Tax Changes for 2026 under the One Big Beautiful Bill Act (OBBBA)

State and Local Tax (SALT) Deduction

One of the most significant changes now in effect is the deductibility of state and local taxes. For years the deduction was limited to $10,000 (2017 – 2024), and now that limitation has been increased to $40,000 beginning in 2025. The enhanced deduction is temporary and will only be available for tax years 2025 through 2029.

There is a catch however, as the expanded SALT deduction phases out at certain income levels.

Enhanced Senior Deduction

Beginning in the 2025 tax year, OBBBA introduced an enhanced, additional senior deduction of up to $6,000 for individuals ($12,000 for married taxpayers) aged 65 and older. This deduction, which is temporarily available through 2028, is in addition to the standard deduction or additional senior standard deduction.

This deduction does phase out as income increases; it impacts tax planning strategies like Roth Conversions and income timing strategies.

Retirement Planning Gets a Boost This Year

401(k) Plans: The contribution limit is now $24,500, with catch-up contributions for those 50 and older at $8,000, allowing total contributions of $32,500. This represents a significant opportunity to reduce your 2026 taxable income while building retirement wealth.

IRAs: Traditional and Roth IRA contribution limits are now $7,500, with an additional $1,100 catch-up contribution for those 50 and older.

Child Tax Credit: Permanent Expansion in Effect

The Child Tax Credit has increased to $2,200 per child and is now permanent, providing ongoing tax relief for families. This credit phases out at higher income levels, so income timing strategies throughout 2026 may help maximize eligibility when you file in 2027.

Various Business Tax Changes

OBBBA made permanent the Qualified Business Income (QBI) deduction, which is a 20% deduction for qualified business income for certain business owners (S Corporation shareholders, LLC members and partners of partnerships).

100% bonus depreciation was reinstated and made permanent for purchases of qualified property made after January 19, 2025.

IRC Section 179, which is a separate provision that allows taxpayers to immediately expense qualified purchases, was modified allowing for a deduction of up to $2.5 million for the purchase of fixed assets.

Lastly, one final business tax opportunity is pass through entity tax payments. OBBBA made this deduction less applicable for some taxpayers, but it is still a valuable planning tool. You can read more about it here: Five Tax Tools Every Business Owner Should Know About (But Some Don't) .

Estate and Gift Tax Changes

Estate and gift tax exemptions have also adjusted for inflation, affecting high-net-worth planning strategies. The increased lifetime exemption provides more flexibility for wealth transfer strategies you can implement this year.

Conclusion

The 2026 tax changes are now reality, presenting both opportunities and complexities throughout this tax year. Success lies in understanding how these changes interact with your specific financial situation and acting on them now.

Every taxpayer's situation is unique, and these changes may affect you differently based on your income level, state of residence, family situation, and financial goals. The key is implementing strategies throughout 2026 that position you advantageously for filing season and beyond.

Ready to optimize your 2026 tax strategy? Let's schedule a consultation to review how this year's tax updates specifically impact your financial situation and develop a customized plan to maximize your tax efficiency throughout the year and beyond.

Disclosure: This material is provided for informational and educational purposes only and does not constitute individualized tax, legal, or investment advice. The information contained herein is based on current tax law as of 2026 and is subject to change. Tax laws are complex and their application depends on individual circumstances. You should consult with a qualified tax professional or legal advisor regarding your specific situation before implementing any strategy discussed.