The One Big Beautiful Bill Act, which passed in July, creates opportunities to save money on your taxes. But you need to act fast. By Karen Hube
A hodgepodge of rule changes under this year's tax legislation adds a host of new considerations for year-end tax planning.
The One Big Beautiful Bill Act, or OBBBA, passed in July, was cheered by taxpayers for maintaining the status quo on key tax issues. Historically low marginal income-tax rates, which were scheduled to rise in 2026, were preserved. The estate tax exemption, which was set to fall to $7 million per person next year from $13.99 million in 2025, received a boost -- to $15 million for 2026.
But these headline provisions don't tell the bill's whole story. Various tweaks to existing tax provisions could significantly affect individuals' 2025 tax bills -- for better or worse -- and they call for some time-sensitive strategies, says Jennifer Baick, vice president of Mercer Advisors' financial planning group.
"Most people don't look at their tax information until January or February, but at that point, all you can do is make sure you're reporting it correctly to the IRS," Baick says. "Now, however, we have a window where we can make informed decisions about how to minimize our taxes."
Here's a look at seven tax rule changes, and how to make the most of them:
Higher Cap on SALT Deductions
Effective for 2025, the maximum deduction you can claim on your federal tax return for state and local taxes, or SALT, has been bumped to $40,000 from $10,000 for both single and joint filers who earn $500,000 or less. For those with income above $500,000, the deduction will be reduced by 30% of the amount of income in excess of $500,000, and the cap falls to $10,000 once income hits $600,000.
If your income is in or above the phaseout range, consider ways you can defer income into 2026 to qualify for a higher SALT cap this year, says Beth Shapiro Kaufman, national chair of the private client services group at the law firm Lowenstein Sandler. "People with the most flexibility are going to be business owners or people who have a fair amount of income from capital gains and can choose whether to realize gains or not," Kaufman says.
If you live in a state with no income tax -- such as Florida, New Hampshire, or Washington -- your total SALT deductions may fall well short of the $40,000 cap. "To maximize the benefit on your 2025 return, consider prepaying a 2026 installment of your property taxes to bump up your total 2025 SALT deductions," says Dan Sudit, a partner at Crewe Advisors.
New Charitable Deduction Rules
If you itemize deductions, the final weeks of 2025 may be your last chance to get the full tax benefit of charitable gifts. Starting next year, two new limits go into effect on itemized charitable deductions.
First, the tax bill sets a new floor: Gifts will be deductible to the extent they exceed 0.5% of your adjusted gross income. In addition, there will be a new 35% cap on the value of your deduction. Think of it this way: If you're in the 37% income tax bracket, you will no longer get a tax benefit valued at 37 cents on each gifted dollar. Your benefit will be capped at 35 cents.
"If I have $1 million in income and give $100,000 this year, my tax benefit in the highest tax bracket is going to be $37,000," says Robert Westley, a regional wealth advisor at Northern Trust. "If I make the same gift next year, my $100,000 is reduced by the 0.5% floor to $95,000, and with the 35% cap, my tax benefit goes to $33,250."
To maximize your tax benefit, consider accelerating future years' gifts into 2025 so you get a full deduction before the new limits go into effect. Consider contributing them to a donor-advised fund, Sudit says. You get the upfront tax deduction, but can dole the funds out to charity over future years.
Sudit recommends contributing highly appreciated stock, because neither you nor the charity will be subject to taxes on the capital gains. "If you like the stock, you can buy the position again and step up your cost basis," he says.
There's an exception to the new limits on charitable deductions if you are age 70 1/2 or older and give from your IRA account. You reduce your required minimum distribution by the amount you give, thereby reducing your taxable income.
If you claim the standard deduction instead of itemizing, there's good news: Starting next year, you can snag a charitable deduction for cash gifts on top of the standard deduction for the first time. It's capped at $1,000 for single filers and $2,000 for couples.
"If you [plan to] claim the standard deduction, there's no reason to bunch deductions into this year," says Sam Petrucci, head of advice, planning, and fiduciary services at Neuberger Berman Private Wealth.
When determining whether you will itemize or take the standard deduction next year, keep in mind that the higher SALT cap will cause more people to itemize. Total deductible expenses are more likely to be higher than the standard deduction, especially for people in high-tax states.
Increased Access to HSAs
Eligibility for health savings accounts will expand substantially in 2026 to some 10 million more people. But you may have to take steps now to be able to open and fund one of these accounts next year.
HSAs are tax-favored savings accounts for healthcare expenses, with triple tax benefits. If you have an employer-sponsored health plan, you make pretax contributions. If you have independent insurance, you sock away after-tax money but get a tax deduction for your contribution. Money in the account can be invested and grows tax deferred, and can be tapped tax-free when used for healthcare expenses.
You'll pay a 20% penalty on top of income taxes for taking money out for nonhealthcare expenses before age 65. Once you turn 65, the penalty falls away, but you pay income taxes on the nonhealthcare withdrawals.
