A detailed guide to the major individual, business, benefits, and international changes now in force, and what taxpayers should do about them
By Jessica I. Marschall, CPA | President and CEO, Marschall Accounting Services LLC | August 2026
The One Big Beautiful Bill Act, enacted as Public Law 119-21 on July 4, 2025, changed more of the Internal Revenue Code in a single statute than any legislation since the Tax Cuts and Jobs Act of 2017, in my opinion. Taxpayers and practitioners spent the recent filing season absorbing the provisions that applied to 2025 returns, but a substantial second wave of changes became effective for the first time in tax years beginning after December 31, 2025. Other provisions that touched 2025 now operate differently in 2026, and the one-year transition relief that softened several reporting requirements has expired. This article catalogues the significant OBBBA provisions in effect for 2026, drawing on the framework set out by Wolters Kluwer principal federal tax analyst Mark Luscombe in Accounting Today and supplemented by guidance from national law and accounting firms, the Tax Foundation, charitable sector analysts, and the American Medical Association. It is intended as a comprehensive reference for individuals, business owners, employers, and their advisors.
Part I: Individual Provisions
Charitable Contributions: Three Structural Changes
The charitable deduction underwent its most significant redesign in decades. First, for tax years beginning after December 31, 2025, taxpayers who claim the standard deduction may nonetheless deduct qualifying cash charitable contributions of up to $1,000 for single filers and $2,000 for married couples filing jointly. The deduction is taken below the line, after adjusted gross income is computed, and applies only to cash gifts made directly to public charities described in Section 170(b)(1)(A); gifts to donor-advised funds and certain supporting organizations do not qualify. Second, itemizers now face a floor: charitable contributions are deductible only to the extent total contributions exceed 0.5 percent of the taxpayer’s contribution base, generally adjusted gross income. A taxpayer with $200,000 of adjusted gross income therefore has a $1,000 floor, meaning the first $1,000 of charitable contributions generally produces no current-year deduction. Special carryforward rules may apply when the taxpayer also has contributions carried forward under an applicable percentage limitation. Third, in a narrower provision, the limit on deductions for expenses related to subsistence bowhead whaling activities by Alaska Natives increased from $10,000 to $50,000. Planning responses include bunching multiple years of gifts into one year, donating appreciated property rather than cash, and, for IRA owners aged 70 and one half or older, using qualified charitable distributions of up to $111,000 in 2026, which bypass the floor entirely by excluding the distribution from income.
The Overall Itemized Deduction Limitation
Effective for tax years beginning after December 31, 2025, taxpayers whose income reaches the 37 percent bracket generally receive no more than a 35 percent marginal federal income tax benefit from affected itemized deductions. The mechanism reduces itemized deductions by two thirty-sevenths of the lesser of total itemized deductions or taxable income above the 37 percent threshold, which for 2026 begins at $640,600 for single filers and $768,700 for joint filers. This limitation permanently replaces the former Pease phase-out and applies after all other restrictions, including the new charitable floor. Top-bracket taxpayers with large deductions should model the combined effect before committing to major charitable gifts or discretionary deductible expenses.
Permanent Rates, the 2026 Standard Deduction, and the Senior Deduction
Although technically an extension rather than a new provision, the permanence of the individual rate structure frames every other 2026 decision. The 10, 12, 22, 24, 32, 35, and 37 percent brackets no longer face a sunset. The standard deduction for 2026 is $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household, indexed going forward. Taxpayers aged 65 and older may also claim the temporary bonus deduction of $6,000 per qualifying individual, which phases out above $75,000 of income for single filers and $150,000 for joint filers and expires after 2028. This deduction, frequently mischaracterized as an exemption of Social Security benefits, does not change the taxation of Social Security itself.
