2026 Tax Changes (OBBBA) | Ultimate Tax Preparation

Rules starting the 2026 tax year

Tax Changes to Know for 2026 (a.k.a. “Trump tax plan 2026”)

Some rules begin in 2026; others later Updated August 22, 2025

The One Big Beautiful Bill Act didn’t just make changes that impact your 2025 taxes. There are several changes that won’t apply until 2026 and, in some cases, after 2026. Read on to understand what may impact you in the future.

OBBBA signed into law

July 4, 2025

On July 4, 2025, new tax rules were signed into law under the 2025 Reconciliation Legislation known as the One Big Beautiful Bill Act (OBBBA). This sweeping legislation introduces significant updates across the tax code, impacting how Americans file in 2025 and for years to come.

Income tax rates

The legislation generally makes permanent the seven rates created by the TCJA, with an initial inflation adjustment in 2026 for the first two brackets (10%, 12%).

Permanent brackets: 10%, 12%, 22%, 24%, 32%, 35%, 37%

SALT deduction cap increase

Effective: 2025–2029

The State and Local Tax (SALT) deduction cap is raised with new income-based phase-downs.

Cap raised to $40,000 if income under $500,000 ($250,000 MFS).
For MAGI over $500,000 → cap gradually reduced by 30% until it reaches $10,000.
Cap & threshold increase 1% annually.

These changes may affect whether you itemize vs. take the standard deduction—revisit your strategy.

Form 1099-K reporting threshold

Effective: 2025+

For third-party platforms (apps/marketplaces), a Form 1099-K is required only if:

Total payments > $20,000 and
200+ transactions on any one platform in a year.

You must still report all income even if you don’t receive a form.

Car Loan Interest Deduction

Effective: 2025–2028

Deduction limited to $10,000 of qualified interest.
“Final assembly” must be in the U.S.; report the VIN on the return.
Phase-out: 20% for MAGI > $100,000 (Single) / $200,000 (MFJ).

Clean Vehicle Credits repealed

Effective: Sept 30, 2025

New Clean Vehicle Credit — repealed
Used Clean Vehicle Credit — repealed
Qualified Commercial Clean Vehicle Credit — repealed

Residential energy credits repealed

Effective: 2025

Energy-efficient home improvement credits generally terminated after 2025, including:

Energy Efficiency Home Improvement Credit
Residential Clean Energy Credit

Tax benefits for parents, families, and individuals

Effective: 2026–2028

Trump Child Savings Accounts

A new type of savings account for children under age 18.

Contribute up to $5,000/year (inflation-adjusted after 2027).
Employers may contribute up to $2,500/year.
Contributions not deductible until age 18; earnings tax-deferred.
No withdrawals until age 18.

Automatic funding (2025–2028 births): One-time federal $1,000 for U.S.-citizen babies; account auto-created if needed.

Child & Dependent Care Credit expansion

Effective: 2026+

Max rate 50%; expense caps stay at 50% of $3,000 (1) / $6,000 (2+).

Single (AGI): $0–$15k → 50%; $15k–$45k → phases 50%→35%; $45k–$75k → 35%; $75k–$105k → phases 35%→20%; >$105k → 20%

MFJ (AGI): $0–$15k → 50%; $15k–$45k → phases 50%→35%; $45k–$150k → 35%; $150k–$210k → phases 35%→20%; >$210k → 20%

Premium Tax Credit changes

Effective: 2026+ (varies)

Expanded repayments (2026): More excess APTC repayment scenarios.
SEP due to income (2026): No PTC if enrollment is solely from income-change SEP.
Eligibility restrictions: Some lawfully present individuals restricted (starts 2027; under 100% FPL rule in 2026).
Extra documentation (2028): More verification for income, immigration status, family size.

Education tax benefits

Effective: 2026+

Student loan debt cancellation (disability/death): Excluded from income.
AOC & LLC: Available with qualifying expenses; AOC now requires the school’s EIN.

Employer contributions to student loans

Permanent from 2026: up to $5,250 (inflation-indexed) for qualified loan payments.

Educator Expense Deduction expansion

Above-the-line $300 remains; expands eligible educators & items (incl. coaches, sports equipment).
Additional deduction available for itemizers.

Scholarship fund contribution credit

Effective: 2027+

Credit up to $1,700; reduced by any state-level credit allowed.

Vehicle and home tax benefits

Qualified residence interest deduction

Effective: 2026+

$750,000 cap on acquisition debt ($375,000 MFS) permanent.
PMI may be treated as mortgage interest when tied to acquisition debt.
Home equity loan interest remains excluded from “qualified residence interest.”

Qualified alt-fuel vehicle refueling credit

Ends: June 30, 2026

Credit terminated for property placed in service after June 30, 2026.

Reporting and deduction thresholds

1099-NEC / 1099-MISC thresholds

Effective: 2026+

Threshold raised to $2,000 (from $600) for 1099-NEC and some 1099-MISC items.
Inflation-indexed annually.

Itemized deduction cap for high earners

Benefit limited to 35¢ per $1 deducted (highest bracket).

Wagering loss deduction limit

Only 90% of wagering losses deductible, up to winnings.

General rule changes

Charitable deduction for non-itemizers

Effective: 2026+

Standard deduction filers may claim a charitable deduction for cash contributions.
Caps: $1,000 Single; $2,000 MFJ.

Charitable deduction for itemizers

Reduce deduction by 0.5% of contribution base (generally AGI).

Casualty loss deduction

TCJA limitation (federally declared disasters) made permanent.
Expanded to certain state-declared disasters.

1% tax on foreign transfers

Effective: 2026+

Money transfers to foreign locations are subject to a 1% excise tax (e.g., money orders, cashier’s checks).

Important: This page summarizes provisions from your draft and is for informational purposes only. Rules can change and may have exceptions. Consult a qualified tax professional before making decisions.