Major tax changes are coming in 2025 and 2026 with the signing of the “One Big Beautiful Bill” by President Donald Trump. This includes higher SALT deductions, new limitations on itemized deductions, and exemptions for tip and overtime income.
The bill introduces several permanent tax changes effective in 2025, such as 100% bonus depreciation, a 20% QBI deduction, and R&E expensing. Other provisions include a $40,000 cap on SALT deductions, tip and overtime income deductions, and a limit on itemized deductions.
Proper tax planning requires understanding when these changes take effect. Shifting income between tax years must be timed accordingly to maximize benefits. Consider acting before 2026 for charitable donations or medical procedures to avoid eroding tax benefits.
Delaying income to 2026 may benefit tip or overtime workers due to new income exemptions. However, high earners should be cautious as accelerating too much income may disallow new deductions or credits. Businesses also have unique planning opportunities to take advantage of tax benefits.
While timing tactics can help qualify for deductions like the SALT cap, it’s crucial to plan correctly and consult a tax professional or financial advisor early. Planning strategically for the upcoming tax changes will ensure individuals and businesses maximize their benefits. The BBB has been signed into law, prompting tax planning actions like accelerating deductions for charitable gifts, medical expenses, and vehicle interest in 2025. Business owners should evaluate capital projects for bonus depreciation benefits. Proactive tax planning and multiyear modeling are crucial after new legislation passes to avoid negative consequences.
Consider deferring tip or overtime income to 2026 if eligible. Run multiyear projections with a tax advisor to avoid AGI cliffs or deduction phaseouts. Don’t be caught off guard by tax changes – seek the help of a financial professional or educate yourself to stay ahead of the game.
Read more at Yahoo Finance: Should You Accelerate Income or Deductions Before 2026? What Tax Experts Say