2026 Tax Law Changes
The One Big Beautiful Bill Act, signed into law on July 4, 2025, changed a wide range of tax rules for individuals, families, workers, business owners, and investors.
Some provisions apply for 2026 and future years. Others remain temporary and expire after 2028 or 2029. Because the law includes several phaseouts, income limits, and implementation details, taxpayers should review how the changes affect their own situation before making tax or planning decisions.
At True North Wealth Management, we help clients understand how tax law changes may affect retirement planning, investment strategy, charitable giving, estate planning, business decisions, and long-term financial goals.
Individual Tax Changes
Tax Brackets
The law made the current federal income tax rates permanent: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
Without this change, several brackets would have reverted to higher pre-TCJA levels after 2025.
Standard Deduction
For 2026, the standard deduction increases to:
- $16,100 for single filers
- $32,200 for married couples filing jointly
These amounts will continue to adjust for inflation.
Bonus Deduction for Seniors
Taxpayers age 65 and older may qualify for a temporary additional deduction of up to $6,000 per eligible individual.
This deduction phases out at higher income levels and expires after 2028. Retirees should review how this change may affect IRA withdrawals, Roth conversions, Social Security taxation, capital gains, and Medicare-related income planning.
State and Local Tax Deduction
The SALT deduction cap increased to $40,400 for 2026 and rises by 1% annually through 2029.
In 2030, the cap returns to $10,000 unless Congress changes the law again. Higher-income taxpayers also face phaseout rules.
This temporary change may affect taxpayers who itemize deductions, especially those with higher property, income, or sales taxes.
Charitable Contributions
Taxpayers who claim the standard deduction may now deduct a limited amount of charitable contributions without itemizing.
This change may help taxpayers who give to qualified charities but do not have enough deductions to itemize.
Families and Children
Child Tax Credit
For 2026, the child tax credit increases to $2,200 per qualifying child and will adjust for inflation in future years.
Families should still review eligibility rules, income limits, and Social Security number requirements.
Dependent Care
Beginning in 2026, the dependent care flexible spending account limit increases to $7,500.
The dependent care credit also increases the maximum percentage of qualifying expenses from 35% to 50%, depending on income.
Families with childcare costs may want to compare FSA elections, the dependent care credit, and employer benefits before open enrollment.
Trump Accounts
The law created a new savings vehicle called a Trump Account. Eligible children born between 2025 and 2028 may receive a one-time $1,000 federal contribution if the required election occurs.
Parents and others may contribute within annual limits. Withdrawals generally cannot begin before age 18.
529 Plan Expansion
The law expanded 529 education savings plan rules to cover more qualified education expenses.
Beginning in 2026, the annual limit for certain K–12 tuition-related 529 expenses increases from $10,000 to $20,000.
Families should compare federal rules with state tax treatment before making withdrawals. Nonqualified distributions may trigger income tax and a 10% federal penalty on earnings.
New Deductions for Workers
Tip Income Deduction
Eligible workers may deduct up to $25,000 of qualified tip income.
Income phaseouts apply, and this deduction expires after 2028. Workers and employers should pay close attention to reporting requirements.
Overtime Deduction
Eligible taxpayers may deduct up to $12,500 of qualified overtime compensation, or $25,000 for married couples filing jointly.
This deduction also phases out at higher income levels and expires after 2028.
New Car Loan Interest Deduction
From 2025 through 2028, eligible taxpayers may deduct up to $10,000 of interest on certain new vehicle loans.
The vehicle must meet specific requirements, including final assembly in the United States. Income phaseouts also apply.
Small Business and Investor Changes
Qualified Business Income Deduction
The law made the 20% Qualified Business Income deduction permanent.
This change matters for many sole proprietors, partnerships, S corporation owners, and other pass-through business owners. However, QBI rules still include limitations based on income, business type, wages, and qualified property.
100% Bonus Depreciation
The law permanently restored 100% bonus depreciation for certain qualifying property acquired after January 19, 2025.
This may create planning opportunities for businesses purchasing equipment, machinery, technology, vehicles, or other qualifying assets. Business owners should coordinate major purchases with their CPA before relying on accelerated deductions.
1099-K Reporting Threshold
The law restored the federal Form 1099-K reporting threshold to more than $20,000 and more than 200 transactions for third-party payment platforms.
This reporting threshold does not change whether income is taxable. Business owners, freelancers, and gig workers still need accurate records of income and expenses.
Estate and Gift Tax Changes
Increased Estate and Gift Tax Exemption
For 2026, the federal estate and gift tax exemption increases to $15 million per individual and $30 million for married couples, with inflation adjustments in future years.
This removes the scheduled sunset of the lower exemption amount, but future Congresses can still change estate tax rules.
Families with significant wealth should continue to review estate plans, beneficiary designations, trusts, gifting strategies, and business succession plans.
What to Watch Now
Tax law changes create planning opportunities, but they can also create confusion.
Several provisions expire after 2028, including the senior deduction, tip income deduction, overtime deduction, and new car loan interest deduction. The SALT deduction increase also expires after 2029.
Other provisions now appear permanent, but “permanent” in tax law means permanent unless Congress changes the law later.
At True North Wealth Management, we help clients coordinate tax-aware financial planning with investment strategy, retirement income, business planning, charitable giving, and estate goals.
Before changing your tax strategy, speak with a qualified tax, legal, or accounting professional. The right approach depends on your income, deductions, family situation, business structure, and long-term goals.
Important Disclosures:
This material is for informational purposes only and is not intended as tax, legal, accounting, payroll, estate-planning, retirement-plan, or individualized financial advice. Tax laws, limits, phaseouts, deductions, credits, reporting requirements, and IRS guidance may change. True North Wealth Management does not provide tax or legal advice. Consult qualified tax, legal, accounting, payroll, estate-planning, and financial professionals regarding your circumstances.
1. Congress.gov
2. IRS.gov
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite and customized by True North Wealth Management LLC to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.