When the One Big Beautiful Bill Act (OBBBA) was signed on July 4, 2025, it brought back several familiar tax breaks and introduced a few new twists. For most people, the key difference comes down to timing. Some opportunities close on December 31, 2025, while others open up in 2026. Here are tips to help make the most of year-end planning and start 2026 with a plan in place.
Strategies to Consider Before December 31, 2025
Finish home-energy projects while credits last. Federal credits of up to $3,200 per year are still available through December 31, 2025, for upgrades such as insulation, energy-efficient windows, doors, and heat pumps. Check for state or utility rebates that can stack with the federal credit.
Keep an eye on AMT. The rules on alternative minimum tax tighten in 2026, so timing matters. If you’re planning big moves—e.g., taking a large bonus, selling appreciated assets, or bunching income into a single year—consider spreading them across 2025–2026 to keep AMT out of the phase‑out bands. Keep in mind that SALT isn’t deductible for AMT, so loading up on property‑ or state‑tax payments won’t offset AMT liability.
Make this your big giving year. If you’re charitably inclined, 2025 may be the time to lean in. Beginning in 2026, itemizers will face a 0.5% AGI floor on deductions, and the value of those deductions will be capped at 35% for taxpayers in the top bracket. Next year, non-itemizers will get a modest above-the-line deduction, but this year remains the last full year for unlimited itemized charitable giving.
A donor-advised fund can be an easy way to lock in the deduction now and decide later where your gifts go. Pair those contributions with other itemized expenses (such as mortgage interest and property taxes) to clear the standard-deduction hurdle.
Reimburse 2025 education costs from a 529. OBBBA expanded the list of qualified 529 expenses this year to include more K–12 items and many credentialing or continuing-education costs. For 2025, you can reimburse those expenses if you take the distribution by December 31. The $10,000 K-12 cap remains in place this year and doubles to $20,000 in 2026. Keep good records for every reimbursement.
Roth conversions and withdrawals can use a fresh look. New OBBBA deductions include an additional deduction for seniors, breaks for tips and overtime, and an auto-loan-interest deduction for certain U.S.-made vehicles. However, they phase out at different income levels between 2025 and 2028. If you’re planning a Roth conversion or large pretax withdrawal, the added income could reduce or eliminate one of those deductions and nudge your effective tax rate higher. The takeaway: Run projections first, and size conversions to stay comfortably within your preferred income band rather than crossing into a phaseout zone.
Use the bigger SALT cap while it lasts. The state and local tax (SALT) deduction cap is $40,000 for 2025, a big jump that may make itemizing worthwhile (the benefit tapers at higher incomes).
If you expect to itemize this year, consider:
Paying any remaining 2025 property‑tax bills and 2025 state estimated taxes by December 31.
If you’re a business owner in a state with a pass‑through entity (PTE) tax option, check with your tax professional to see whether a 2025 election still helps under the higher cap.
SALT won’t help if you’re likely to have AMT. Do a quick projection before making extra payments.
Potential Strategies for 2026
A new charitable-giving rhythm. Starting next year, non-itemizers can claim up to $1,000 (single) or $2,000 (joint) for cash gifts to public charities. At the same time, itemizers will face the new 0.5% AGI floor and 35% benefit cap. It may make sense to bunch gifts, meaning completing larger ones in your itemizing years, and smaller ongoing donations in your standard-deduction years.
Business owners, watch the QBI phaseout shift. The 20% qualified business income (QBI) deduction stays, and the income phaseouts for service businesses expand in 2026. If your 2025 income sits near the old limits, it might help to shift timing, deferring income into 2026 or pulling it forward into 2025, depending on where you land.
Refresh estate and gift planning. The federal estate and gift exemption increases to $15 million per person in 2026, indexed thereafter. That may be a cue to review beneficiary designations, titling, and your gifting approach. Families who plan to make substantial lifetime gifts should weigh potential estate tax benefits against the income-tax basis step-up that comes from keeping assets in the estate.
A simple way to use this list
You might want to think of 2025 as your “itemize and act” year and 2026 as your “simplify and adjust” year. Consider grouping deductions strategically, keeping taxable income within the new deduction ranges, and planning big moves, such as conversions, gifts, or business-income timing, based on how each year’s rules line up.
At Northstar Financial Planners in Plantation, Florida, we’re helping clients weave these changes into their charitable giving, retirement income, education, and business strategies. If you’d like to see how we may be able to help with your financial planning, please schedule a call.
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This material was written in collaboration with artificial intelligence (ChatGPT) derived from sources believed to be accurate. This information should not be construed as investment, tax, or legal advice.