What changed in US federal tax for 2026 under the One Big Beautiful Bill Act and the 2026 inflation adjustments: no tax on tips and overtime, the senior deduction, car loan interest, the SALT cap, child tax credit, Trump accounts, bonus depreciation, research expensing, QSBS, Opportunity Zones, charitable and estate changes, sorted by who is affected, with a 2026 planning checklist.
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| Item | 2026 value | Note |
|---|---|---|
| Source | all figures below | https://www.irs.gov/pub/irs-drop/rp-25-32.pdf |
| Standard deduction, married filing jointly and surviving spouses | USD 32,200 | "Married Individuals Filing Joint Returns and Surviving Spouses $32,200" |
| Standard deduction, head of household | USD 24,150 | "Heads of Households (§ 1(j)(2)(B)) $24,150" |
| Standard deduction, single and married filing separately | USD 16,100 | "Unmarried Individuals (other than Surviving Spouses and Heads of $16,100" |
| Additional standard deduction, aged 65 or blind, married | USD 1,650 | "the aged or the blind is $1,650" |
| Additional standard deduction, aged 65 or blind, unmarried | USD 2,050 | "increased to $2,050 if the individual is also unmarried" |
| Top rate, married filing jointly, on taxable income over USD 768,700 | 37% | "plus 37% of the excess over $768,700" |
| 37% band starts, single and head of household | USD 640,600 | "Over $640,600" |
| AMT exemption, married filing jointly | USD 140,200 | "Joint Returns or Surviving Spouses $140,200" |
| AMT exemption, unmarried | USD 90,100 | "Unmarried Individuals (other than Surviving Spouses) $90,100" |
| AMT exemption phase-out starts, married filing jointly | USD 1,000,000 | "Joint Returns or Surviving Spouses $1,000,000 $1,280,400" (fully phased out at USD 1,280,400) |
| AMT exemption phase-out starts, unmarried | USD 500,000 | "Unmarried Individuals (other than $500,000 $680,200" (fully phased out at USD 680,200) |
Figures are for tax year 2026. This Guide lists what is different on a 2026 federal return and what to do about it. It covers the One Big Beautiful Bill Act, Public Law 119-21, approved on 4 July 2025 (text on govinfo.gov), and the 2026 inflation figures in Rev. Proc. 2025-32. It is federal only. States decide for themselves whether to follow these rules. Many of the new deductions are temporary: each rule below names the years it covers.
Sections are organised by who is affected: everyone, employees, seniors, families, business owners and the self-employed, real estate investors, founders and investors, givers and estates, and high earners in high-tax states. Where a named accountant's Guide covers a topic in depth, this Guide gives one paragraph and links to it by slug.
The rate brackets that applied from 2018 through 2025 no longer expire. Section 70101 of the Act removes the end date for taxable years beginning after 31 December 2025, so 2026 uses the same rate structure with indexed band edges. The standard deduction and the alternative minimum tax (AMT) exemption are also permanent, at the 2026 amounts in the table below. From 2026 the AMT exemption phases out twice as fast: the Act substitutes '50 percent' for '25 percent' in the phase-out rule (section 70107), for taxable years beginning after 31 December 2025.
| Item | 2026 value | Note |
|---|---|---|
| Source | all figures below | https://www.irs.gov/pub/irs-drop/rp-25-32.pdf |
| Standard deduction, married filing jointly and surviving spouses | USD 32,200 | "Married Individuals Filing Joint Returns and Surviving Spouses $32,200" |
| Standard deduction, head of household | USD 24,150 | "Heads of Households (§ 1(j)(2)(B)) $24,150" |
| Standard deduction, single and married filing separately | USD 16,100 | "Unmarried Individuals (other than Surviving Spouses and Heads of $16,100" |
| Additional standard deduction, aged 65 or blind, married | USD 1,650 | "the aged or the blind is $1,650" |
| Additional standard deduction, aged 65 or blind, unmarried | USD 2,050 | "increased to $2,050 if the individual is also unmarried" |
| Top rate, married filing jointly, on taxable income over USD 768,700 | 37% | "plus 37% of the excess over $768,700" |
| 37% band starts, single and head of household | USD 640,600 | "Over $640,600" |
| AMT exemption, married filing jointly | USD 140,200 | "Joint Returns or Surviving Spouses $140,200" |
| AMT exemption, unmarried | USD 90,100 | "Unmarried Individuals (other than Surviving Spouses) $90,100" |
| AMT exemption phase-out starts, married filing jointly | USD 1,000,000 | "Joint Returns or Surviving Spouses $1,000,000 $1,280,400" (fully phased out at USD 1,280,400) |
| AMT exemption phase-out starts, unmarried | USD 500,000 | "Unmarried Individuals (other than $500,000 $680,200" (fully phased out at USD 680,200) |
What to do: re-run withholding or estimated payments on the 2026 bands. A taxpayer with AMT income near the phase-out start should model AMT again, because the faster phase-out from 2026 removes the exemption over a narrower band.