The State and Local Tax Deduction in 2026
The SALT cap, fixed at $10,000 since 2018, rose to $40,000 in 2025 and stands at $40,400 for 2026, increasing one percent annually through 2029 before reverting to $10,000 in 2030. The enhanced cap begins to phase down for taxpayers with modified adjusted gross income above $505,000 in 2026, returning high earners to an effective $10,000 limit. Combined with the higher cap, many homeowners who abandoned itemizing years ago should re-run the itemization analysis for 2026. Pass-through entity tax elections, which remain fully available, continue to provide a workaround at the entity level for owners of partnerships and S corporations in high-tax states.
Estate and Gift Tax Exclusion
For decedents dying and gifts made after December 31, 2025, the estate and gift tax exclusion is set at $15 million per person, or $30 million for a married couple, with inflation indexing in later years. The annual gift exclusion is $19,000 per recipient for 2026. Families whose estate plans were drafted around the previously scheduled reduction of the exemption should revisit their documents, reconsider the balance between lifetime gifting and retaining assets for a basis step-up, and confirm adequate estate liquidity.
New One Percent Excise Tax on Overseas Remittances
A new one percent excise tax applies to certain remittance transfers made after December 31, 2025. The tax reaches transfers of cash and similar physical instruments sent abroad, and remittance providers bear collection responsibilities. Individuals who regularly send funds to family members overseas should understand which transfer channels trigger the tax.
Trump Accounts Become Operational
The new tax-favored savings accounts for children, established through an election on Form 4547, could not officially commence operations until July 4, 2026, even though eligible children born from 2025 through 2028 qualify for a one-time $1,000 federal contribution. Beginning in 2026, annual contributions of up to $5,000 may be made for qualifying children under age 18. Annual contributions from individuals and employers are generally subject to the $5,000 limit, with employer contributions limited to $2,500 on a basis that is not taxable to the employee. The federal pilot contribution and certain qualified general contributions from governments and nonprofit organizations are excluded from the $5,000 annual limit. The IRS has issued proposed regulations clarifying the gift tax treatment of contributions, and families should coordinate these accounts with existing 529 plans and custodial arrangements.
529 Plan Expansion for K-12 Expenses
While several OBBBA expansions of qualified 529 plan distributions became available on July 4, 2025, the increase in the annual limit for K-12 expenses from $10,000 to $20,000 took effect for tax years beginning after December 31, 2025. Families using 529 plans for elementary and secondary tuition and newly eligible expense categories should update their distribution planning accordingly.
Gambling Loss Limitation
For tax years beginning after 2025, gambling losses are deductible only up to 90 percent of losses incurred, and only to the extent they do not exceed gambling winnings. The provision creates the possibility of taxable income even for a taxpayer who breaks even across a year of wagering. Congress has debated repealing the limitation but has not done so, and taxpayers with significant gambling activity should maintain meticulous session records.
New Itemized Deduction for Educator Expenses
Beginning in tax years after 2025, educators may claim an itemized deduction for qualifying out-of-pocket classroom expenses in addition to the continuing above-the-line deduction. Teachers who itemize can now capture expenses beyond the above-the-line cap that previously went unrewarded. The expense categories qualifying for the two deductions are not identical, however, so educators should not simply duplicate the same expenditures on both schedules.
Dependent Care Assistance and the Child and Dependent Care Credit
Two family-related enhancements took effect together. The annual exclusion for employer-provided dependent care assistance increased from $5,000 to $7,500, or $3,750 for married individuals filing separately, although employer adoption of the higher limit is optional and may require plan amendments. Separately, the maximum Child and Dependent Care Credit percentage rose from 35 percent to 50 percent of qualifying expenses for lower-income taxpayers, with the percentage phasing down as income rises. Working families should review their elections during open enrollment and coordinate the exclusion with the credit, since the same expenses cannot support both.
