2026 Tax Law Changes

The One Big Beautiful Bill Act, signed into law on July 4, includes several tax changes that may affect your household, business, and long-term planning. Some changes are permanent, while others are temporary and may require attention before they expire.¹

 Bottom line: The key is to identify which changes apply to you, when they take effect, and whether any planning should happen before temporary benefits expire.

 Key Takeaways

• Several temporary deductions may be available through 2028.
• The higher State and Local Tax (SALT) deduction cap may help taxpayers in higher-tax states, but it is temporary.
• Business owners may benefit from permanent Qualified Business Income (QBI) deduction and expensing rules.
• The estate and gift tax exemption increases to $15 million per person in 2026, with inflation adjustments thereafter.²

 What May Matter Most to You

Use this handout as a starting point. The provisions most likely to affect planning are those with expiration dates, income limits, or major cash-flow implications.

1. Individual Income Tax Updates

Standard Deduction and Tax Brackets

The current individual income tax rates are now permanent, 12, 22, 24, 32, 35, and 37 percent, which may make long-term planning more predictable.

For 2026, the standard deduction increases to $16,100 for single filers and $32,200 for married couples filing jointly.²

Planning Tip: These changes may affect whether you itemize deductions, how you time charitable gifts, and how you manage income from year to year.

Quick Reference: Selected Deductions

The table below summarizes selected deductions that may be relevant for planning. Eligibility and benefit amounts depend on your filing status, income, and facts.

2. Families & Children

Families may see expanded benefits for children, dependent care, education savings, and new savings options for children born between 2025 and 2028.

 Child Tax Credit [Permanent]

Beginning in 2026, the child tax credit is $2,200 per qualifying child. The credit is also indexed for inflation, so the amount will increase with inflation in future years.¹

 Dependent Care [Effective 2026]

Beginning in 2026, families may be able to set aside more pre-tax income for dependent care expenses through a flexible spending account. The annual limit increases from $5,000 to $7,500, while the maximum percentage of qualified expenses eligible for the dependent care credit increases from 35% to 50%.^¹

 New Savings “Trump” Account for Children [Expires after 2028]

A new savings vehicle for children, including a one-time $1,000 government contribution for children born between 2025 and 2028. Parents may contribute up to $5,000 annually, although withdrawals generally are not permitted before the child reaches age 18.¹

 Expanded 529 Education Savings Opportunities [Permanent]

The legislation expands the types of expenses that may be paid from 529 accounts, including certain non-tuition expenses for elementary and secondary education. Beginning in 2026, the annual limit for certain tuition-related expenses increases from $10,000 to $20,000. ¹

 For families using 529 plans, the expanded rules may create added flexibility. However, fees, expenses, state tax treatment, and the potential consequences of non-qualified withdrawals should still be considered before making changes to an existing strategy. Availability of a state tax deduction will depend on your state of residence, as state tax laws and treatment may vary from federal tax laws.

 3. Temporary Worker Deductions 

 Planning Tip: These deductions may reduce taxable income even if you take the standard deduction, but they are scheduled to expire after 2028.

•  Tips: Workers may deduct up to $25,000 in tip income, subject to income limits. The deduction phases out for individuals earning above $150,000 (or $300,000 for married filers filing jointly).¹
• Overtime pay: Workers may deduct up to $12,500 for single filers or $25,000 for joint filers in overtime pay. The deduction phases out above the same income thresholds: $150,000 for individuals and $300,000 for married joint filers.¹
• New car loan interest: Buyers of qualifying new U.S.-assembled vehicles purchased between 2025 and 2028 may deduct up to $10,000 in loan interest, subject to income limits. The deduction phases out for individuals with gross income above $100,000 and married filers with income above $200,000.¹

 4. Small Business & Investors

 Planning Tip for business owners: This is a good time to review planned equipment purchases, expected business income, and year-end cash-flow decisions.

 Qualified Business Income (QBI) Deduction [Permanent]

The 20 percent deduction for qualified business income is now permanent. This may continue to benefit many small business owners of pass-through businesses, including sole proprietorships, partnerships, and S corporations.¹

 Business Equipment and Capital Purchases [Permanent]

Businesses may expense 100 percent of qualifying capital investments, such as equipment and machinery, made on or after January 19, 2025. This may be especially helpful for owners considering larger purchases or upgrades.1 Some limitations may apply depending on the type of investment.¹

 Digital Payment Reporting [Permanent]

For transactions through cash apps and digital payment platforms, the reporting threshold has been reset to $20,000 and 200 transactions.¹

 5. Estate & Gift Tax

 Planning Tip: Considering the higher exemption, families with larger estates may want to revisit gifting strategies, trust planning, and beneficiary designations.

 Increased Exemptions [Permanent]

For 2026, the estate and gift tax exemption increases to $15 million for individuals and $30 million for married couples, with inflation adjustments thereafter.¹

 Planning Tip: The new law reduces uncertainty around the estate and gift tax exemption. Tax laws can change, so families with significant assets should continue to review their plans periodically.¹

 Planning Checklist

• Review expiring benefits. Identify deductions scheduled to expire after 2028.
• Evaluate itemized deductions. Consider whether the higher SALT cap or charitable deduction rules may change your planning.
• Coordinate family benefits. Review child tax credits, dependent care, and education savings strategies.
• Plan business purchases carefully. Consider timing equipment purchases and capital spending with cash flow and tax planning in mind.
• Update estate planning documents. Review wills, trusts, beneficiary designations, and gifting strategies as appropriate.

 Final Thoughts

Tax law changes can create opportunities, but the right strategy depends on your income, family situation, business activity, and long-term goals. Because additional IRS guidance may affect implementation, it is important to review your situation before taking action.³

 Next step: If you would like to understand how these changes may affect your household, business, or estate plan, schedule a conversation with your tax, legal, or accounting professional.

Sources: 

1. Congress.gov, H.R. 1, One Big Beautiful Bill Act, July 4, 2025. 

2. Internal Revenue Service, tax year 2026 inflation adjustments, Oct. 9, 2025. 

3. Internal Revenue Service, IRS.gov resources on One Big Beautiful Bill provisions, Jan. 9, 2026. 

This material is for informational purposes only and is not intended as tax, legal, or accounting advice.