A deduction for qualified tips applies for taxable years beginning after 31 December 2024 and ends for any taxable year beginning after 31 December 2028, so it covers 2025, 2026, 2027 and 2028. Qualified tips are cash tips (paid in cash or charged, and an employee's share under a tip-sharing arrangement) received in an occupation that customarily and regularly received tips on or before 31 December 2024, as listed by the Treasury. A tip counts only if it is paid voluntarily, is not negotiated and is set by the payer. Tips earned in a specified service trade or business do not qualify, and for an employee that test looks at the employer's business. The tips must be on a statement furnished to the worker (for example Form W-2) or reported on Form 4137. The return must carry the worker's social security number, and a married worker must file a joint return. The deduction is capped per return (the Act prints no separate joint cap) and is then reduced, not lost at once, by USD 100 for each USD 1,000 of MAGI above the threshold in the table below. It is allowed whether or not the taxpayer itemizes (new section 63(b)(5)). A self-employed worker deducts tips only up to the net income of the business that earned them.
What to do: keep a record of tips by source, check that the employer reports them, and file jointly if married.
A deduction for qualified overtime compensation applies for taxable years beginning after 31 December 2024 and ends for any taxable year beginning after 31 December 2028 (2025 to 2028). It covers only overtime that section 7 of the Fair Labor Standards Act requires, and only the part paid in excess of the regular rate (the premium, not the whole overtime wage). Overtime an employer pays voluntarily beyond what section 7 requires does not qualify, and qualified tips are excluded. The amount must be on a statement furnished to the worker (new Form W-2 line under section 6051(a)(19), or the section 6041 statement). The return must carry the worker's social security number, and a married worker must file a joint return. The cap is per return, with a higher cap on a joint return, and the deduction is reduced by USD 100 for each USD 1,000 of MAGI above the same thresholds as tips. It is allowed whether or not the taxpayer itemizes (new section 63(b)(6)).
What to do: track the overtime premium separately from regular pay for every pay period, and ask the employer how it will report the qualifying amount.
Interest on a loan to buy a new passenger vehicle for personal use is deductible for taxable years beginning after 31 December 2024 and before 1 January 2029 (2025 to 2028). The loan must be incurred after 31 December 2024 and secured by a first lien on the vehicle. The vehicle must be new (its original use starts with the taxpayer), be a car, minivan, van, sport utility vehicle, pickup truck or motorcycle, weigh under 14,000 pounds gross vehicle weight rating, and have its final assembly in the United States. Leases, fleet sales, commercial vehicles not used personally, salvage titles and vehicles bought for scrap or parts are excluded. A loan from a person related to the borrower under section 267(b) or 707(b)(1) does not count. A refinancing of a qualifying loan counts, but only up to the balance refinanced. The vehicle identification number must be on the return. The interest is capped each year and the deduction is reduced by USD 200 for each USD 1,000 (or part of USD 1,000) of MAGI above the threshold in the table below. It is allowed whether or not the taxpayer itemizes (new section 63(b)(7)).