High-Deductible Health Plans and Direct Primary Care
Effective after 2025, bronze and catastrophic plans purchased on the individual marketplace may be treated as high-deductible health plans, preserving health savings account eligibility for their enrollees. Also effective after 2025, individuals covered by a high-deductible health plan may participate in a direct primary care arrangement without forfeiting HSA eligibility, subject to monthly fee limits. The telehealth safe harbor permitting pre-deductible telehealth coverage was separately made permanent.
Education Credits Require a Social Security Number
Effective after 2025, a Social Security number is required for any student with respect to whom the American Opportunity Tax Credit or Lifetime Learning Credit is claimed. Families of students who hold only individual taxpayer identification numbers lose access to these credits and should evaluate alternative education funding strategies.
Temporary Deductions Continuing Through 2028
Four headline deductions that began in 2025 remain available in 2026: the deduction of up to $25,000 for qualified tips, the deduction of up to $12,500 ($25,000 for joint filers) for the premium portion of qualified overtime, the $6,000 senior deduction described above, and the deduction of up to $10,000 for interest on loans financing new vehicles assembled in the United States. Each phases out at higher incomes and each expires after 2028, so taxpayers who qualify should treat the next three years as a closing window, particularly when timing Roth conversions or other income recognition around these deductions.
Residential Clean Energy Incentives Have Ended
The OBBBA accelerated the sunset of the Inflation Reduction Act’s residential energy credits. Homeowners can no longer look to federal credits for solar installations, energy-efficient HVAC systems, windows, or similar improvements, and the credits for new and used clean vehicles terminated in 2025. Home improvement and vehicle decisions in 2026 should be evaluated on their economics and any available state incentives alone.
Part II: Business and Corporate Provisions
Qualified Tip and Overtime Reporting: The Transition Period Is Over
Although the tip and overtime deductions took effect for employees in 2025, the IRS granted employers a one-year grace period for separately reporting these amounts. That relief has ended. For 2026, employers must separately report qualified tips and qualified overtime compensation on Form W-2, using Box 12 Code TP for qualified tips and Code TT for qualified overtime, along with the occupation codes identified in IRS guidance. Only overtime required by the Fair Labor Standards Act qualifies, and only the premium portion above the regular rate; state-law daily overtime and contractual premiums generally do not. Qualified tips must be voluntary, and mandatory service charges are excluded, while amounts received through tip-sharing arrangements qualify. Payroll, timekeeping, and point-of-sale systems must capture and code these amounts throughout the year, because reconstructing them at year-end is rarely feasible. Employers should also monitor state conformity, since more than twenty states have introduced legislation either adopting or decoupling from the federal deductions.
Corporate Charitable Contribution Floor
For tax years beginning after December 31, 2025, a corporation may deduct charitable contributions only to the extent total contributions exceed one percent of taxable income, while the ten percent ceiling is retained. Corporations that give below the threshold generally receive no current-year deduction for those contributions, although a special carryforward rule can preserve amounts disallowed by the floor in a year in which contributions also exceed the ten percent ceiling. The new floor argues for consolidating gifts into fewer, larger commitments, managing giving proactively against the taxable income forecast, and considering in-kind contributions of inventory and equipment as part of a coordinated philanthropic strategy. Fiscal-year corporations should confirm how the effective date maps onto their year.
Section 179 Expensing and Bonus Depreciation
The Section 179 expensing limit is $2.56 million for tax years beginning in 2026, with the deduction beginning to phase out when qualifying Section 179 property placed in service exceeds $4.09 million. Both amounts are indexed for inflation, and the 2026 expensing cap for qualifying sport utility vehicles is $32,000. One hundred percent bonus depreciation, restored and made permanent for qualified property placed in service after January 19, 2025, continues to apply, and the special expensing regime for qualified film and television productions expanded to cover qualified sound recording productions commencing in tax years ending after July 4, 2025, with bonus depreciation extended to qualified sound recordings produced after 2025. Because bonus depreciation no longer phases down, the equipment decision has shifted from beating a deadline to choosing the year in which the deduction produces the greatest benefit, in coordination with the qualified business income deduction and the permanent excess business loss limitation.
