Q4 2025

Happy Fall to you and your family! We continue to consider it a great honor to guide you through pertinent financial decisions as they arise. 

Another edition of The Inside Scoop is here, and this one is packed full of more great content. In this quarter’s edition you will find timely pieces surroundingmarket volatility, The "One Big Beautiful Bill" Act,and Donor Advised Funds We have also included some photos of recent events our team has experienced.

We hope you enjoy.

Yaz, Justin, Karley, Ashley & Whitney 

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BULL & BAIRD : Resilience

Resilience might be one of the most important things we can build as human beings. Whether it’s investing or life, being able to endure is a powerful human trait. Let me tell you a story about how my resilience was tested recently.

“What are we going to do now, is our home ruined?”

Words uttered by my 19-year-old son at 3:30 a.m. on August 10^th, 2025. The look on his face is something I’ll never forget.

My wife and I were standing in our basement, water over our ankles. He had heard our screams and wandered down to see what was happening.

Milwaukee was experiencing its worst single day rainstorm in history. It rained close to 8” by that time, it would go on to rain another 2” before it was done, and a lot of it was pouring into my home.

I’ve never felt more helpless in my life. As the water crept higher, there were moments my wife and I felt overwhelming dread.

I had a plan for this though! I had bought a submersible pump and we had a backup system for our sump pump. I thought about what I’d do if our basement flooded for years but even though I had a plan, I was frozen in place. In the end, a plan is just a piece of paper when human emotions take the wheel.

There are times when a storm is happening where you must let it pass; I wrote about that earlier this year. But there are times when actions are needed to shore up a problem and the plan was in place for just that.

The three of us decided in that moment to do just one thing. Then another and another. If we could pile up small successes eventually we could overcome the problem.

“I’ll move everything as high as I can.”

“I’ll start pumping water out the laundry vent.”

“I’ll bail water from near the furnace.”

Suddenly our mood was lifted enough to think clearly again.  We went back to the plan and it helped us immensely.

There are lots of things that happen to us in life that are completely out of our control. Weather, stock market crashes, election results, pandemics, just to name a few. Was my situation as bad as others have faced across the country? No, in the grand scheme of things my flooded basement is a blip in history. But it taught me something important.

In the end it’s our reaction to the event that determines whether we will survive it or not. Which means resilience is probably the most important thing we can learn in such a chaotic world.

Not only does it take resilience to survive surprising events, it also takes a good support system. By the time the sun rose we had 6-7 friends in our home helping dry us out. They wouldn’t leave us until the job was done. The kind of help that makes you cry a few days later thinking about it.

After the storm I suddenly had a deeper understanding of the kind of helplessness some of our clients feel in a market selloff. Fear is something that can overwhelm anyone at any time, even if they have a plan in place. Again, a plan is just a piece of paper when our very real emotions bubble to the surface, but it's your guide to getting to the other side.

If you’re reading this at some point in the future and you’re feeling overwhelmed by what’s happening in the world just know this: it’s normal. It’s normal to feel afraid and scared of the unknown. It’s normal to feel overwhelmed and hopeless, even if you have a plan in place.

Your goal is to lean into your support system and build small wins, even if that small win is a walk around the block to clear your head. Even if that small win is your son saying, “We’re doing good Dad, lets keep going.”  But don’t lose sight of your plan because that’s how we reinforce resilience.

Whatever you are facing will eventually pass, like it did for us, and the sun will shine on you once again.

All That Matters: Can't Keep a Good Market Down
AI momentum and rate cut optimism are fueling a broad market rally — but surprises still lurk. Mike and Ross break down what’s driving growth, what history tells us, and what economic indicators investors should be watching.

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For individuals and families with strong charitable inclinations, donor-advised funds (“DAFs”) may provide many of the same grant-making and tax benefits of a private foundation, but without the operating expense and administrative burden of creating and running a private foundation.

BASICS
• A donor makes an unconditional and irrevocable contribution to one of several sponsoring organizations that have established a DAF.
• The donor selects from among various mutual funds in which their contributions will be invested.
• The donor receives an immediate charitable income tax deduction equal to their contributions.
• The donor periodically recommends which individual public charities should receive grants.
• The donor receives periodic reports from the DAF on the earnings and disposition of the funds.
• In some cases, the donors will have the right to designate successor “advisers,” such as their children, who may continue to advise the fund after the donor’s death.

OTHER CONSIDERATIONS
• Because DAFs are designated as “public charities,” contributions to donor advised funds are deductible at the most favorable public charity levels. This allows donors to deduct up to 60% of their adjusted gross income when cash is contributed to a DAF, or up to 30% of their adjusted gross income for gifts of appreciated stock. (These percentage limitations are lower for contributions to private foundations.)

• The donor’s recommendations to the sponsoring DAF as to how the contributions should be used are non-binding, advisory recommendations only. Donors who wish to retain greater control over which individual charitable organizations receive their contributions may prefer the alternative of a private foundation. However, private foundations are complex, can generate costly administrative expenses, and will generally only be practical for charitable gifts of $1 million or more.

