax system illustrates both hazards: While estate taxes under federal law only tax the amount above the federal estate tax exemption ($15 million per individual in 2026), several states tax the entire estate if it exceeds a given threshold.

Finding Footholds

The U.S. tax code also offers plenty of footholds (or tax breaks) to help taxpayers advance toward firmer financial footing. The One Big Beautiful Bill Act (OBBBA), effective January 1, 2026, increases many of these helpful provisions—from eliminating income tax on up to $25,000 in tips to making higher gift and estate tax limits permanent. Read more about OBBBA measures here.

Mapping Cliffs

But while you’re enjoying the tax advantages those footholds provide, beware of stepping off a cliff! The tax code contains plenty of dangerous terrain that can significantly hinder your financial climb, including the following cliffs and phaseouts:

• Tip deduction phases out once a single filer earns $150,000.
• The additional $6,000 deduction for taxpayers over age 65 phases out if a single filer makes $75,000 or more.
• Employees aged 50 or older earning more than $145,000 must make catch-up contributions to a Roth 401(k) rather than a pre-tax 401(k).
• The increased State and Local Tax (SALT) deduction of $40,000 phases out if you earn $500,000 ($250,000 if married filing separately) or more.
• The Child Tax Credit of up to $2,200 per child phases out if a taxpayer earns $200,000 a year.
• The car loan interest deduction allows purchasers of certain new vehicles to deduct up to $10,000 in interest payment, but this deduction phases out once an individual earns $100,000 a year.
• For taxpayers in the highest tax bracket (37%), the value of their deductions is now limited to 35%, providing a two percent haircut on deductions.

For years, taxpayers have tried to deftly juggle Roth conversions, required minimum distributions, and capital gain events in an attempt to navigate around these cliffs and phaseouts. Though it requires careful attention to detail, planning financial moves around these tax code hazards can pay off in big ways.

Charitable Giving Strategies

One meaningful way to keep your income level below desired thresholds is the strategic use of charitable gifts. By making qualified charitable distributions from your IRA, you exclude those donated dollars from being counted in your income. To save on capital gains tax and get a charitable tax deduction, you can donate appreciated assets to a donor advised fund (DAF) or a charitable remainder trust (CRT). A DAF allows you to bundle giving in some years and take the standard deduction in others, all while continuing to make grants to your favorite charities. A CRT can provide a lifetime income stream for you or loved ones while ultimately benefiting a nonprofit.

These are only a few of the many creative ways to structure your charitable giving to benefit your favorite nonprofit and reduce your tax burden. Experienced guides, such as the trust and legal team at HighGround Advisors, can help you find footholds and navigate around cliffs through individually-tailored charitable giving strategies.

To learn more about how HighGround can help you navigate tax strategies through charitable giving, go to highgroundadvisors.org/gift-planning or call 214.978.3300.