2026 Tax Updates and The Big Beautiful Bill
Below is a refreshed summary of the provisions most relevant to our clients. The IRS has released more information regarding the Big Beautiful Bill (BBB) and executive order impacts for 2026.
No Tax on Tips - This still doesn’t apply to most of you but for those curious about if your industry is affected, the IRS has listed eight categories of occupations this does apply to. This deduction is still available for taxpayers whether they itemize or not, but high-income earners should be aware of phase out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers). IRS transition relief expired in 2025. This change goes into effect for 2025 through 2028.
No Tax on Overtime - Starting in 2025 through 2028 there will be a maximum of $12,500 ($25,000 for married filing jointly) deduction for pay that exceeds their regular rate of pay required by the FLSA. There is a deduction phaseout for folks earning over 150K (300K for joint filers). This deduction is available for taxpayers whether they itemize or not, but high-income earners should be aware of phase out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers). IRS transition relief expired in 2025. This change goes into effect for 2025 through 2028.
No Tax on Car Loan Interest - Starting in 2025 through 2028 there will be a maximum of $10,000 deduction available for interest paid on a qualified vehicle used for personal use. To qualify for this deduction the interest must be paid on a loan that is used to purchase a vehicle originally used by the taxpayer and secured by a lien on the vehicle. Used vehicles and leased vehicles do not qualify. The loan must have been originated after December 31, 2024. An applicable passenger vehicle is defined as a car, minivan, van, SUV, pick-up truck or motorcycle, with a gross vehicle weight rating of less than 14,000 pounds, and that has undergone final assembly in the United States. The final assembly location should be listed on each vehicle on a dealer’s premises or can be found using the VIN Decoder. This deduction is available for taxpayers whether they itemize or not, but high-income earners should be aware of phase out for folks earning over 100K (200K for joint filers).
Standard Deduction - Increases to the standard deduction are $16,100 for single filers, $24,150 for head of household filers, and $32,200 for joint filers. Individuals age 65 or older can claim an additional $6,000 ($12,000 for married couples who both qualify) but this additional deduction will phase out for folks with modified adjusted gross income over $77,000 ($154,000 for joint filers). The standard deduction will still adjust annually for inflation. Check out this blog for more details on 2026 inflation adjustments. Planning Opportunity for Retirees – Taxpayers age 65 and older may qualify for an additional deduction of up to $6,000 ($12,000 for qualifying married couples), subject to income limitations. Retirees should review the impact of IRA distributions, Roth conversions, and capital gains on these phaseout thresholds.
State and Local Tax Deduction (SALT) - Starting in 2025, the max SALT deduction is now $40,000 and increased through 2029 each year - it was 10K. For folks earning more than 250K (500K for joint filers), the max amount is reduced but not below 5K (10K for joint filers). After 2029, it reverts to $10,000 (the 2024 tax year limit). This is a temporary relief unless it gets extended in the future.
Charitable Contributions - Beginning in 2026, taxpayers who claim the standard deduction may deduct up to $1,000 of cash contributions to qualifying charities ($2,000 for married couples filing jointly). This creates a tax benefit for charitable giving even when taxpayers do not itemize deductions. However, taxpayers who itemize should be aware that a new limitation applies. Charitable contributions are deductible only to the extent they exceed 0.5% of adjusted gross income (AGI). For example, a taxpayer with $100,000 of AGI who contributes $10,000 to charity may deduct $9,500, while the first $500 is disallowed under the new rule. The 60% AGI limitation for cash contributions to qualified charities was also made permanent. Donations to donor-advised funds and private foundations generally do not qualify for the new non-itemizer deduction. Taxpayers who itemize deductions may want to consider "bunching" charitable donations into a single year to exceed the new 0.5% AGI threshold and maximize deductions. Taxpayers age 70½ or older should continue evaluating Qualified Charitable Distributions (QCDs) from IRAs as part of their charitable giving strategy.
Child Tax Credit (CTC) - For 2026, the maximum credit remains $2,200 and up to $1,700 is refundable.
Estate and Gift Tax Exemptions - Set to be cut in half in 2025, the provisions permanently continued the higher exemption of 15 million per individual (30 million for married couples) in 2026, and will continue to adjust for inflation in future years. This provides continued estate planning flexibility for business owners, farmers, and higher-net-worth families. The annual gift tax exclusion remains at $19,000 per recipient ($38,000 for married couples electing gift splitting). Amounts transferred above the annual exclusion generally reduce the taxpayer's lifetime exemption rather than triggering immediate gift tax.
IRS Refund Checks - The IRS and Treasury Department have confirmed that paper refund checks for individual taxpayers were fully phased out on September 30, 2025, under a presidential executive order. All tax refunds will be issued electronically via direct deposit, prepaid debit cards, or secure digital wallets, with limited exceptions. The change aims to reduce fraud, speed refunds, and cut costs—paper checks are 16 times more likely to be lost or stolen and take weeks longer to process.
