Federal Tax Provisions Taking Effect in 2026
Now that the main portion of the 2026 filing season has concluded, it’s time to shift focus toward the federal tax law changes that will impact the 2026 tax year.
The One Big Beautiful Bill Act (HR 1), signed into law on July 4, 2025, introduced several significant updates that go into effect beginning in 2026. In addition, various provisions have been adjusted for inflation.
Below is a comprehensive breakdown of these changes.
One Big Beautiful Bill Act Provisions (Effective 2026)
Charitable Contribution Deduction for Non-Itemizers
- Taxpayers who do not itemize can claim a deduction for cash charitable contributions up to:
- $1,000 (Single)
- $2,000 (Married Filing Jointly)
- Cash contributions made to donor-advised funds (DAFs) do not qualify.
New Education Credit Requirement (Form 8863)
Beginning in 2026, both the American Opportunity Credit and the Lifetime Learning Credit will require:
- A valid Social Security Number (SSN) for both the taxpayer and the student.
Child and Dependent Care Credit (Form 2441)
- Credit percentage increases:
- Maximum: 50%
- Minimum: 35%
- The percentage decreases by 1% for every $2,000 increase in income.
Charitable Contribution Itemized Deduction Limitations
- Contributions must exceed 0.5% of AGI to be deductible.
- Total deductions are reduced by 0.5% of AGI.
- For taxpayers in the 37% tax bracket, deductions are capped at the 35% rate.
Educator Expense Deduction
- Up to:
- $350 (Single)
- $700 (Married Filing Jointly)
- Claimed as an adjustment to income on Schedule 1 (Form 1040).
- Additional qualifying expenses may be claimed as itemized deductions starting in 2026.
Qualified Business Income (QBI) Deduction
- Deduction is now permanent.
- Updated phase-out thresholds:
- $203,000 (Single)
- $406,000 (Married Filing Jointly)
- Minimum deduction:
- $400 for taxpayers with at least $1,000 in QBI.
Casualty Loss Deduction
- Expanded to include state-declared disaster areas, not just federally declared ones.
Moving Expense Deduction
- Certain members of the intelligence community can now deduct unreimbursed moving expenses using Form 3903.
Itemized Deduction Limitation (37% Tax Bracket)
Taxpayers in the highest tax bracket will see reduced itemized deductions calculated as:
- 2/37 of the lesser of:
- Total itemized deductions, or
- Taxable income + itemized deductions exceeding the 37% bracket threshold.
Gambling Loss Deduction
- Deduction limited to 90% of total gambling losses.
1099 Reporting Threshold
- Businesses must issue a Form 1099 when payments to an individual reach $2,000 or more annually.
- This threshold will increase annually based on inflation.
Individual Alternative Minimum Tax (AMT)
- Phase-out thresholds:
- $500,000 (Single)
- $1,000,000 (Married Filing Jointly)
- Phase-out rate increases to 50% (previously 25%).
Corporate Charitable Contribution Limit
- Deduction capped at 10% of taxable income.
- Contributions must exceed 1% of taxable income to qualify.
Inflation Adjustments for 2026
Mileage Rates
- Business: 72.5 cents per mile
- Medical: 20.5 cents per mile
- Charitable: 14 cents per mile
Standard Deduction
- $16,100 – Single
- $32,200 – Married Filing Jointly
- $24,450 – Head of Household
Additional Standard Deduction (Aged & Blind)
- $1,650
- $2,050 – Unmarried
Refundable Adoption Credit
- $5,120
IRA Contribution Limits
- $7,500 – Age 50 and under
- $8,600 – Over age 50
State and Local Tax (SALT) Deduction Limit
- Increased to $40,400
The 2026 tax year introduces a wide range of changes that will impact both individual and business taxpayers. From expanded credits and deductions to stricter limitations and reporting requirements, staying informed is essential for accurate tax preparation and strategic planning.
Tax professionals should begin preparing now to ensure compliance and maximize opportunities for their clients in the upcoming filing season.