Traditionally, HSAs have only been available to people who have high-deductible health insurance policies. Most are offered through employers. The tax bill expands eligibility to people who use independent insurance through the Affordable Care Act, or ACA, and opt for either the Bronze or Catastrophic level of coverage. The bill also opens HSAs to people with subscription-style primary-care services, in which they pay an annual fee rather than a per-visit fee to see their doctor. The open-enrollment period for insurance through the ACA is currently under way and ends Jan. 15.
To optimize your HSA, make annual contributions, but use non-HSA funds to pay for healthcare expenses so your money can grow tax-deferred, says Molly Reese Ward, an advisor with Equitable Advisors. "Later, after years of compounding growth, you can take money out tax-free to reimburse yourself for your healthcare expenses."
This year, you can contribute a maximum $4,300 if you have single coverage or $8,550 for family coverage. The limits rise to $4,400 and $8,750 next year. An additional $1,000 contribution is allowed for people age 55 or older.
Rising Impact of AMT
The alternative minimum tax, or AMT, will snag more taxpayers starting this year due to OBBBA changes. It particularly affects people who earn $400,000 to $600,000 in 2025 or who plan on exercising incentive stock options. Taxpayers are required to calculate taxes under both the AMT and income tax systems, then pay the higher of the two.
Your best protection? Crunch the numbers now so you can determine whether you're in the AMT's crosshairs. If you are, there may be time to enact strategies before year end to minimize or avoid the AMT, says Joseph Perry, national tax leader at the accounting firm CBIZ.
The AMT was created in 1969 after wealthy taxpayers used loopholes to pay zero income tax. But the AMT's rules weren't updated, and by 2017 it hit 88% of taxpayers with incomes from $200,000 to $1 million and just 25% of folks earning more than $1 million, according to the Tax Policy Center.
The Tax Cuts and Jobs Act, or TCJA, reformed the AMT beginning in 2018 by raising the exemption and the income level at which the exemption phases out. For 2025, the exemption is $137,000 for joint filers and $88,100 for singles. It begins phasing out once income reaches $1,252,700 for couples and $626,350 for singles.
But starting next year, the bill lowers the income level at which the exemption begins to phase out to $1 million for couples and $500,000 for singles. The exemption will also phase out more quickly: by 50% annually, up from 25% a year.
The SALT cap increase, effective this year, is another factor that will revive the AMT. The higher your deductions are relative to income, the more likely you are to trigger the AMT.
To minimize or avoid AMT exposure, consider accelerating income by advancing a bonus or realizing investment income to reduce the value of deductions relative to income, Sudit says.
But don't look at the AMT in isolation, he says. "If additional income means your Medicare contribution would be higher, then your great idea may not turn out great after all."
If you have incentive stock options, you may be highly sensitive to exposure to the AMT because the difference in your shares' fair market value and your strike price when you exercise is considered income under the AMT, but not for income tax purposes.
"You may want to slow down exercising ISOs," says Brian Schultz, a tax partner at Plante Moran. "Maybe exercise a bit in December and a bit in the new year."
Last Chance for a Clean Energy Credit
The tax bill is phasing out green energy credits on a staggered schedule, but homeowners can still nab up to $3,200 in credits for 2025. The energy-efficient home-improvement credit, which was originally set to expire at the end of 2032, will expire at the end of this year, leaving time for last-minute upgrades to qualify for the tax perk.
There is a caveat: To be eligible for the credit, it isn't enough to purchase equipment. Improvements must be installed and operational by year end.
Qualifying expenses are energy-efficient exterior doors and windows, solar panels, heat pumps, water heaters, and biomass stoves and boilers. Each improvement comes with its own credit limit. For example, you can claim up to $250 for an exterior door or up to $600 for exterior windows.
Return of 100% Bonus Depreciation
Taxpayers with business income can now write off 100% of the value of certain assets in the year they are purchased.
Called bonus depreciation, the tax break applies to purchases such as new carpeting or appliances for owners of rental properties, or new computer equipment or a vehicle for business owners.
Under the TCJA, the maximum depreciation that could be claimed in the year of purchase phased down annually and was set at 40% this year. "Bringing it back to 100% is a huge deal, because you can claim it even if you don't have a profit," says Steve Elliott, a tax director at Mercer Advisors.
The tax benefit applies to assets that have a depreciation life -- which is set by the IRS -- of 20 years or less. The rule change is effective on purchases made after Jan. 19 of this year.
More Flexibility for 529 Plan Funds
Until now, at the kindergarten through 12th-grade level, 529 plan assets could only be used to cover tuition. The tax bill added a list of eligible expenses at the pre-college level, such as educational materials, test fees, and tutoring. Up to $10,000 distributed from a plan after July 4 this year can be used for such expenses in 2025. The cap rises to $20,000 in 2026.
The tax bill also expands eligible expenses to include credentialing and licensing programs such coursework or tests to become a fitness trainer, a certified public accountant, or a lawyer.
A caveat: Some states' 529 plans haven't kept up with federal rule changes. Be sure to check if your state plan has adapted to the federal changes.
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November 28, 2025 21:31 ET (02:31 GMT)
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