A unique twist in Donald Trump’s One Big Beautiful Bill Act is paving the way for what economists predict will be a record-breaking tax refund season in 2026. Average refunds are expected to increase by about $1,000, compared to the typical $3,000 in recent years.

However, this doesn’t necessarily mean that end-of-year tax planning will become any simpler.

In fact, a comprehensive new tax megabill, passed quietly in July, has significantly altered many of the rules regarding deductions, donations, retirement accounts, and even Medicare premiums.

Experts are advising that the potential for a larger refund shouldn’t lead to complacency. Many of the most significant tax-saving strategies under the new legislation need to be implemented by December 31.

This guide is tailored for middle and upper-income Americans who still have the opportunity to leverage these changes to their advantage.

Here’s what to do — and what not to do — before December 31.

Do you itemize or not? 

Everything flows from this question, so begin here.

Following the tax megabill, far more Americans should itemize deductions instead of taking the standard deduction — especially homeowners in high–tax states. 

For example, consider a hypothetical married couple living in New Jersey — a high–tax state — who pay roughly $18,000 a year in property taxes and about $12,000 in state income tax. These amounts reflect what many middle– and upper–income homeowners in high–tax states actually pay. 

Under the old rules, in place for several years, the IRS capped the federal deduction for all state and local taxes at just $10,000. 

That meant that even though this couple paid $30,000 in total state and local taxes, only $10,000 of it could be deducted on their federal tax return. The remaining $20,000 simply did not count for federal tax purposes. 

Under the new law, that cap has been raised dramatically so that, for many filers, up to $40,000 in state and local taxes can now be deducted. 

In this example, the same couple would be able to deduct the full $30,000 they actually paid, rather than being stuck at the old $10,000 limit.

That single change could wipe tens of thousands off taxable income — but only if you itemize. 

If you don’t run the numbers, you could miss the biggest break of the year. 

SALT is bigger — but it’s not free money 

State and local tax deductions (SALT) are now capped at $40,000, up from $10,000. 

But there are strings. The full break applies only if your income is under $500,000. It shrinks between $500,000 and $600,000. You must itemize to get it.

If your income is close to the cutoff, timing matters. 

For example, a consultant expecting a big December bonus could push income over the limit and lose most of the SALT break. Delaying income into January could preserve it. 

Charitable giving: old tricks may now backfire

Charity is where many Americans make costly mistakes. 

Starting in 2026, new limits kick in that reduce the tax value of charitable donations.  In simple terms, large donors will no longer be able to deduct the full amount of their gifts in the same way they can today.

One change introduces a new floor, meaning the first portion of charitable giving will no longer count toward a tax deduction at all. Another change caps the value of deductions for top earners, so each donated dollar saves less on their tax bill than it does today.

That means 2025 may be the last year to get the full tax benefit for large gifts. 

For example, consider a couple earning $250,000 who donates $20,000 to charity each year. Under current rules, nearly all of that gift can reduce their taxable income.

Starting in 2026, however, the first slice of their donation would no longer count toward a deduction, and the tax benefit on the rest would be capped. 

 If they give in 2026, the first slice won’t count — and their tax benefit will be capped. Giving that money in 2025 could save thousands.

If you want the deduction now but don’t want to choose charities yet, a donor–advised fund lets you lock in the tax break and decide later. 

For seniors, there’s an even better option: giving directly from an IRA. These gifts don’t raise taxable income at all.

Thinking about a Roth conversion? Read this first

Many Americans are converting traditional IRAs — retirement accounts funded with pre–tax income — into Roth accounts, which are funded with after–tax dollars but allow tax–free withdrawals later in life.

Roth conversions themselves aren’t new, but the new tax law makes them easier to misjudge.  

When money is converted from a traditional IRA to a Roth, the amount converted still counts as income for the year, even if deductions later wipe out the tax bill. 

So a retired couple might convert $30,000, owe little or no federal tax on the move, and assume it was ‘free’. 

But their reported income still rises by $30,000. That income increase can trigger higher Medicare premiums or other income–based penalties in future years. 

The move may still be smart –– but only if you check the knock–on effects. 

Inherited an IRA? The clock is ticking 

If you inherited an IRA in recent years, a temporary IRS grace period has ended. 

Under current rules, many non–spouse heirs are required to take annual withdrawals from inherited retirement accounts 

From 2021 through 2024, the IRS waived penalties for missed withdrawals because the rules were confusing.  That leniency is now over. 

If you are required to take a withdrawal and fail to do so by December 31, penalties can once again apply.

Parents: 529 money just got more flexible 

Families can now use up to $10,000 from a 529 plan for more than tuition — including test prep, tutoring and books.

A 529 plan lets parents, grandparents, or anyone else set aside money for a child’s education. The money is invested, similar to a retirement account, and it can grow over time. 

This can be a smart way to use money that might otherwise sit unused.

But check state rules — not all states follow the federal changes.

Homeowners: clean–energy credits are about to vanish 

You can still claim up to $3,200 in tax credits for energy–efficient home upgrades.

But the work must be finished and operating by December 31.

Ordering windows or a water heater isn’t enough. If it’s not installed, the credit is gone.

What you can still do after December 31 — and what you can’t 

Most tax moves must be done by year–end.

But there are exceptions.  IRA and HSA contributions can be made until April. Some business retirement plans allow even later contributions

Everything else — income timing, deductions, conversions, distributions — locks in on December 31.

The quiet perks that are gone or weaker 

Some tax breaks didn’t disappear outright — but they’re less generous or harder to use than before. Here’s what Americans are losing compared to last year:

• Large charitable donors are approaching the last year of full deductions before new limits kick in 
• High earners will soon get a smaller tax benefit from itemized deductions
• Some retirement ‘catch–up’ contributions lose their upfront tax deduction starting next year 
• Energy–efficiency credits that once ran into the 2030s now expire at the end of this year 
• The IRS grace period on missed inherited IRA withdrawals is over
• Roth conversions now collide more often with Medicare premium thresholds 

None of these scream ‘tax hike’ — but together, they can quietly cost thousands.

The bottom line

This year’s tax law didn’t just change the size of deductions. It changed how they interact — and where the traps are.

The biggest mistake Americans will make is assuming they can ‘figure it out later’.

By January, it’s too late.