Feb 10, 2026

Key Tax Changes Taking Effect in 2026

It may be hard to believe, but now is a good time to begin planning for the 2026 tax season. Several provisions enacted in 2025 will take effect in 2026, and early awareness could help you avoid surprises. Read through to learn which changes may affect your filing and what steps to consider ahead of the next tax season.

Advance planning starts with understanding new rules before they come into effect. The One Big Beautiful Bill Act introduced a wide range of tax changes, including several provisions that have received relatively little attention but will affect individual and business taxpayers beginning in 2026. What follows is a summary of key changes to be aware of; it is not an exhaustive list.

Filing logistics: Postmarks no longer suffice

One procedural (rather than substantive) change affecting tax filing is that, as of Dec. 24, 2025, the U.S. Postal Service no longer accepts postmarks as date-specific proof of mailing unless an envelope is hand-stamped. If you rely on an April 15 postmark to establish timely filing, you will need to plan ahead and visit a post office during its open hours to request a hand-stamped postmark.

Changes to individual income taxes

The OBBBA made several changes that you as an individual filer should consider in your tax planning.

• It permanently extended the 37% top individual federal income tax rate.
• Beginning in 2026, it permanently increased the standard deduction to $16,100 for single filers and $32,200 for joint filers and surviving spouses. Taxpayers age 65 and older will be entitled to an additional $6,000 standard deduction through 2028.
• It eliminated the personal exemption and miscellaneous itemized deductions.
• It introduced a new car loan interest deduction of up to $10,000 for qualifying new vehicles. This deduction can be claimed whether a taxpayer itemizes or claims the standard deduction.
• It repealed clean vehicle credits, commonly referred to as electric vehicle tax credits, for EVs acquired after Sept. 30, 2025.
• It revised Form 1099-K reporting thresholds. Beginning in 2025, third-party platforms will be required to issue Form 1099-K only when payments exceed $20,000 and involve more than 200 transactions on a single platform in a year. Taxpayers remain responsible for reporting taxable income even if no form is issued.

The OBBBA also introduced two new deductions for wage earners.

• While tip income is not fully exempt from tax, taxpayers may deduct up to $25,000 of qualifying tip income.
• Overtime compensation is deductible up to $12,500 for single filers and $25,000 for joint filers, with the same income phaseout thresholds.

You may wish to confirm that your employer is accurately accounting for these changes in payroll reporting and withholding.

Charitable deductions

Beginning in 2026, if you itemize, you may deduct charitable cash contributions only to the extent that they exceed 0.5% of your adjusted gross income. Contributions below that threshold are generally nondeductible. Contributions that exceed applicable AGI limits remain subject to existing carryforward rules, and the 60% AGI cap for cash contributions continues to apply.

Additionally, the OBBBA introduced a new above-the-line charitable deduction of up to $1,000 for single filers and $2,000 for joint filers. If you are in the 37% tax bracket, the value of charitable deductions is capped at 35%.

Estate planning and wealth transfer

Effective Jan. 1, 2026, the OBBBA increases the federal estate, gift and generation-skipping transfer tax exclusion to $15 million for individuals and $30 million for married couples. These higher thresholds have significant implications for estate planning and lifetime gifting strategies.

Qualified small-business stock

The OBBBA expanded the benefits available under the qualified small-business stock rules for shares issued after July 4, 2025. Changes include a new tiered exclusion system if you do not meet the five-year holding period, an increase in the capital gains exclusion cap from $10 million to $15 million (or 10 times basis) and an increase in the gross assets limit from $50 million to $75 million.

Shares issued before July 4, 2025, remain subject to the rules in effect prior to the enactment of the OBBBA.

Energy-related credits and deductions

The OBBBA significantly narrowed the availability of several clean energy incentives. For wind and solar projects, construction must begin on or before July 4, 2026, to qualify under current law. Projects that begin construction after that date must be placed in service by the end of 2027. Other technologies, including geothermal, nuclear and hydrogen, have longer timelines but begin to phase out in 2034.

The OBBBA maintains through 2032 the zero-emission nuclear power production credit for electricity generated at qualifying nuclear facilities that were placed in service before Aug. 4 (or possibly Aug. 16), 2022.

The clean production fuel credit for certain transportation fuels and sustainable aviation fuel remains available through 2029 but is subject to stricter sourcing rules and tightened eligibility requirements. Given the pace of regulatory change, affected businesses should monitor guidance closely, particularly as it relates to supply chains.

The OBBBA terminated the deduction for energy-efficient commercial building improvements, such as lighting and HVAC systems, for construction that begins after June 30, 2026.

The OBBBA also introduced new restrictions on foreign involvement in clean energy projects, affecting specified foreign entities, foreign-influenced entities and projects receiving material assistance from prohibited foreign entities. The Treasury Department is required to issue guidance by Dec. 31, 2026, to clarify how these rules apply.

State and local tax deduction limit

The OBBBA increased the state and local tax deduction cap from $10,000 to $40,000 for tax years 2025 through 2029. Higher-income taxpayers begin phasing out of this benefit at $250,000 of AGI for single filers and $500,000 for joint filers, with the deduction fully phased out at higher income levels. Absent further legislative action, the cap is scheduled to revert to $10,000 after the temporary increase expires.

Final considerations

This article highlights selected changes under the OBBBA but does not capture every provision or extension. Taxpayers — both individuals and businesses — should consult a qualified tax adviser to ensure their planning strategies are both compliant and effective. The legislation provides greater certainty in some areas, but it is important to keep in mind that certain provisions under the Tax Cuts and Jobs Act of 2017 were not extended, additional guidance and regulations will continue to be issued, and future legislation could alter even provisions described as permanent.