What to do: before buying, confirm final assembly in the United States and that the loan is a purchase loan, not a lease. Keep the lender's interest statement.
| Item | Value | Note |
|---|---|---|
| Source | all figures below | https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm |
| Tips deduction cap, per return, 2025 to 2028 | USD 25,000 | "for any taxable year shall not exceed $25,000." (section 224(b)(1)) |
| Tips and overtime: phase-out starts, MAGI, other than joint | USD 150,000 | "exceeds $150,000 ($300,000 in the case of a joint return)" |
| Tips and overtime: phase-out starts, MAGI, joint return | USD 300,000 | same sentence |
| Tips and overtime: reduction per USD 1,000 of MAGI over the threshold | USD 100 | "reduced (but not below zero) by $100 for each $1,000" |
| Overtime deduction cap, per return | USD 12,500 | "shall not exceed $12,500 ($25,000 in the case of a joint return)" |
| Overtime deduction cap, joint return | USD 25,000 | same sentence |
| Car loan interest cap per year, 2025 to 2028 | USD 10,000 | "for any taxable year shall not exceed $10,000." (section 163(h)(4)(C)(i)) |
| Car loan: phase-out starts, MAGI, other than joint | USD 100,000 | "exceeds $100,000 ($200,000 in the case of a joint return)" |
| Car loan: phase-out starts, MAGI, joint return | USD 200,000 | same sentence |
| Car loan: reduction per USD 1,000 (or part) of MAGI over the threshold | USD 200 | "reduced (but not below zero) by $200 for each $1,000 (or portion thereof)" |
From 2026 the exclusion for employer dependent care assistance rises (section 70404, taxable years beginning after 31 December 2025). Employer payments of an employee's student loans stay inside the educational assistance exclusion for payments made after 31 December 2025, because the Act strikes the old end date (section 70412). The 2026 limits are in the first table below. Retirement limits rose for 2026 under Notice 2025-67. The Roth catch-up wage threshold for 2025 in the second table decides, under section 414(v)(7)(A), whether a person's 2026 catch-up contributions to an employer plan (other than a SEP or SIMPLE) must be designated as Roth contributions. For the full retirement rules see us-secure-2-and-retirement-updates and, for the self-employed, us-self-employed-retirement.
| Item | 2026 value | Note |
|---|---|---|
| Source | all figures below | https://www.irs.gov/pub/irs-pdf/p15b.pdf |
| Dependent care assistance exclusion | USD 7,500 | "$7,500 ($3,750 for married employee filing separate return)" |
| Dependent care assistance exclusion, married filing separately | USD 3,750 | same row |
| Educational assistance exclusion (includes student loan payments) | USD 5,250 | "Exempt up to $5,250 of benefits each year." |
| Item | 2026 value | Note |
|---|---|---|
| Source | all figures below | https://www.irs.gov/pub/irs-drop/n-25-67.pdf |
| 401(k), 403(b) and TSP elective deferral limit | USD 24,500 | "Thrift Savings Plan, is increased from $23,500 to $24,500" |
| Catch-up for those who attain age 60, 61, 62 or 63 in 2026 | USD 11,250 | "61, 62, or 63 in 2026 remains $11,250" |
| Roth catch-up wage threshold for 2025, used for 2026 catch-ups | USD 150,000 | "is increased from $145,000 to $150,000" |
| IRA contribution limit | USD 7,500 | "is increased from $7,000 to $7,500" |
What to do: raise payroll deferrals to the 2026 limit, and check with payroll whether the Roth catch-up rule applies.
A taxpayer aged 65 or over before the end of the taxable year gets an extra deduction for taxable years beginning before 1 January 2029. The Act applies it to taxable years beginning after 31 December 2024, so it covers 2025 to 2028. On a joint return each spouse aged 65 or over by the end of the year counts as a separate qualified individual. The return must carry each qualified individual's social security number, and a married taxpayer must file a joint return. It is allowed whether or not the taxpayer itemizes, because section 63 subtracts the section 151 deductions in both cases (26 U.S.C. 63, LII mirror). The amount is reduced, not lost at once, by 6 percent of MAGI above the threshold in the table below. This is a separate deduction from the additional standard deduction for age in the first table of this Guide, and the two are not the same amount.
| Item | Value | Note |
|---|---|---|
| Source | all figures below | https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm |
| Senior deduction per qualified individual, 2025 to 2028 | USD 6,000 | "there shall be allowed a deduction in an amount equal to $6,000 for each qualified individual" |
| Phase-out rate | 6 percent | "shall be reduced (but not below zero) by 6 percent of so much of the taxpayer's modified adjusted gross income as exceeds $75,000" |
| Phase-out starts, MAGI, other than joint | USD 75,000 | "as exceeds $75,000 ($150,000 in the case of a joint return)" |
| Phase-out starts, MAGI, joint return | USD 150,000 | same sentence |
What to do: check MAGI against the threshold before taking extra IRA distributions or realising gains late in the year, and file jointly if married.