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Our team exists to come alongside you in your wealth journey as we do not believe in a one sized fits all approach when it comes to your future. In order for us to serve you to the best of our ability, we ask that you keep a few things updated along the way.

Taxes
After filing, send us your tax return. Every year. It's that easy. Our team will then do a thorough analysis. 
We will discuss implications and scenario-based decisions personalized to you and your family. 

Tax Planning Perspective VIDEO

Estate Documents
It is imperative that you update us when there are material changes to your will, power of attorney, and other directives. No one wants to think about the worst-case scenario, however, keeping our team informed of any updates ensures a smooth transition if/when it was to happen.

Estate Planning Perspectives VIDEO 

Insurance
Start the conversation and keep us updated on your current plan. 
Whether it be a whole life policy review, health or property insurance referrals, we will review your current situation and connect you with the best resource to mitigate risk.

360 Wealth
Log in to the Baird Online app. At a minimum, link the basics. (mortgage, 401(k), loans and bank accounts). 
Your accounts will auto-update and will feed into your financial plan for a 360 view & precise financial advice. It is important to keep us informed of any outside accounts as we periodically review your long-term goals.   

We share our lives with you because you are an extension of our family.  Long-term relationships which encourage open and honest communication have been the cornerstone of our team's success for many years.  Thank you for allowing us to walk alongside you and your family. 

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With a flurry of activity leading up to July 4, Congress passed a sweeping budget reconciliation bill – referred to as the “One Big Beautiful Bill" Act (OBBBA) – that tackled two main goals for the current administration: extending tax breaks from the 2017 Tax Cuts and Jobs Act (TCJA) and delivering on many campaign promises. This legislation brings long-awaited clarity to the tax code, and introduces new planning opportunities.

Below is a summary of key changes, although specific planning opportunities are best explored with your Baird Financial Advisor, who can leverage a full wealth planning team and advanced tax modeling tools to tailor any strategies to your unique goals.

WATCH THE VIDEO HERE

Changes to TCJA-Related Income, Taxes and Credits

One of the most significant outcomes of the OBBBA is the extension of thecurrent income tax rates and brackets, originally enacted under the 2017 Tax Cuts and Jobs Act (TCJA). These rates, which were set to expire at the end of 2025, will now remain in place – avoiding a 1–4% increase across most income levels. In addition, the OBBBA extends several key TCJA provisions:

• Enhanced Child Credit: Taxpayers can receive a credit up to $2,200 (a $200 increase) per child in 2025, with inflation adjustments beginning in 2026.
• Lifetime Gift and Estate Tax Exemption:Instead of reverting to $7 million in 2026 following the TCJA sunset, the exemption will increase to $15 million, with annual inflation adjustments thereafter.
• Alternative Minimum Tax:While most provisions remain unchanged, new thresholds beginning in 2026 will expand the number of taxpayers subject to the AMT. As a result, couples with income over $1 million are more likely to owe additional tax under these rules beginning next year.

Changes to TCJA-Related Deductions

The OBBBA makes several important updates to deductions originally introduced under the TCJA, giving taxpayers new opportunities to reduce their taxable income:

• Standard Deductions: The enhanced standard deduction will not only remain in place but will increase for 2025: $31,500 for joint filers (up from $30,000), and $15,750 for single filers (up from $15,000).
• Itemized Deductions: The reductions that have been in place for the last several years have now been made permanent, with a few tweaks such as a new deduction for educators and coaches. The most significant change for itemizers is concerning state and local taxes.
• State and Local Taxes (SALT): One of the biggest focuses throughout the budget reconciliation process has been the deduction for state and local taxes (SALT). The OBBBA has increased the limit to $40,000 (up from $10,000) for 2025 with an increase of 1% per year through 2029. Without further legislation, it will revert back to $10,000 in 2030. There are additional phaseouts based on income and tax filing status – this creates a window where taxpayers within that income range could see an effective tax rate on those dollars as high as 45% – connect with your Baird Financial Advisor for more specific guidance and planning measures.

• Mortgage Interest: The mortgage interest deduction limits are unchanged from current rules (homeowners can only deduct interest on qualifying loans up to $750,000). However, the deduction for private mortgage insurance (PMI) returns in 2026, subject to income qualifications.

New Deductions Created by the OBBBA

The OBBBA introduces three new deductions for 2025 through 2028, each with specific eligibility requirements and income limits. While each of the deductions can be used by taxpayers who use the standard deduction or itemize, they are not considered adjustments and do not lower the adjusted gross income.

• Tip Income: Taxpayers in traditionally tipped occupations can deduct up to $25,000 in qualified tip income. These “traditionally tipped occupations” will be defined by the IRS within 90 days of enactment. Deductible tip income must be reported on a form provided by the employer or contractor and will still be subject to employment taxes.  
• Overtime Income: Joint filers can deduct up to $25,000 of qualifying overtime ($12,500 for single filers) The deduction applies only to the additional pay received above the standard rate and must be reported by the employer. It will also be subject to employment taxes.
• Auto Loan Interest: Taxpayers can deduct up to $10,000 in interest on a loan used to purchase a qualifying vehicle. Certain rules apply, including: the car must be purchased (not leased) between 2025 and 2028, must be for personal use, and final assembly must have occurred in the United States.

