Year-End Planning Considerations Around SALT Caps, Expanded Deductions, and Timing Opportunities

As we approach year end, tax planning should be top of mind. The One Big Beautiful Bill Act altered many of the deductions and credits that you or your small business could be eligible for. In this article, we want to explore who stands to benefit from these new tax provisions and what steps you can take to improve your tax position as we head into 2026.

Below, we will answer the following questions:

• What is the One Big Beautiful Bill Act?
• What does the One Big Beautiful Bill Act have to do with the Tax Cuts and Jobs Act?
• What thresholds and limitations changed in the One Big Beautiful Bill Act?
• How should I adjust my tax strategy in light of the One Big Beautiful Bill Act?

What is the One Big Beautiful Bill Act?

The One Big Beautiful Bill Act (OBBBA) is a 330-page spending bill that was signed by President Trump on July 4, 2025. Within the confines of the budget reconciliation process, the OBBBA introduced quite a few changes — to healthcare, to homeland security, to defense — but also to individual and business taxation.

What does the One Big Beautiful Bill Act have to do with the Tax Cuts and Jobs Act?

Before we get into the details of the OBBBA, it’s worth bringing up the Tax Cuts and Jobs Act (TCJA).

President Trump passed the TCJA in his first term. This record-setting tax law introduced many new tax provisions to both individual and business taxes. While the corporate tax law changes were permanent, most of the individual tax law provisions were set to sunset (or expire) at the end of 2025. The OBBBA made nearly all these provisions permanent.

What thresholds and limitations changed in the One Big Beautiful Bill Act?

Below is a list of thresholds and limitations that will change in 2025 or 2026 thanks to the OBBBA.

• Lower tax rates and broader tax brackets: The OBBBA permanently extended the individual tax rates that were established by the TCJA, which are lower than they would have been had the TCJA-era rules expired at the end of 2025.

Not only are the tax rates lower, but the tax brackets are broader, meaning that people may fall into lower marginal tax brackets than if the law hadn’t changed. Though the brackets aren’t finalized for the 2026 tax year, it’s estimated that a married couple making $210,000 in 2026 will be in the third tax bracket with their marginal earnings taxed at 22%. If the OBBBA had not been passed, this same couple would have been in the fourth tax bracket with their marginal earnings taxed at 28%.

• Standard deduction: The OBBBA retained the larger standard deduction established by the TCJA. In 2025, the standard deduction will be:
  • $15,750 for single taxpayers
  • $23,625 for heads of households
  • $31,500 for jointly filing taxpayers

If the OBBBA had not been passed, the standard deduction would have been cut nearly in half beginning in 2026 when the TCJA provisions expired. In effect, the larger deduction allows more individuals to take the standard deduction rather than itemize, which often (1) reduces their taxable income, and (2) saves them time and effort gathering the information needed to itemize.

• Qualified business income deduction: The TCJA introduced the QBI deduction, which gave non-corporate taxpayers a 20% deduction on qualified business income (which is income derived from most partnerships, S corporations, and sole proprietorships). This was set to expire in 2025. The OBBBA made this deduction permanent and increased the phase-out limitations, ensuring more taxpayers will be eligible for the deduction starting in 2025.
• Estate tax exemption: The estate tax exemption was scheduled to be cut nearly in half in 2026, but the OBBBA made the higher exemption permanent. Starting in 2026, the base exemption is set at $15 million and will be adjusted for inflation in the years that follow.
• Charitable contribution deductions: The OBBBA brings both good news and bad news for charitable givers in 2026. The good news? Taxpayers may be able to deduct up to $1,000 or $2,000 of charitable donations (for single and joint filers, respectively) without having to itemize — subject to certain stipulations. The bad news? Individual taxpayers who itemize their deductions can only deduct charitable contributions that exceed 0.5% of their adjusted gross income.
• Limitation on itemized deductions: The OBBBA places a limit on itemized deductions that effectively caps the benefit at 35% for taxpayers in the highest tax bracket.
• State and local tax deduction: Beginning in 2018, the TCJA limited taxpayers’ state and local tax (SALT) deductions to $10,000. Many taxpayers, especially those living in states with high income or property tax rates, paid higher taxes as a result. The OBBBA made this $10,000 SALT deduction cap permanent but offered a temporary boost to the deduction. In 2025, the deduction is capped at $40,000. This cap increases by 1% each year through the year 2029, after which it falls back to $10,000. However, the enhanced SALT deduction is subject to a phase-out for higher-income taxpayers, meaning those above certain income thresholds may see a reduced benefit or lose eligibility entirely.
• Residential clean energy credit: The OBBBA effectively ended the residential clean energy credit in 2025. Taxpayers who wish to benefit from this credit must make eligible energy improvements to their house by the end of the 2025 tax year.
• Trump Accounts: The OBBBA establishes a new tax-advantaged savings account for children under age 18. The beneficiaries of these accounts can receive up to $5,000 in annual contributions (adjusted for inflation) from family, friends, employers, or anyone else. Those deposits will grow tax-free. When the beneficiary turns 18, it will convert into a traditional IRA in their name. The Federal government will deposit $1,000 into accounts for beneficiaries born in 2025, 2026, 2027, or 2028. Although some details are still being finalized, contributions to these accounts will be permitted starting in July 2026.
• Child tax credit: The OBBBA made the larger child tax credit permanent. Prior to the TCJA, the maximum credit was $1,000 per child. In 2025, the maximum credit is $2,200 per child, adjusted for inflation moving forward. The credit is partially refundable and subject to the same income phase-outs as last year.