Expiring Tax Regulations
The following regulations are expired or are set to expire:
Electric Vehicle Tax Credits - Electric Vehicle (EV) credits expired on September 30, 2025. Alternative Fuel Vehicle Refueling Property Credit expires on June 30, 2026.
Personal Moving Expenses - This law permanently eliminated all personal moving expenses except members of the armed forces.
Advanced Premium Tax Credit - Expired as planned. Although not gone completely, it means eligibility will be more difficult. Most my client benefit from NOT receiving PTC; however, carefully monitoring income levels throughout the year may avoid unexpected repayment obligations if receiving these funds now is best.
Miscellaneous Itemized Deductions - This law permanently eliminated miscellaneous itemized deductions such as unreimbursed employee business expenses, investment fees and expenses, tax preparation fees, and hobby expenses. Educator expenses have now been expanded to include more types of educational expenses and will adjust for inflation and are deducted elsewhere on your taxes.
Permanently Extended Regulations
The following regulations have been permanently extended:
Alternative Minimum Tax (AMT) - This was set to expire this year and now makes AMT exemption amounts permanent, adjusted annually for inflation. The exemption amount for unmarried individuals increases to $90,100 ($70,100 for married individuals filing separately) and begins to phase out at $500,000. For married couples filing jointly, the exemption amount increases to $140,200 and begins to phase out at $1,000,000.
Mortgage Interest Limit - The $750,000 limit on acquisition indebtedness has been made permanent. Interest on home equity debt generally remains as non-deductible personal interest unless proceeds are used to buy, build, rebuild or substantially improve your home. It also restores the deduction for qualified mortgage insurance premiums, subject to income limitations when gross income exceeds 50K (100K for joint filers).
Restoration of Bonus Depreciation - Starting January 19, 2025, 100% bonus depreciation was permanently restored for qualifying business property, including most machinery, equipment, certain computer software, and agricultural equipment that meet applicable requirements.
Section 179 Depreciation - Beginning in 2025, the maximum Section 179 deduction ceiling on qualified property is now $2.5 million instead of $1 million and will be indexed for inflation annually starting in 2026. There is a phaseout for property that exceeds $4 million.
Qualified Business Income Deduction - QBI deduction is now permanent and will not expire at the end of 2025 and there were changes to increase the taxable income threshold amounts to allow more folks to qualify.
Employer Student Loan Repayment - Employers may continue to provide up to $5,250 annually toward an employee's qualified student loans on a tax-favored basis. This provision was scheduled to expire after 2025 but was made permanent. Amounts paid within the statutory limits are generally excluded from the employee's taxable wages for federal income tax purposes. If you are not offering this employee benefit, consider including it.
Trump Accounts - Contributions generally begin on July 4, 2026. Children born between January 1, 2025, through December 31, 2028, who meet eligibility requirements may qualify for a one-time individual retirement accounts (different than a traditional IRA) for minors and a pilot program where the government will contribute $1,000 to each child with a valid Social Security number. Funds are invested in qualifying index funds, and parents, relatives, employers, and certain other contributors may make additional contributions subject to annual limits. Special rules apply regarding withdrawals, rollovers, account administration, and no distributions may be made before the child turns 18. This pilot program has a limit of $410 million available. Check out details on this program here.
Research and Development Expenses – This still doesn’t apply to most of you but for those curious about it. Businesses once again may benefit from more favorable treatment of domestic research and development expenditures. Companies engaged in software development, engineering, manufacturing, and product design should review whether amended returns or planning opportunities exist.
Federal Tax Rates – The current individual tax brackets were permanently extended. While several new deductions were added, taxpayers should remember that wages, business income, retirement distributions, and investment income generally remain subject to federal income tax. Checkout this blog for more details on 2026 federal tax rates.
Additional Guidance Still Expected by the IRS.
The following regulations have not been updated on the IRS website:
529 Education Savings Plans - Recent legislation expanded the definition of qualified education expenses specifically to include curriculum and curricular materials, books or instructional materials, online education materials and certain tutoring and education classes outside of the home, fees for specified tests, and others starting July 5, 2025.
What Should You Do?
Most taxpayers will not need to take immediate action, but several provisions could create planning opportunities during 2026. Business owners should review depreciation elections, Section 179 purchases, QBI eligibility, and employer benefit programs. Individuals should evaluate whether they qualify for new deductions related to overtime pay, tip income, vehicle loan interest, charitable contributions, or senior deductions.
As additional IRS guidance is released, we expect further clarification on several provisions discussed above.
If you have questions about how these changes affect your specific situation, contact our office before year-end so we can evaluate available planning opportunities.
Updated on June 2, 2026