Navigating the One Big Beautiful Bill Act's 2026 Tax Provisions
2026 Tax Law Changes
What the One Big Beautiful Bill Act Means for Your 2026 Taxes
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. Now more than a year in, the 2026 tax year is the first full year shaped by the law's provisions alongside the IRS's annual inflation adjustments — and the numbers below reflect where things actually landed, not just what was originally proposed.
Some provisions are permanent. Others are temporary and set to expire on a specific date. As always, we encourage you to speak with your tax, legal, or accounting professional before making any adjustments based on these updates.
Individual Taxes
Tax Brackets. The TCJA-era income tax rates — 10, 12, 22, 24, 32, 35, and 37 percent — are now permanent. Without the new law, most brackets were set to revert to higher levels when the TCJA expired at the end of 2025. Bracket income thresholds continue to be adjusted annually for inflation.
Status: Permanent.
Standard Deduction. For 2026, the standard deduction is $16,100 for single filers and married filing separately, and $32,200 for married couples filing jointly — up from the OBBBA-raised 2025 baseline of $15,750 / $31,500, reflecting this year's inflation adjustment on top of the law's boost.
Effective: 2026.
Bonus Deduction for Seniors. Taxpayers age 65 and older can claim an additional $6,000 deduction, on top of the regular standard deduction (or in addition to itemizing).
- Phases out at 6 percent of income above $75,000 (individuals) and $150,000 (joint filers)
- Phases out completely above $175,000 (individuals) and $250,000 (joint filers)
- Temporary; available for tax years 2025 through 2028
State and Local Tax (SALT) Deduction. The cap on deductible state and local taxes rose to $40,400 in 2026 (up from $40,000 in 2025), and continues climbing 1 percent annually through 2029. In 2030, the cap reverts to $10,000 — a built-in sunset worth planning around now.
- Applies to both single and married filers
- Begins phasing out for taxpayers with MAGI above $505,000 ($252,500 if married filing separately), tapering toward a $10,000 floor
Charitable Contributions. Taxpayers who claim the standard deduction can also deduct up to $1,000 (single) or $2,000 (married filing jointly) in charitable contributions without itemizing.
Families & Children
Child Tax Credit. The credit is $2,200 per qualifying child for 2026, with annual cost-of-living adjustments built in going forward.
Status: Permanent, with annual inflation adjustments.
Dependent Care. The dependent care FSA limit rose from $5,000 to $7,500 per year starting in 2026, and the maximum percentage of qualified expenses eligible for the dependent care credit increased from 35 to 50 percent.
Effective: 2026.
"Trump" Accounts. A one-time $1,000 federal contribution funds a new savings account for babies born between 2025 and 2028. These accounts began rolling out this year — parents may contribute up to $5,000 annually, and withdrawals aren't permitted before the child turns 18.
529 Expansion. 529 plans now cover a broader range of K-12 non-tuition expenses (effective immediately upon passage), and as of 2026 the annual limit for tuition-related 529 expenses rose from $10,000 to $20,000.
A 529 plan is a tax-advantaged education savings vehicle, but state tax treatment, fees, and expenses vary — it's worth reviewing your specific plan. Nonqualified withdrawals remain subject to income tax and a 10% federal penalty on earnings.
New Deductions for Workers
No Tax on Tips. Workers can deduct up to $25,000 in reported tip income, available even alongside the standard deduction. Phases out above $150,000 (individuals) or $300,000 (married filing jointly).
Status: Temporary; available through 2028.
No Tax on Overtime. Single filers can deduct up to $12,500 in overtime pay; married filers filing jointly, up to $25,000. Same income phaseouts as the tips deduction.
Status: Temporary; available through 2028.
New Car Loan Interest. Through 2028, taxpayers can deduct up to $10,000 in interest on a new car loan, provided the vehicle is new and assembled in the U.S. Phases out above $100,000 (individuals) or $200,000 (married filing jointly) in gross income.
Status: Temporary; available through 2028.
Small Business & Investors
Qualified Business Income (QBI) Deduction. The 20 percent deduction for sole proprietorships, partnerships, and S corporations — originally set to expire with the TCJA — is now permanent.
Status: Permanent.
Expensing of Capital Investments. Businesses can expense 100 percent of qualifying capital investments (equipment, machinery, and similar assets) placed in service on or after January 19, 2025. Some limitations apply depending on asset type.
1099-K Reporting Threshold. The reporting threshold for third-party payment platforms (PayPal, Venmo, payment card processors, and similar) has been permanently restored to $20,000 in gross payments and more than 200 transactions in a calendar year — reversing the phased-down thresholds that had been scheduled to take effect. Both conditions must be met for a 1099-K to be required. Separately, the threshold for Forms 1099-NEC and 1099-MISC rose from $600 to $2,000 starting with 2026 payments, with future inflation indexing beginning in 2027.
This overview is for general informational purposes and isn't tax, legal, or investment advice. Provisions, thresholds, and phaseouts are subject to further IRS guidance and legislative change — speak with your tax or legal professional about how these rules apply to your specific situation.
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Sources:
https://www.congress.gov/bill/119th-congress/house-bill/1/text