The higher child tax credit no longer expires after 2025 (section 70104, taxable years beginning after 31 December 2024). No credit is allowed for a child unless the return carries the child's social security number and the taxpayer's social security number (on a joint return, at least one spouse's). The number must be issued before the return's due date, to a citizen or under the Social Security Act provision the Act cites (section 205(c)(2)(B)(i)(I)). The 2026 amounts are in the table below. The maximum credit is indexed for taxable years beginning after 2025, with any increase rounded down to the next lowest multiple of one hundred dollars (section 70104(c)); for 2026 the indexed amount is the one in the table.
From taxable years beginning after 31 December 2024 part of the adoption credit is refundable (section 70402). The 2026 maximum, the refundable part and the phase-out start are in the table below.
| Item | 2026 value | Note |
|---|---|---|
| Source | all figures below | https://www.irs.gov/pub/irs-drop/rp-25-32.pdf |
| Child tax credit, maximum per qualifying child | USD 2,200 | "the maximum amount of the credit allowed under § 24(a) is $2,200" |
| Child tax credit, refundable part per child | USD 1,700 | "may be refundable is $1,700" |
| Adoption credit, maximum (and the special needs amount) | USD 17,670 | "the credit allowed for an adoption of a child with special needs is $17,670" |
| Adoption credit, refundable part | USD 5,120 | "may be refundable is $5,120" |
| Adoption credit phase-out starts, modified AGI | USD 265,080 | "modified adjusted gross income in excess of $265,080" |
A Trump account is a traditional IRA (not a Roth IRA) set up for a child under 18 (section 70204, taxable years beginning after 31 December 2025). The account may not accept any contribution before "the date that is 12 months after the date of the enactment of this section". Before the year the child turns 18, ordinary contributions are capped each year. An employer may contribute for an employee or the employee's dependent, and that contribution is excluded from the employee's income up to its own cap (new section 128). Under the pilot program, a taxpayer may elect for a child who is the taxpayer's qualifying child under section 152(c) born after 31 December 2024 and before 1 January 2029 who is a United States citizen; the Treasury then pays a fixed amount into the child's account. The election needs the child's social security number.
For taxable years beginning after 31 December 2025 the credit percentage starts at 50 percent. It falls by 1 percentage point for each USD 2,000 (or fraction) of adjusted gross income above USD 15,000, but not below 35 percent. It then falls further by 1 percentage point for each USD 2,000 (USD 4,000 on a joint return) above USD 75,000 (USD 150,000 joint), but not below 20 percent (section 70405).
| Item | Value | Note |
|---|---|---|
| Source | all figures below | https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm |
| Trump account: yearly cap on ordinary contributions before the year the child turns 18 | USD 5,000 | "for such calendar year shall not exceed $5,000." |
| Trump account: employer contribution excluded from the employee's income | USD 2,500 | "with respect to any employee shall not exceed $2,500." |
| Trump account pilot payment per eligible child born 2025 to 2028 | USD 1,000 | "in an amount equal to $1,000." (section 6434) |
| Dependent care credit: first reduction step, AGI over | USD 15,000 | "for each $2,000 or fraction thereof by which the taxpayer's adjusted gross income for the taxable year exceeds $15,000" |
| Dependent care credit: step size | USD 2,000 | same sentence |
| Dependent care credit: second reduction step, joint step size | USD 4,000 | "for each $2,000 ($4,000 in the case of a joint return)" |
| Dependent care credit: second reduction starts, AGI, other than joint | USD 75,000 | "exceeds $75,000 ($150,000 in the case of a joint return)" |
| Dependent care credit: second reduction starts, AGI, joint | USD 150,000 | same sentence |
| Dependent care credit: starting percentage | 50 percent | "the term 'applicable percentage' means 50 percent" |
| Dependent care credit: floor after the first reduction | 35 percent | "reduced (but not below 35 percent)" |
| Dependent care credit: floor after the second reduction | 20 percent | "further reduced (but not below 20 percent)" |
Money from a 529 plan may pay for more elementary and secondary school costs: tuition, curriculum and curricular materials, books and other instructional materials, online educational materials, and some tutoring (section 70413, for distributions after enactment). The yearly limit on 529 money used for those school costs doubles for taxable years beginning after 31 December 2025.
