One Big Beautiful Bill: 2026 Tax Ramifications

🏛️ Permanent Extensions & Enhancements

• Federal Tax Brackets (10%–37%) — The One Big Beautiful Bill Act (OBBBA) makes the individual income tax rates established under the 2017 Tax Cuts and Jobs Act permanent. Tax brackets continue to adjust for inflation.

• Standard Deduction — For the 2026 tax year, the standard deduction increases to $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household.

• Child Tax Credit — The maximum Child Tax Credit increases to $2,200 per qualifying child beginning in 2025, with inflation adjustments in future years. Eligibility and income phaseouts still apply.

• Qualified Business Income (QBI) Deduction — Section 199A — The 20% deduction for eligible pass-through business income is made permanent. Beginning in 2026, the phase-in range for certain wage and qualified-property limitations increases to $75,000 for most non-joint filers and $150,000 for joint filers. A new $400 minimum deduction is available to eligible taxpayers with at least $1,000 in qualified business income from an active qualified trade or business, subject to the law’s requirements.

• Estate and Gift Tax Exemption — The federal basic estate and gift tax exclusion increases to $15 million per individual for 2026, or potentially $30 million for a married couple, subject to applicable rules and planning. The individual amount is indexed for inflation after 2026.

• Mortgage Interest Deduction — The $750,000 limit on qualifying acquisition mortgage debt is made permanent for most new mortgages subject to the limit ($375,000 for married filing separately). Special rules may apply to older mortgages. Home equity interest generally remains nondeductible when the proceeds are used for purposes unrelated to the secured home.

• Alternative Minimum Tax (AMT) — The increased AMT exemption amounts are made permanent, with revised phaseout thresholds. For 2026, the exemption is $90,100 for unmarried filers and $140,200 for married couples filing jointly. The exemption begins phasing out at $500,000 for unmarried filers and $1 million for joint filers, with inflation adjustments.

• New Charitable Deduction for Non-Itemizers — Beginning in 2026, taxpayers who claim the standard deduction may also deduct up to $1,000 in qualifying cash charitable contributions ($2,000 for married couples filing jointly). Donations must be made to eligible charitable organizations. Donations of clothing, household goods, stock, and other noncash property do not qualify for this additional deduction. Special exclusions apply, including donor-advised funds.

• New 0.5% AGI Floor for Charitable Deductions — Beginning in 2026, taxpayers who itemize deductions on Schedule A may deduct only the portion of qualifying charitable contributions that exceeds 0.5% of their adjusted gross income (AGI). For example, a taxpayer with $100,000 in AGI would generally need more than $500 in qualifying charitable contributions before any amount is deductible under this rule. Other deduction limitations may also apply.

  Official references:

  • IRS: 2026 Tax Inflation Adjustments

  • Public Law 119-21 — One Big Beautiful Bill Act

  • IRS — Charitable Contribution Deduction Tips for Non-Itemizers
    

    ⏳ Temporary Tax Deductions (2025–2028)

    The One Big Beautiful Bill Act introduced several temporary federal tax deductions available for tax years 2025 through 2028. These deductions may be available whether you take the standard deduction or itemize, subject to eligibility rules and income limitations.

    • ✅ Qualified Tips — Deduct up to $25,000 annually in qualified tips received in eligible occupations. The deduction phases out when modified adjusted gross income (MAGI) exceeds $150,000 for single filers or $300,000 for married couples filing jointly.

    • ✅ Qualified Overtime Pay — Deduct up to $12,500 for individual filers or $25,000 for married couples filing jointly. Only the qualifying overtime premium required under the Fair Labor Standards Act generally qualifies, not all overtime wages. The deduction phases out above $150,000 MAGI for single filers or $300,000 for joint filers.

    • ✅ Qualified New Vehicle Loan Interest — Deduct up to $10,000 annually in interest paid on qualifying loans for new vehicles acquired for personal use, provided final assembly occurred in the United States. Used vehicles and leases do not qualify. The deduction phases out above $100,000 MAGI for single filers or $200,000 for married couples filing jointly.

    • ✅ Enhanced Senior Deduction — Eligible taxpayers age 65 or older may claim an additional $6,000 deduction per qualifying individual, or up to $12,000 for a married couple when both spouses qualify. The deduction phases out above $75,000 MAGI for single filers or $150,000 for married couples filing jointly.

    Important: These deductions reduce taxable income; they do not directly reduce your tax bill dollar for dollar. Eligibility requirements, reporting rules, and other restrictions apply. These temporary provisions are scheduled to expire after the 2028 tax year.

    Source: IRS — Working Families Tax Cuts: Individuals and Workers.

💸 SALT Deduction Increase

The One Big Beautiful Bill Act temporarily increases the federal deduction for state and local taxes (SALT), which may benefit taxpayers who itemize deductions.

• Increased SALT Limit — The deduction cap rises from $10,000 to $40,400 for 2026 (up from $40,000 in 2025). For married taxpayers filing separately, the limit is $20,200. The cap increases by 1% annually through 2029.

• Income-Based Phaseout — The higher deduction limit begins phasing out when modified adjusted gross income (MAGI) exceeds $505,000 for most filers in 2026, or $252,500 for married taxpayers filing separately. The expanded benefit phases down as income increases, reaching the former $10,000 limit ($5,000 for married filing separately) at sufficiently high income levels.

• Scheduled Reversion — Unless the law changes, the SALT deduction cap returns to $10,000 in 2030 ($5,000 for married filing separately).

Important: You must itemize deductions on your federal return to claim the personal SALT deduction. Compare your total itemized deductions with your standard deduction to determine which approach is more beneficial.

Source: IRS — 2026 Tax Inflation Adjustments and Congress.gov — One Big Beautiful Bill Act.

Let’s Make Tax Season Easier

Have questions or want to see how I can help you get the most from your 2025 tax return? Don’t hesitate to reach out! Contact me today to schedule your appointment or to learn more about the services I offer.