What Action To Take If You Think The New Tax Plan Will Pass?
The tax proposals in “The One, Big, Beautiful Bill” will make tax planning hard. Some proposals are retroactive to January 1, 2025. Other proposals are effective in 2026 or future years.
Here are planning tips for the 2025 under the ASSUMPTION THAT THE TAX BILL WILL BECOME ENACTED INTO LAW.
1. Purchase electric vehicles this year as the clean vehicle credit expires this year (instead of 2032). You want to purchase as soon as possible since tariffs can increase the cost of the vehicle. Keep in mind, the vehicle's manufacturer suggested retail price (MSRP) can't exceed:
$80,000 for vans, sport utility vehicles and pickup trucks
$55,000 for other vehicles
2. Purchase clean energy equipment (such as solar property or wind energy) as the credit expires this year (instead of 2034).
3. Make energy efficient home improvements (that are eligible for a 30% credit) or have a home energy audit as this credit expires this year (instead of 2032).
4, Make your Pass Through Entity (PTE) election as these taxes will be subject to the $30,000 SALT cap in 2026. Also some states like California have their PTE election law automatically expire in 2025.
5. Delay paying state taxes until 2026 to take advantage of the increased state and local tax cap (which rises from $10,000 to $30,000 in 2026). 2025 fourth quarter state income taxes can be paid by January 15. Delay paying second installment of property taxes until the 2026 due date. This assumes your state quarterly income tax and property taxes is not due until 2026 as you don’t want to be subject to a late payment penalty.
6. Self-employed taxpayers can defer income to 2026 as the QBI deduction rises from 20 to 23% in 2026. In addition, the phaseout calculation for taxpayers in a specified service trade or businesses are relaxed allowing a higher deduction. Self-employed taxpayers may consider not invoicing clients in December and wait for early January. However, the credit risk of your customers should be carefully considered.
7. There is no need to make large gifts to family or friends anymore as the estate tax exemption will not drop in 2026.
8. If you make regular remittance transfers overseas, try to make transfers in December 2025, before a new 5% remittance excise tax starts January 2026.
9. For taxpayers in the 37% tax bracket, accelerate charitable contributions from 2026 to December 2025. Starting 2026, itemized deductions will only save you 35 cents in taxes if you are in the highest 37% tax bracket. Taxpayers may want to consider donor advised funds as you can receive an immediate charitable tax deduction even if no distribution is made to a charity from the fund.
10. Corporations may wish to accelerate charitable contributions from 2026 to December 2025. Starting 2026, charitable contributions are subject to a floor and contributions up to 1% of income are not tax deductible.
11. Private foundations should monitor assets in late December to see if they can drop into a lower tax range as the investment tax rate is now based on assets owned on December 31.
12. For no taxes on tips, the tip has to be voluntary, not subject to negotiation, and determined by the payor. Therefore, restaurants that have a mandatory tip should remove this rule if they want to help their employees receive tax-free tips. Note: Some restaurants only have a mandatory tip on large groups (such as 6 or more). How will employees be able to figure out which tips were voluntary versus mandatory?
For a tax consultation on the impact of new tax laws, contact me today.
For my comments on the new tax bill the May 21, 2025 USA Today see