| Item | Value | Note |
|---|---|---|
| Source | all figures below | https://www.law.cornell.edu/uscode/text/26/529 |
| Yearly limit per beneficiary on 529 distributions for elementary and secondary school costs (LII mirror of the U.S. Code) | USD 20,000 | "include not more than $20,000 in expenses described in subsection (c)(7)" |
What to do: get social security numbers for every child before filing, open a Trump account and make the pilot election for a child born from 2025, and claim the higher dependent care credit percentage if AGI is low.
The Act sets bonus depreciation at "100 percent" with no phase-down for property acquired after 19 January 2025 (section 70301). Property is not treated as acquired after the date a written binding contract for it was signed, so a contract signed on or before 19 January 2025 keeps the old rules. For the first taxable year ending after 19 January 2025 a taxpayer could elect 40 percent instead (60 percent for longer production period property and certain aircraft under section 168(k)(2)(B) and (C)). Property acquired in 2026 is acquired after 19 January 2025, so the 100 percent rate applies to it. States differ: see us-state-bonus-depreciation-conformity-matrix. For building studies see us-federal-cost-segregation.
A new election gives a 100 percent first-year allowance for the part of nonresidential real property used as an integral part of a qualified production activity in the United States (section 70307). The Act defines that activity as "the manufacturing, production, or refining of a qualified product", which must be tangible personal property and must involve a substantial transformation; production covers only agricultural and chemical production. Construction must begin after 19 January 2025 and before 1 January 2029, original use must start with the taxpayer, unless the property is acquired in that window and no one used it in a qualified production activity at any time from 1 January 2021 to 12 May 2025, the taxpayer never used it before, and the purchase meets the section 179(d) acquisition tests (section 168(n)(2)(B)), and the property must be placed in service before 1 January 2031. Property a lessor leases to someone else does not count for the lessor.
The Act raised the section 179 limit and phase-out start for property placed in service in taxable years beginning after 31 December 2024. The 2026 indexed amounts are in the table below.
New section 174A lets a business deduct domestic research or experimental expenditure in the year paid or incurred, for taxable years beginning after 31 December 2024 (section 70302). A business may instead elect to capitalise it and amortise it over not less than 60 months. Domestic amounts capitalised in taxable years beginning after 31 December 2021 and before 1 January 2025 may be deducted in full in the first taxable year beginning after 31 December 2024, or spread over that year and the next. A small business that meets the section 448(c) gross receipts test for its first taxable year beginning after 31 December 2024 may elect to apply the new rule back to taxable years beginning after 31 December 2021 by amended returns. The Act sets that election window as "not later than the date that is 1 year after the date of the enactment of this Act" (the Act was approved on 4 July 2025), in the manner the Treasury provides. For the method, the research credit and the elections, see us-r-and-d-section-174-and-41.
For taxable years beginning after 31 December 2024 the Act removes the words that limited section 163(j)(8)(A)(v) to years before 2022 (section 70303). That clause adds back "any deduction allowable for depreciation, amortization, or depletion" when computing adjusted taxable income (26 U.S.C. 163, LII mirror). A business with debt and large depreciation may be able to deduct more interest from 2025.
The section 199A deduction no longer expires after 2025 (section 70105). For taxable years beginning after 31 December 2025 the phase-in range above the threshold widens, and a minimum deduction applies to a taxpayer whose qualified business income from active trades or businesses (ones in which the taxpayer materially participates under section 469(h)) is at least the amount in the table. The thresholds and the minimum are in the tables below. For the method, see us-qbi-deduction.
