The nearly 900-page One Big Beautiful Bill Act (OBBBA), which includes 250 pages of tax provisions, was signed into law on July 4th. Below I highlight the major items that will interest most of you, organized by topic so you can skip sections that don’t apply. Please note: California and many other states have not conformed to many of these changes. This is a good time to think about planning moves that could lower your tax bill this year and next.
Individuals: rates & deductions
- Reduced income tax rates made permanent (effective 1/1/26). The lower brackets from the 2017 Tax Cuts and Jobs Act (TCJA) are now permanent: 10%, 12%, 22%, 24%, 32%, 35% and 37%, with income ranges still adjusted for inflation.
- Higher standard deduction made permanent and indexed for inflation. For 2025 it’s $15,750 for single filers and $31,500 for married filing jointly.
- Personal exemptions permanently eliminated (other than the new senior deduction below). The $600, $100 and $300 exemptions for trust and estate returns remain.
- Itemized deduction phaseouts return in 2026 for taxpayers in the 37% bracket, capping the benefit at 35%. Strategies to stay below this bracket include maximizing pre-tax retirement and HSA contributions, deferring income or accelerating deductions, investing in tax-exempt bonds, and shifting allowable deductions to Schedules C and E.
- $750,000 mortgage interest cap made permanent. Beginning in 2026, mortgage insurance premiums are again deductible as mortgage interest.
- Educator expenses above the $300 above-the-line deduction for 2025 become an itemized deduction, with additional educators and supplies eligible starting in 2026.
- Miscellaneous itemized deductions permanently suspended. Unreimbursed employee business expenses remain non-deductible — making an accountable reimbursement plan with your employer (and negotiating for licenses, dues and work tools) more important than ever.
- Estate and gift tax exclusion made permanent and increased to $15 million per person effective 2026, indexed annually.
- 1% excise tax on remittance transfers from U.S. senders to recipients outside the U.S. (with certain exemptions), for transfers after 12/31/25.
Other 2026 changes & charitable giving
- AMT exemption phase-out thresholds permanently increased starting in 2026 to $500,000 ($1 million for joint filers).
- Non-itemizers can permanently deduct up to $1,000 ($2,000 married filing jointly) of cash gifts to qualifying charities. Substantiation rules are unchanged: gifts of $250+ to one charity require a written acknowledgment stating no goods or services were received.
- The 60% of AGI limit for cash gifts to public charities is permanently extended.
- New 0.5% floor for itemizers. Charitable deductions are only allowed to the extent they exceed 0.5% of AGI. Example: with 2026 AGI of $100,000 and $4,000 of gifts, only $3,500 is currently deductible. Unused amounts carry forward five years.
Two strategies to minimize the 0.5% floor:
- Make larger contributions in 2025, before the floor takes effect in 2026.
- If you’re over 70½, make qualified charitable distributions directly from your IRA to the charity. The 2025 annual limit is $108,000 per individual.
State & local tax (SALT) deduction
The $10,000 SALT cap is temporarily raised to $40,000 starting in 2025, increasing 1% per year through 2029 before reverting to $10,000 in 2030. The benefit phases down for modified AGI above $500,000 (inflation-adjusted), but not below $10,000.
Seniors, gambling & green energy
Deduction for seniors: While taxation of Social Security benefits is unchanged, a temporary deduction of $6,000 per individual age 65+ is available for 2025–2028. It phases out above $75,000 of modified AGI ($150,000 married filing jointly).
Gambling losses limited to 90% beginning in 2026 — effectively taxing 10% of gross winnings even when losses equal winnings.
Green energy credits are going away. The bill cuts back or ends many credits and blocks future extensions without new legislation:
| Credit / deduction | Ends |
|---|---|
| Clean Vehicle Credit (new, used & commercial EVs) | 9/30/25 |
| Energy Efficient Home Improvement Credit (heat pumps, windows, insulation) | 12/31/25 |
| Residential Clean Energy Credit (solar, wind, battery storage) | 12/31/25 |
| Energy efficient commercial buildings deduction | Construction beginning after 6/30/26 |
| Energy efficient manufactured homes credit | 6/30/26 |
| Alternative fuel vehicle refueling property credit | 6/30/26 |
| Clean electricity ITC / PTC | 12/31/26 unless construction began before 7/4/26 |
Family & child tax benefits
- Child tax credit made permanent with favorable income thresholds and refundability; the “other dependent” credit is also permanent. The nonrefundable credit increases to $2,200 for 2025, and both portions are indexed for inflation from 2026.
- Child and dependent care credit increases from 35% to up to 50% of eligible costs beginning 2026 (phasing down to 20% above $75K AGI / $150K MFJ). The employer dependent care exclusion rises from $5,000 to $7,500.
- New “Trump Accounts” — tax-deferred investment accounts for children who are U.S. citizens. For children born 2025–2028, parents can elect a $1,000 federal contribution. After July 4, 2026, parents and others can contribute up to $5,000 per year after-tax until the child turns 18. Investment restrictions apply.
- 529 plans expanded. Beginning 2026, the K-12 tax-free withdrawal limit rises from $10,000 to $20,000, and postsecondary credentialing expenses qualify for distributions after 7/4/25.
- Scholarship contribution credit of up to $1,700 begins in 2027 for cash gifts to qualifying scholarship-granting organizations.
- Premium Tax Credit changes (think Covered California): enhanced subsidies expire after 2025, the cap on repaying excess advance credits is removed, and pre-enrollment verification begins in 2028. You may see higher premiums.
Tips, overtime & car loan interest
- Qualified tips: deduction of up to $25,000 for 2025–2029 in traditionally tipped occupations, reported on W-2 or 1099. Phases out above $150K modified AGI ($300K MFJ). Self-employed individuals can deduct tips only if business income exceeds expenses.
- Overtime pay: deduction of up to $12,500 ($25,000 MFJ) for overtime exceeding your regular rate, with the same phase-out thresholds.
- Car loan interest: deduction of up to $10,000 of interest on loans for new, U.S.-assembled personal-use vehicles, phasing out above $100K ($200K MFJ).
These deductions reduce taxable income but don’t change withholding, Social Security or Medicare taxes — you’ll see the benefit when you file.
Exclusions from income
- Qualified small business stock: noncorporate taxpayers may exclude up to 100% of gain on certain small business stock.
- Student loan forgiveness exclusion was not extended, though the exclusion for discharge due to death or disability remains.
Business provisions
- QBI deduction made permanent at 20%, with higher phase-out thresholds for specified service businesses and a new $400 minimum deduction for taxpayers with at least $1,000 of QBI from active businesses.
- 100% bonus depreciation made permanent for property placed in service after January 19, 2025, plus a new 100% class for certain U.S. manufacturing and production real property.
- Section 179 limit increased to $2.5 million for 2025, phasing out at $4 million of purchases, indexed for inflation.
- Research & development: credit expanded and the five-year amortization requirement repealed.
- Business meals: deductions for de minimis employee meals and meals for the convenience of the employer are eliminated beginning 2026.
- Form 1099-K threshold restored to $20,000 and more than 200 transactions. 1099-NEC / MISC thresholds rise from $600 to $2,000 for 2025, indexed annually.
- Employee Retention Credit: no claims allowed if filed after January 31, 2024 for wages paid after June 30, 2021.
- Opportunity Zones permanently extended with updated benefits for investments after 2026.
This article is for general information only and is not tax advice for your specific situation. Tax laws change frequently; please contact Cyndi before acting on any of this information.