Prepare for Major Tax Changes Coming in 2026: What You Need To Know

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The 2025 One Big Beautiful Bill Act (OBBBA) reshaped large portions of the tax code, triggering significant changes for millions of Americans in 2026. The updates affect tax brackets, deductions, credits and several key provisions that determine how much you owe — or how much you get back.

Here’s a clear breakdown of the most important 2026 tax changes and what they could mean for your planning, paycheck and refund.

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Major Tax Law Changes for 2026

Recent legislation — including the OBBBA — made several key updates to the tax code for 2026. Some provisions that were set to expire are now permanent, others were expanded, and a few new benefits were introduced.

Here are the most notable changes:

• Adjusted income tax brackets. Updated income thresholds may shift how much of your earnings are taxed at each rate.
• Higher standard deduction. Many taxpayers will see a larger standard deduction, reducing taxable income.
• Increased SALT deduction cap. The state and local tax (SALT) deduction limit has been raised, benefiting taxpayers in higher-tax states.
• New temporary deduction for seniors. Eligible older taxpayers may qualify for an additional deduction.
• Expanded child and education benefits. Updates to child-related and education-related tax provisions could increase savings for families.
• More retirement and savings flexibility. Certain rules around retirement contributions and savings accounts have been loosened.
• Expiration of some clean energy credits. Certain energy-related tax incentives have been reduced or phased out.
• Changes to estate and business tax rules. Updates may affect high-net-worth households and business owners.

How 2026 Tax Changes Affect Individuals and Families

Several updates for 2026 could directly impact how much you owe — or how much you get back — whether you file as single, married filing jointly or head of household.

Here are the biggest changes.

2026 Income Tax Bracket Adjustments

Each year, the IRS adjusts federal income tax brackets for inflation. For 2026, the income thresholds increased slightly, which may reduce how much of your income is taxed at higher rates.

Below is a side-by-side comparison.

If your income stayed the same, you may owe slightly less tax in 2026 because more of your income falls into lower brackets.

Higher Standard Deduction for 2026

The standard deduction also increases for all filing statuses in 2026, reducing taxable income for most filers who don’t itemize.

A higher standard deduction means more of your income is shielded from taxes — automatically lowering your taxable income if you claim it.

SALT Deduction Cap Raised to $40,000

The OBBBA significantly increased the state and local tax (SALT) deduction cap — from $10,000 to $40,000.

The new cap will increase by 1% annually through 2029 before reverting to prior limits. However, the expanded deduction begins phasing out for taxpayers with incomes above $500,000.

Homeowners and high-income earners in high-tax states could see meaningful federal tax relief — at least temporarily.

New Temporary Senior Deduction Through 2028

Beginning in 2026, taxpayers age 65 and older qualify for an additional temporary deduction.

This new provision adds:

• $6,000 for eligible single filers
• $12,000 for married couples filing jointly if both spouses qualify

This amount is added on top of the existing age-based standard deduction bonus and is scheduled to run through 2028. Older taxpayers may see a noticeable reduction in taxable income during these years.

Higher Estate and Lifetime Gift Tax Exemptions

While the annual gift exclusion remains $19,000 per recipient, the lifetime gift and estate tax exemption increased from $13.99 million to $15 million. High-net-worth families can transfer more wealth without triggering federal estate or gift taxes.

Temporary Auto Loan Interest Deduction

The OBBBA introduced a temporary deduction for up to $10,000 in interest paid on a qualified auto loan.

The deduction phases out beginning at:

• $100,000 modified AGI for single filers
• $200,000 for married couples filing jointly

Middle-income car buyers who finance their vehicles may see modest tax savings.

New “Trump Accounts” for Children

The law created new savings accounts for children referred to as “Trump Accounts.”

Key features include:

• A one-time $1,000 federal contribution for each eligible account
• Contributions of up to $5,000 per year from parents, guardians or employers
• Contributions beginning July 4

Details and long-term tax treatment will depend on final regulatory guidance.

Expanded 529 Plan Benefits for K-12 Education

Starting in 2026, the annual 529 plan withdrawal cap for K-12 education expenses doubles from $10,000 to $20,000.

The definition of qualified expenses was also expanded to include certain non-tuition costs, such as tutoring and books, giving families using 529 plans for private or specialized education have more flexibility.

Several Clean Energy Tax Credits Eliminated

The OBBBA rolled back several green energy incentives.

For vehicles acquired after Sept. 30, 2025, the following credits were eliminated:

• New Clean Vehicle Credit
• Used Clean Vehicle Credit
• Qualified Commercial Clean Vehicle Credit

Additionally, the law eliminated these home-related credits, which had previously been scheduled to continue through 2032:

• Energy Efficient Home Improvement Credit
• Residential Clean Energy Credit

Tax incentives for electric vehicles and certain energy-efficient home upgrades are no longer available for purchases made after the cutoff dates.

How the 2026 Tax Law Affects Businesses and Certain Workers

The OBBBA doesn’t just impact individuals. It also introduces new deductions and restores key tax breaks for workers and business owners.

Here are the most important updates for 2026.

New Tip Income Deduction Through 2028

Workers who earn tips can claim a new temporary deduction of up to $25,000 in qualified tip income.

For self-employed individuals, the deduction cannot exceed net business income. This provision runs through 2028.

Service workers — including restaurant, hospitality and gig workers — may see lower taxable income.

Overtime Pay Deduction (2026-2028)

Employees who earn overtime beyond the standard 40-hour workweek can claim a new temporary deduction.

The maximum deduction is:

• $12,500 for individual filers
• $25,000 for married couples filing jointly

The deduction begins phasing out at:

• $150,000 modified AGI (single)
• $300,000 modified AGI (joint)

Middle-income workers who regularly earn overtime may see additional tax relief.

100% First-Year Write-Off for Qualified Production Property

The law accelerates the Qualified Production Property deduction, allowing businesses to deduct 100% of eligible property costs in the first year.

Previously, businesses had to spread these deductions over multiple years.

Companies investing in equipment or production facilities can reduce taxable income more quickly.

Qualified Business Income Deduction Made Permanent

The 20% Qualified Business Income (QBI) deduction — originally introduced under the 2017 Tax Cuts and Jobs Act — is now permanent.

Starting in 2026, the law also:

• Expands income phase-in ranges
• Adds an inflation-adjusted minimum QBI deduction of $400 for small businesses

Owners of pass-through entities, including S corporations, partnerships and sole proprietorships.

100% Bonus Depreciation Restored Permanently

Bonus depreciation allows businesses to deduct a large portion of the cost of equipment, software and certain buildings.

The deduction had been phasing out and was scheduled to disappear in 2026. The OBBBA restores 100% bonus depreciation and makes it permanent.

Businesses can continue fully expensing qualifying investments upfront, rather than spreading deductions over time.

What the 2026 Tax Changes Mean for You

The OBBBA brings sweeping changes to vast swaths of the tax code, impacting millions of Americans and changing how they pay taxes. It’s crucial to know and understand these changes so you can prepare. 

Taking action now to address the impact of the 2026 tax brackets and other adjustments can put you in a better position to manage and leverage them. If your taxes are especially complex, consider hiring a licensed tax professional to help navigate upcoming tax changes to amplify your savings and lower your bill.

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