How should I adjust my tax strategy in light of the One Big Beautiful Bill Act?

Let’s answer a few common tax planning questions that we hear our clients asking now that the OBBBA has made it across the finish line.

Should I change when (or how) I make charitable donations?

Yes, you may want to change your charitable giving strategy in light of the OBBBA. Timing matters here.

The two major changes to charitable contribution deductions kick in in 2026. This means that you have the remainder of the 2025 tax year to contribute under existing tax laws.

If you itemize your deductions, you’ll automatically lose some portion of your charitable contribution deduction in 2026. If you don’t want to see this haircut to the contributions you make that are eligible for deduction, you could consider accelerating your 2026 donations into 2025.

Another common giving strategy when there is a deduction floor like this is to “bunch” multiple years’ worth of deductions into a single tax year. This ensures that your donations get that 0.5% haircut only once.

The opposite plan could make sense for those who don’t itemize. These taxpayers may see more of a benefit by delaying charitable donations to 2026 so that they can get that “free” $1,000 or $2,000 deduction.

Wealthy taxpayers with complex charitable giving strategies will want to reach out to their advisors before the year ends to see if any of their long-term strategies should change.

Should my estate or gift tax plans change?

Now that the $15 million estate tax exemption was made permanent, very few taxpayers will ever be subject to estate tax. In 2023, when the estate tax was $12.92 million per individual, the Tax Policy Center estimated that fewer than 7,000 estate tax returns would ever need to be filed, and that fewer than 4,000 would owe any tax.[1]

Even though you’re unlikely to pay estate tax, estate planning is an essential year-end consideration. Estate taxes are just one piece of the puzzle. You’ll also need to think about:

• Establishing trusts
• Updating your will
• Naming and updating beneficiaries
• Looking over life insurance policies and retirement accounts
• Considering healthcare directives
• Looking into state estate and inheritance tax laws
• Building a business succession plan

You can boost your estate’s value with proper income tax planning, too. Your advisor can help optimize your tax position in light of the OBBBA’s changes.

Should I elect into pass-through entity taxation?

The expanded SALT deduction cap — $40,000 rather than $10,000 — is effective starting this year, in 2025. This means that more of your state and local taxes (like property taxes, state income taxes, etc.) will be deductible on your personal income tax returns. If this allows you to take the full deduction for taxes paid, that’s great! Establishing a workaround becomes less urgent.

However, electing into a Pass-Through Entity Tax (PTET) can still offer meaningful benefits, as the PTET elections allow state taxes to be paid and deducted at the entity level. Meaning, those taxes don’t count against your personal SALT cap. This can preserve the full $40,000 deduction for other state and local taxes — such as property taxes — on your individual return.

The only way that you’ll know if PTETs provide you (and your fellow shareholders/members) with a tax benefit is to walk through the scenario. Depending on—

• The state of residence for each owner
• The availability of state credits for PTET taxes paid on owners’ behalf
• The type of entity
• How income and tax liability is allocated among owners
• How individuals’ credits and deductions play into the rest of their tax position - you may find PTETs beneficial.

It’s also wise to think ahead. This $40,000 cap will drop back down to $10,000 after 2029, which means that you’ll likely need to consider a workaround at some point. Use these next four years to figure out what that workaround looks like. For most taxpayers, PTETs are the perfect solution. But PTETs are complex and can take some time to implement. So don’t delay talking to your advisor.

Our Meaden & Moore advisors are here to help you with any year-end planning needs that you might have. Schedule a consultation with us today.

[1] https://taxpolicycenter.org/briefing-book/how-many-people-pay-estate-tax