The One Big Beautiful Bill Act has brought changes to tax rules, impacting Americans starting in 2026. Financial experts advise taking action now to strengthen your finances before the new provisions take effect in 2025. Taxpayers who itemize will lose deductions on the first 0.5% of their adjusted gross income given to charity.
To counter this change, experts recommend bunching multiple years of charitable donations into 2025 through a donor-advised fund. Contributing appreciated securities can also help avoid capital gains taxes while still receiving a full deduction. Non-itemizers will receive a new above-the-line deduction for public charities.
Tax-loss harvesting remains a solid strategy, but timing is crucial. Selling losing investments by Dec. 31 can offset gains and up to $3,000 of ordinary income. However, the wash-sale rule prohibits repurchasing substantially identical stocks within 30 days before or after a sale to avoid loss disallowance.
Acting now is crucial, as waiting until December may cause missed opportunities. Review contribution levels before year-end, especially for older workers facing new IRS rules for catch-up contributions in 2026. Health savings accounts offer triple-tax benefits and expanded eligible expenses, making them valuable for future healthcare costs.
The state and local tax deduction cap has quadrupled to $40,000 for 2025-2029, benefiting residents of high-tax states who itemize. However, the deduction phases out for high earners exceeding certain income thresholds. Consider prepaying 2026 state and local taxes in 2025 to maximize deductions before the cap lowers. The standard deduction has increased to $15,750 for single filers and $31,500 for joint filers, making itemizing less beneficial. The annual gift exclusion allows giving up to $19,000 per recipient without affecting the lifetime estate exemption. The exemption will rise to $15 million per person or $30 million per couple in 2026.
Estate planning may be less complex with the higher exemption, but annual gifting remains impactful. Gifts made by Dec. 31 count towards this year’s exclusion. Taking action before 2025 ends can reduce tax burdens, with charitable giving, tax-loss harvesting, and maxing out retirement contributions being time-sensitive.
Consulting a tax professional before the year ends is wise for personalized tax advice.
Read more at Yahoo Finance: 5 smart tax moves you should make before the end of 2025