Qualified Business Income Deduction Enhancements
The 20 percent qualified business income deduction is now permanent, with expanded phase-in ranges that restore or enlarge the deduction for many owners previously phased out. For 2026, the phase-in ranges run from $201,750 to $276,750 for single filers and from $403,500 to $553,500 for joint filers, and a new $400 minimum deduction applies, subject to inflation adjustment, to taxpayers with at least $1,000 of qualifying QBI from a trade or business in which the taxpayer materially participates. S corporation owners should revisit the interaction between reasonable compensation and the deduction, since salary levels directly reduce QBI-eligible income.
Research Expensing, Business Interest, and Qualified Production Property
Three additional business provisions deserve attention in any 2026 planning conversation. First, new Section 174A permanently restores immediate expensing for domestic research or experimental expenditures paid or incurred in tax years beginning after December 31, 2024, replacing the mandatory five-year amortization regime that generally applied to domestic research expenditures for tax years beginning after December 31, 2021 and before January 1, 2025. Retroactive relief is available to certain eligible small businesses, while other taxpayers may elect accelerated recovery of remaining unamortized domestic research expenditures; foreign research remains subject to fifteen-year amortization. Second, the Section 163(j) business interest limitation is once again computed on an EBITDA basis rather than the stricter EBIT basis, permanently, which enlarges the interest deduction for many leveraged businesses. Third, new Section 168(n) permits elective 100 percent expensing of qualified production property, generally certain nonresidential real property used in qualified production activities and meeting statutory construction and placed-in-service windows, a provision manufacturers contemplating domestic facility investment should evaluate closely.
Employer Credits for Childcare and Paid Leave, and a Lost Meals Deduction
The employer-provided childcare credit was significantly expanded beginning in 2026. The maximum annual credit increased from $150,000 to $500,000, or $600,000 for an eligible small business. The credit rate for qualified childcare expenditures increased from 25 percent to 40 percent, or 50 percent for eligible small businesses, while the rate for qualified childcare resource and referral expenditures remains 10 percent. In addition, the paid family and medical leave credit, worth up to 25 percent of wages paid for qualifying leave, was made permanent, allowing employers to build these benefits into long-term compensation planning rather than treating them as temporary incentives. Moving in the opposite direction, beginning in 2026 the general deduction for meals provided for the employer’s convenience and through certain employer-operated eating facilities is eliminated, subject to specified statutory exceptions, including exceptions for certain food-service businesses; the change should be reflected in benefits budgeting.
Employee Compensation Deduction Limit: New Aggregation Rule
After December 31, 2025, a new aggregation rule applies to the $1 million limitation on the deduction of compensation paid to covered employees of publicly held corporations. Compensation paid by all members of a controlled group is aggregated in applying the limit, closing a structure in which compensation could be spread across affiliated entities. Affected corporations should inventory covered employees across the group and model the expanded disallowance.
International Tax: GILTI Becomes NCTI, FDII Becomes FDDEI
The most substantial business changes for multinationals arrived in the international provisions, generally applicable to tax years beginning after December 31, 2025. The global intangible low-taxed income regime has been renamed net CFC tested income, and the change is far more than cosmetic. The ten percent qualified business asset investment carve-out is eliminated, pulling more foreign earnings into the United States tax base, particularly for capital-intensive foreign operations. The Section 250 deduction for NCTI is 40 percent, producing a 12.6 percent United States corporate tax rate before foreign tax credits. The deemed-paid foreign tax credit percentage increases from 80 percent to 90 percent, which can further reduce residual United States tax depending on the foreign effective tax rate and applicable limitations. Expense allocation rules for the NCTI foreign tax credit limitation were also relaxed, with interest and research expenses no longer allocated against the basket. In parallel, foreign-derived intangible income has been renamed foreign-derived deduction eligible income, likewise losing its tangible-asset carve-out and gaining a broader income base, with a 33.34 percent deduction corresponding to an effective United States rate of approximately 14 percent, and the base erosion and anti-abuse tax rate is permanently set at 10.5 percent. United States multinationals should model their structures under the new rules, since the balance of assets and income between domestic and foreign locations now drives the outcome more directly than before.