For payments made after 31 December 2025, a business files Form 1099-NEC or 1099-MISC under section 6041(a) only when payments to a payee reach the higher base threshold in the table below (section 70433). See us-1099-nec-issuance. A payment platform (third party settlement organisation) files Form 1099-K only if a payee's payments exceed USD 20,000 AND the number of transactions exceeds 200 (section 70432). Both tests must be met. The Act makes this change as if included in the 2021 law that had lowered the threshold, so the lower threshold never applies. See us-1099-k-and-payment-processors.
A non-corporate taxpayer's business losses above the threshold in the table below are not deductible in 2026. The Act makes this limit permanent for taxable years beginning after 31 December 2026 (section 70601).
The section 179D deduction for energy efficient commercial buildings does not apply to property whose construction begins after 30 June 2026 (section 70507). The section 45L new energy efficient home credit end date moves to 30 June 2026 (section 70508).
| Item | Value | Note |
|---|---|---|
| Source | all figures below | https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm |
| Bonus depreciation rate, property acquired after 19 January 2025 | 100 percent | "by striking "the applicable percentage" and inserting "100 percent"" |
| Transition election, first taxable year ending after 19 January 2025 | 40 percent | "by substituting '40 percent' for '100 percent'" |
| Transition election, longer production period property and certain aircraft, first taxable year ending after 19 January 2025 | 60 percent | "by substituting '60 percent' for '100 percent'" |
| Section 174A: shortest amortisation period if the taxpayer elects to capitalise | 60 months | "ratably over such period of not less than 60 months" |
| QBI phase-in range from 2026, other than joint | USD 75,000 | "inserting "$75,000 ($150,000 in the case of a joint return)"" |
| QBI phase-in range from 2026, joint | USD 150,000 | same sentence |
| Form 1099-K: payments must exceed | USD 20,000 | "exceeds $20,000, and "(2) the aggregate number of such transactions exceeds 200"" |
| Form 1099-K: number of transactions must exceed | 200 | same sentence |
| Item | 2026 value | Note |
|---|---|---|
| Source | all figures below | https://www.irs.gov/pub/irs-drop/rp-25-32.pdf |
| Section 179 limit | USD 2,560,000 | "cannot exceed $2,560,000" |
| Section 179 phase-out starts (cost of property placed in service) | USD 4,090,000 | "during the 2026 taxable year exceeds $4,090,000" |
| Section 179 cap on a sport utility vehicle | USD 32,000 | "sport utility vehicle that may be taken into account under § 179 cannot exceed $32,000" |
| QBI threshold, married filing jointly | USD 403,500 | "Married Individuals Filing Joint Returns $403,500 $553,500" |
| QBI phase-in ends, married filing jointly | USD 553,500 | same row |
| QBI threshold, all other returns | USD 201,750 | "All Other Returns $201,750 $276,750" |
| QBI phase-in ends, all other returns | USD 276,750 | same row |
| QBI minimum deduction | USD 400 | "amended § 199A(i) to add a minimum deduction of $400" |
| Active QBI needed for the minimum deduction | USD 1,000 | "a minimum of $1,000 of qualified business income" |
| Form 1099-NEC and 1099-MISC base threshold, payments after 31 December 2025 | USD 2,000 | "For payments made after December 31, 2025, the base threshold under section 6041(a) is $2,000" |
| Excess business loss threshold, other than joint | USD 256,000 | "is $256,000 ($512,000 for joint returns)" |
| Excess business loss threshold, joint | USD 512,000 | same sentence |
The IRS raised the business standard mileage rate from 1 July 2026. Miles driven from 1 January to 30 June 2026 use the first rate and miles from 1 July to 31 December 2026 use the second.
| Item | Value | Note |
|---|---|---|
| Source | all figures below | https://www.irs.gov/tax-professionals/standard-mileage-rates |
| Business rate, 1 January to 30 June 2026 | 72.5 cents per mile | rates table, row for 1 January to 30 June 2026: "72.5" |
| Business rate, 1 July to 31 December 2026 | 76 cents | "Self-employed and business: 76 cents/mile" |
| Charity rate, all of 2026 | 14 cents per mile | "Charities: 14 cents/mile" |
What to do: date every business mile, time asset purchases knowing that 100 percent bonus applies, decide on 174A before filing, and update the 1099 threshold in the payables system for 2026 payments.
