Important points
- Taxpayers can benefit from the new SALT cap by prepaying estate taxes and paying state and local taxes before the year’s end.
- Those who don’t itemize might want to postpone charitable contributions planned for 2025 to next year, whereas itemizers may consider making contributions due in 2026 sooner.
- Homeowners have just a month left to utilize two clean energy tax credits, so they should start renovations soon to claim them.
From rising state and local taxes to the timing of charitable contributions, here’s what taxpayers should consider before the year closes to make the most of recent tax changes.
The “One Big, Beautiful Bill” brought significant alterations to tax credits and deductions effective for the 2025 tax year. Some changes will impact 2025 taxes retroactively, while others are set for 2026. Tax experts suggest taking action now to fully leverage these modifications, irrespective of their implementation date.
Why this matters to you
This bill introduces crucial updates to the tax code, often leading to lower taxes. Taxpayers have the chance to make a decision before the year’s end that could enhance their benefits from these new tax credits and changes.
How to make the most of your increased SALT deduction
The “One Big Beautiful Bill” raises the SALT deduction limit from $10,000 to $40,000 for the upcoming 2025 tax year.
The SALT deduction allows those who itemize to subtract state and local taxes from their federal taxable income, effectively lowering their tax load. This cap increase primarily benefits high-income earners and residents in states with high taxes.
Jonathan Jack, a senior tax advisor, mentioned that taxpayers with incomes below $633,333 — the point at which the deduction phases out — might want to “double pay” their estate taxes before the year wraps up.
This tactic means paying state and local taxes for both 2025 and 2026, while receiving a full credit, assuming the 2025 taxes don’t surpass the new SALT limit.
“There are pros and cons to that,” Jack notes. “It’s effective if you have other itemized deductions and plan to take those this year. Just keep in mind, if you pay double this year, you lose that option for next year.”
Taxpayers earning income via interest, self-employment, or capital gains usually need to pay estimated taxes quarterly. For the IRS and many states, the fourth quarter due dates typically fall around January 15.
However, paying your quarterly taxes before year-end might qualify you for the increased SALT deduction.
The timing of when you should make a charitable donation depends on whether you itemize your taxes.
The One Big, Beautiful Bill makes charitable contribution deductions more favorable starting in 2026 for non-itemizers. So, for those not itemizing, it may actually be better to delay supporting charities until after 2025, Jack suggests.
Specifically, the legislation reestablishes a deduction for non-itemizers, allowing up to $1,000 in deductions for charitable contributions made in the 2020 tax year.
Nevertheless, starting in 2026, itemizers will face limitations on charitable deductions, indicating that those taxpayers might benefit from accelerating donations they’d otherwise make next year, according to Mark Luscombe, a principal tax analyst.
In 2026, many taxpayers will encounter new floors and limits for their charitable contribution deductions, potentially decreasing the amount they can claim.
This is your last chance to take advantage of these deductions
Several Clean Energy Vehicle Credits expired in September, and some Clean Home Credits are set to expire on December 31. To capitalize on these credits, taxpayers need to implement clean energy upgrades in their homes by year’s end.
- Residential clean energy credits: Taxpayers can deduct up to 30% of eligible costs, which include:
- solar panels
- solar water heaters
- wind turbines
- geothermal heat pumps
- fuel cells
- storage batteries
- Energy Efficient Home Improvement Credit: Offers up to 30% in deductions (up to $3,200) on eligible expenses like:
- exterior doors
- windows and skylights
- insulation and air sealing
- energy audits
- central air conditioning
- gas, propane, or oil water heaters
- gas, propane, or oil furnaces
- heat pumps
- biomass stoves and boilers