Additionally, the OBBBA introduced anew deduction for seniorsto partially address one of the President’s campaign promise to make Social Security benefits tax-free. Taxpayers age 65 or older can deduct up to $6,000 per person, though income phaseout rules apply and the provision is only available now through 2028.

Taxpayers will need to be especially mindful as their income approaches these phaseout levels. Actions like a Roth conversion or realizing a capital gain could inadvertently push your income beyond these limits—causing the loss of valuable deductions and increasing the effective tax cost of those decisions. Your Baird Financial Advisor team can help you build a thoughtful, multi-year tax strategy that accounts for these nuances, and identifies opportunities to optimize your total wealth plan.

Charitable Giving Changes Created by the OBBBA

The OBBBA introduces several updates to charitable giving rules, offering new opportunities and limitations depending on how taxpayers file:

• For those who claim the standard deduction:Starting in 2026, joint filers can claim a separate deduction of up to $2,000 ($1,000 for all other filers) for cash gifts, provided they are not made to a private foundation or donor advised fund.
• For those who itemize deductions: Starting in 2026, high earners in the top 37% tax bracket who itemize will see the value of their deductions capped at a 35% tax benefit. The OBBBA has also introduced a floor for charitable contributions. Beginning in 2026, only contributions exceeding 0.5% of adjusted gross income will be deductible.
• Cash gifts to public charities will continue to be deductible up to 60% of AGI instead of falling to 50% as scheduled.
• Beginning in 2027, a new tax credit of up to $1,700 is available for charitable gifts of cash to scholarship-granting organizations that meet specific standards. Any amount claimed as a credit cannot also be claimed as a charitable contribution.

With some of these key changes, many taxpayers may consider accelerating or “bunching” their 2026 charitable gifts into 2025, in order to maximize their tax value. A effective way to do this is through establishing aDonor Advised Fund, which provides flexibility in choosing which organizations to support and when.

New Investment Savings Vehicle for Children

In addition to the family-related changes noted above, the OBBBA has created a new type of IRA savings account for children under age 18, named “Trump accounts.”

• Beginning in July 2026, accounts can be opened for those under age 18 with a maximum contribution of $5,000 per year (with annual inflation adjustments after 2027). Contributions are not tax-deductible but have no impact on the ability to make contributions to any other type of IRA.
• These accounts may also be funded by select third parties.
  • Employers can contribute up to $2,500 for an eligible employee or their dependent – the contribution will count towards the annual $5,000 limit but is not considered taxable income to the employee.
  • The federal government will make an initial $1,000 contribution to accounts for individuals born in 2025 through 2028.
  • General funding contributions can also be made by state, local or tribal governments or charitable organizations, based on eligibility requirements.
• Before the child turns 18, there are limitations to what the account can be invested in. Distributions are also generally not allowed.
• After the child turns 18, the account is treated like a Traditional IRA, with all the same rules on contributions and distributions.

Education Funding Changes Created by the OBBBA

The OBBBA expands education-related tax benefits, offering greater flexibility for planning:

• 529 Plan Accounts:The definition of “qualified expenses” for 529 reimbursement has expanded: non-tuition expenses for elementary, secondary, religious and private school expenses are now allowed, as are expenses for acquiring and maintaining professional credentials. Beginning in 2026, a 529 account can also be used to pay up to $20,000 of elementary or secondary tuition (up from $10,000 currently).
• Employer Educational Assistance: Employers can provide up to $5,250 of educational assistance to employees tax-free. While the inclusion of student loan payments was scheduled to expire after 2025, the bill has made that inclusion permanent. The $5,250 limit will also be adjusted for inflation after 2026  

Family-Related Changes Created by the OBBBA

The OBBBA introduces several updates aimed at supporting families and dependent-related expenses:

• Employer Assistance for Dependent Care: Employers can currently provide dependent care assistance of up to $5,000 to an employee tax-free. In 2026, that amount will increase to $7,500.
• Child and Dependent Care Expenses: The maximum tax credit for working parents will increase from 35% to 50% of qualifying expenses, with a new phaseout schedule with a floor of 20%.
• Adoption Expenses: The tax credit for expenses was modified to let $5,000 of the maximum $10,000 credit refundable, meaning the portion of the credit is available to those whose tax liability is less than $5,000.

Tax Changes for Business Owners

While this legislation is largely geared towards individual taxpayers, there are several changes that business owners should also be aware of:

• “Bonus Depreciation” Program:The OBBBA has made this TCJA-era provision permanent. Businesses can continue to deduct 100% of the cost of certain qualifying property in the year of the purchase.
• Qualified Business Income (QBI) Deduction: Owners of pass-through businesses can continue to exempt a portion of their income from tax; in 2026, the phaseout range will expand slightly, allowing even more taxpayers to qualify for the deduction.
• Tax Benefits for C Corporations: The tax benefits available when selling a qualified small business structured as a C Corporation have been expanded, making that form of ownership more attractive.

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