Bonus depreciation at 100 percent applies to qualifying property acquired after 19 January 2025, as described above. Which parts of a building can qualify is covered in us-federal-cost-segregation. Residential rental buildings themselves are not qualified production property: that election covers only nonresidential real property used in a qualified production activity, and a lessor cannot use it for property leased to others. The business interest add-back from 2025 may help owners with debt whose rental activity is subject to section 163(j). New Opportunity Zone rules apply to investments from 2027 (next section). Exchanges of real property under section 1031 are covered by us-federal-section-1031-like-kind-exchange. States may not follow federal bonus depreciation: see us-state-bonus-depreciation-conformity-matrix.
What to do: consider a cost segregation study for a building acquired after 19 January 2025, and check the state add-back before relying on the federal deduction.
For stock acquired after the Act's enactment date, the section 1202 exclusion is tiered by holding period, the per-issuer cap rises, and the corporation's gross assets test rises. Stock acquired on or before that date keeps the old cap. For the method and the conditions, see us-section-1202-qsbs.
The new Opportunity Zone rules apply to amounts invested in qualified opportunity funds after 31 December 2026 (section 70421). An investment held at least five years gets a basis increase of a share of the deferred gain, higher for a qualified rural opportunity fund. If the investment is held 10 years and sold before 30 years after the investment, the investor may elect a basis equal to fair market value at sale. New zone designations follow a decennial determination date of 1 July 2026 and every 10 years after. An investment made before 2027 stays under the old rules. Its deferred gain is included in income in the taxable year that includes the earlier of the date the investment is sold or exchanged or 31 December 2026, so for most investors it lands on the 2026 return (26 U.S.C. 1400Z-2, LII mirror).
| Item | Value | Note |
|---|---|---|
| Source | all figures below | https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm |
| QSBS per-issuer cap, stock acquired after the applicable date | USD 15,000,000 | "if such stock was acquired by the taxpayer after the applicable date, $15,000,000" |
| QSBS per-issuer cap, stock acquired on or before the applicable date | USD 10,000,000 | "acquired by the taxpayer on or before the applicable date, $10,000,000" |
| QSBS exclusion, new stock held 3 years | 50% | "3 years................................................ 50%" |
| QSBS exclusion, new stock held 4 years | 75% | "4 years................................................ 75%" |
| QSBS exclusion, new stock held 5 years or more | 100% | "5 years or more........................................ 100%" |
| QSBS gross assets limit, stock issued after enactment | USD 75,000,000 | "by striking "$50,000,000" and inserting "$75,000,000"" |
| OZ 2.0: basis increase after 5 years | 10 percent | "shall be increased by an amount equal to 10 percent (30 percent in the case of any investment in a qualified rural opportunity fund)" |
| OZ 2.0: basis increase after 5 years, rural fund | 30 percent | same sentence |
What to do: record the acquisition date of every founder or angel share, because 4 July 2025 splits the rules, and do not assume a 2026 fund investment gets the 2027 rules.
For taxable years beginning after 31 December 2025 a taxpayer who does not itemize may deduct gifts made in cash to an organization described in section 170(b)(1)(A), but not gifts to a supporting organization under section 509(a)(3) or to a donor advised fund, up to the fixed amount in the table (double on a joint return) (26 U.S.C. 170, LII mirror) (section 70424). A taxpayer who itemizes may deduct charitable gifts only to the extent they exceed 0.5 percent of the contribution base (section 70425). The 60 percent limit for cash gifts to public charities no longer expires. A corporation may deduct charitable gifts only above 1 percent of taxable income and up to 10 percent (section 70426), for taxable years beginning after 31 December 2025.
