2026 Tax Primer: What the “One Big Beautiful Bill” Means for You
By Neil Rose, CFA
The most consequential tax legislation in nearly a decade is now law.
The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, bringing material tax benefits for most in 2026 and beyond. It’s worth knowing many of OBBBAs provisions.
The most important thing this bill did wasn’t in creating something new. It made permanent what was set to expire. The 2017 Tax Cuts and Jobs Act—which lowered rates, widened brackets, and nearly doubled the standard deduction—was scheduled to sunset after 2025. Without action, most Americans would have faced a significant automatic tax hike starting January 1, 2026. That didn’t happen. The OBBBA locked in those rates permanently.
The Rates You’re Living With
For 2026, the seven federal income tax brackets remain: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The top rate of 37% doesn’t kick in until taxable income exceeds $640,600 for single filers or $768,700 for married couples filing jointly. The standard deduction is now $32,200 for married couples filing jointly—more than double what it was a decade ago.
| Rate | Single Filers (2026) | Married Filing Jointly (2026) |
|---|---|---|
| 10% | Up to $12,400 | Up to $24,800 |
| 12% | $12,401 – $50,400 | $24,801 – $100,800 |
| 22% | $50,401 – $105,700 | $100,801 – $211,400 |
| 24% | $105,701 – $201,775 | $211,401 – $403,550 |
| 32% | $201,776 – $256,225 | $403,551 – $512,450 |
| 35% | $256,226 – $640,600 | $512,451 – $768,700 |
| 37% | Over $640,600 | Over $768,700 |
Source: IRS Rev. Proc. 2025-14; IRS.gov tax inflation adjustments for tax year 2026 (Oct. 2025)
New Deductions
Beyond the permanence play, the OBBBA introduced several targeted deductions taxpayers can take regardless of whether they elected for the standard deduction:
Tips and overtime deductions: Eligible workers in occupations that customarily receive tips may deduct qualified tip income up to $25,000 per year. Eligible employees (FSLA non-exempt) may deduct the premium portion of overtime compensation up to $12,500 (single) or $25,000 (joint) per year. Tips and overtime deductions phase out when MAGI (Modified Adjusted Gross Income) exceeds $150,000 (single) or $300,000 (joint) and expires after 2028.
Auto loan interest: Interest paid on loans for new, U.S.-assembled passenger vehicles purchased for personal use is now deductible up to $10,000, not indexed to inflation. The deduction phases out by $200 for every $1,000 (or portion thereof) of MAGI over $100,000 (single) or $200,000 (joint).
The Senior Bonus Deduction: Taxpayers age 65 and older get an additional $6,000 (single) or $12,000 (joint) standard deduction through 2028. The deduction phases out at a rate of 6% of the amount of MAGI over $75,000 (single) or $150,000 (joint). In effect, this means a full phase out of this deduction at MAGI of $175,000 (single) and $250,000 (joint).
Charitable contribution deduction for non-itemizers: Starting in 2026, non-itemizers can deduct up to $1,000 (single) and $2,000 (joint). This deduction is not subject to the new floor of 0.5% of AGI for Schedule A charitable deductions.
The SALT Cap: Some Relief
The OBBBA raised the state and local tax (SALT) cap to $40,000 for both single and married filers starting in 2025 (the marriage penalty on SALT was eliminated). The cap rises 1% per year from 2026-2029 before reverting to $10,000 in 2030.
For Business Owners and Investors
20% qualified business income (QBI) deduction is now permanent. Previously set to expire in 2025, this is a win for business owners, real estate investors, and professionals with the right entity structures. The AMT exemption was also increased—to $140,200 for married filers in 2026, phasing out at $500,000 of taxable income (single) or $1 million (joint).
Other benefits include:
Permanent 100% bonus depreciation for business related property placed in service after January 19, 2025
Increased Section 179 deduction limits to $2.5 million in aggregate total cost (from $1 million) and $4 million in total Section 179 property (from $2.5 million)
Increased de minimis threshold for 1099-K third party payment processors of $20,000 and 200 transactions from $600 flat (passed in 2021’s American Rescue Plan Act of 2021 but never implemented).
Increased the Section 6041 threshold of $600 for reporting of business payments (1099-NEC, 1099-MISC, etc.) to $2,000, adjusted for inflation, starting in 2026.
What Went Away
Electric vehicle tax credits and many clean energy credits were substantially curtailed or repealed. This includes the tax credit of $7,500 for an electric vehicle and $4,000 for a used one. If you’ve been counting on those for a purchase this year, check with your advisor before assuming the credit still applies.
One Number to Remember: The estate and gift tax exemption—now $15,000,000 per person and $30,000,000 per couple—was made permanent by the OBBBA. This is the most generous exemption in U.S. history. More on that in Article 3.
There’s More
These are just some of the major changes and features in today’s tax code. Indeed, there are many more changes. Most are benefits to after tax earnings; some amount to tax increases. Some are huge benefits in small niches that have nonetheless found their way to becoming law.
The point is there’s a lot to unpack with the OBBBA; there should be at least a couple of things in the new law to take advantage of in 2026 and beyond. Your tax professional will be extra valuable this year if you ask how to optimize your tax efficiency, starting with the low-hanging fruit. (For best results, have these conversations after April 15!) Talk with your financial advisor who might be able to help prompt questions and scenarios and help you get more from your tax expert.
This material is for informational purposes only and does not constitute tax or legal advice. Please consult your tax professional for guidance specific to your situation.
About the Author
Neil Rose, CFA, is the founder and CEO of Regency Capital Management.