For estates of people dying, and gifts made, after 31 December 2025 the basic exclusion amount is set at the 2026 figure in the table below and indexed after that (section 70106). The annual gift exclusion is per donee. For the method and the returns, see us-estate-gift-706-709.
| Item | Value | Note |
|---|---|---|
| Source | all figures below | https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm |
| Non-itemizer charitable deduction, from 2026 | USD 1,000 | "by striking "$300 ($600" and inserting "$1,000 ($2,000"" (the old amounts were USD 300 and USD 600) |
| Non-itemizer charitable deduction, joint return, from 2026 | USD 2,000 | same sentence |
| Floor for individuals who itemize, from 2026 | 0.5 percent | "exceeds 0.5 percent of the taxpayer's contribution base" |
| Cash gifts to public charities, limit | 60 percent | "60 percent of the taxpayer's contribution base for the taxable year" |
| Corporate floor, from 2026 | 1 percent | "exceeds 1 percent of the taxpayer's taxable income for the taxable year" |
| Corporate ceiling, from 2026 | 10 percent | "does not exceed 10 percent of the taxpayer's taxable income for the taxable year" |
| Item | 2026 value | Note |
|---|---|---|
| Source | all figures below | https://www.irs.gov/pub/irs-drop/rp-25-32.pdf |
| Estate and gift basic exclusion amount, 2026 | USD 15,000,000 | "increasing the basic exclusion amount to $15,000,000 for calendar year 2026" |
| Annual gift exclusion, per donee | USD 19,000 | "the first $19,000 of gifts to any person" |
What to do: an itemizer should bunch gifts into one year so more of the total clears the 0.5 percent floor. A non-itemizer should keep receipts for cash gifts up to the new amount. Review estate plans against the 2026 exclusion amount.
The cap on itemized state and local tax (SALT) deductions rose for taxable years beginning in 2025 and 2026 to the amounts in the table below (section 70120, taxable years beginning after 31 December 2024). For taxable years beginning after 2026 and before 2030 the cap is 101 percent of the prior year's cap, so it rises a little each year from 2027 to 2029. For taxable years beginning after 2029 the cap is again USD 10,000. A married person filing separately gets half the cap and half the phase-down threshold. The cap is reduced by 30 percent of MAGI above a threshold, but never below USD 10,000. This is a reduction of the excess, not a cliff: between the threshold and the point where the floor is reached, each extra dollar of MAGI cuts the cap.
For taxable years beginning after 31 December 2025 an individual's itemized deductions are reduced by 2/37 of the lesser of the itemized deductions or the taxable income (plus itemized deductions) above the start of the 37% bracket (section 70111). This applies after other limits.
State pass-through entity tax elections are covered in us-pte-state-matrix.
| Item | Value | Note |
|---|---|---|
| Source | all figures below | https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm |
| SALT cap, taxable years beginning in 2025 | USD 40,000 | "in the case of any taxable year beginning in calendar year 2025, $40,000" |
| SALT cap, taxable years beginning in 2026 | USD 40,400 | "in the case of any taxable year beginning in calendar year 2026, $40,400" |
| SALT cap, 2027 to 2029 | 101 percent of the prior year's cap | "after calendar year 2026 and before 2030, 101 percent of the dollar amount" |
| SALT cap from 2030 | USD 10,000 | "in the case of any taxable year beginning after calendar year 2029, $10,000" |
| Phase-down rate on MAGI over the threshold | 30 percent | "reduced by 30 percent of the excess (if any) of the taxpayer's modified adjusted gross income over the threshold amount" |
| Phase-down threshold, MAGI, 2025 | USD 500,000 | "in the case of any taxable year beginning in calendar year 2025, $500,000" |
| Phase-down threshold, MAGI, 2026 | USD 505,000 | "in the case of any taxable year beginning in calendar year 2026, $505,000" |
| Floor: the phase-down cannot take the cap below | USD 10,000 | "shall not result in the applicable limitation amount being less than $10,000" |
What to do: check which side of the 2026 phase-down threshold MAGI will fall, consider timing income and state tax payments around it, consider a state pass-through entity tax election, and model the 2/37 limit before relying on a large itemized deduction.
| Item | Value | Note |
|---|---|---|
| Source | all figures below | https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm |
| Remittance transfer excise tax, transfers after 31 December 2025 | 1 percent | "a tax equal to 1 percent of the amount of such transfer" |
| Wagering losses deductible, from 2026 | 90 percent | "shall be equal to 90 percent of the amount of such losses" |
| AMT exemption phase-out rate, from 2026 | 50 percent | "by substituting '50 percent' for '25 percent'" |
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