Publicly Traded Partnerships
An expansion of the definition of qualifying income for publicly traded partnerships is effective after 2025, adding categories related to energy and natural resource activities. Sponsors and investors should reassess whether structures previously ineligible for partnership treatment now qualify.
Residential Construction Contracts
For contracts entered into in tax years beginning after 2025, OBBBA expands the exception from the percentage-of-completion method for home construction contracts by broadening the statutory definition of qualifying home construction activity. Residential builders whose contracts previously fell outside the home construction contract exception should determine whether their projects now qualify for an exempt contract method, including the completed contract method where otherwise permissible. A change in treatment may constitute an accounting method change and can produce significant timing differences for projects spanning multiple tax years.
Information Reporting Thresholds
Two reporting changes reduce compliance burdens for 2026. For payments made after December 31, 2025, the reporting threshold for many payments reported on Forms 1099-MISC and 1099-NEC increased from $600 to $2,000, indexed for inflation after 2026, although certain category-specific thresholds are unchanged, including the $10 threshold for royalties and the $600 threshold for gross proceeds paid to attorneys. The OBBBA also retroactively restored the $20,000 gross receipts and 200 transaction thresholds for Form 1099-K reporting by third-party settlement organizations, ending the scheduled descent toward a $600 threshold; the IRS had selected $2,500 for 2025 and imposed no penalty for overreporting where systems were not adjusted in time. Businesses should recalibrate vendor tracking to the new $2,000 threshold while remembering that all income remains taxable whether or not an information return arrives.
Clean Energy Phase-Outs Continuing Through 2026
The phase-out of Inflation Reduction Act incentives continues on several fronts this year. The Section 179D energy efficient commercial building deduction expires for property beginning construction after June 30, 2026, and the alternative fuel vehicle refueling property credit terminated after June 30, 2026. For the clean electricity production credit, the restrictions on facilities receiving material assistance from prohibited foreign entities apply to facilities beginning construction after December 31, 2025. The advanced manufacturing investment credit increased from 25 percent to 35 percent for property placed in service after December 31, 2025. For the clean fuel production credit, revised emissions rate determinations apply to tables published for tax years beginning after December 31, 2025, and the special credit rates for sustainable aviation fuel terminated for fuel produced after that date. Businesses with pending energy-related projects face hard construction and placed-in-service deadlines that should drive 2026 project schedules.
Part III: Benefits, Employment, and Health Care Provisions
Benefit Plan Administration in 2026
Plan sponsors have several operational items this year. The dependent care assistance limit increase to $7,500 may require plan amendments and payroll updates. The permanent telehealth safe harbor for high-deductible health plans should be confirmed in plan documents. In a related development under the SECURE 2.0 Act rather than the OBBBA, the IRS confirmed that mandatory Roth treatment of catch-up contributions for participants with prior-year FICA wages above the indexed threshold applies for plan years beginning in 2026, requiring coordination among payroll vendors, recordkeepers, and counsel. Employers may also make limited tax-favored contributions to employees’ Trump accounts, a benefit worth evaluating within the total rewards framework.
Immigration Fees and Worksite Enforcement
The OBBBA established new and increased immigration-related fees, several of which are mandatory and non-waivable, raising per-case costs that employers should build into 2026 budgets. The law also supports a policy environment of intensified worksite enforcement, and employers should ensure that Form I-9 completion, reverification, document retention, and internal response protocols are standardized and audit-ready.
Health Coverage Changes Affecting Patients and Practices
Several health-related provisions took effect in January 2026 with consequences that reach employers, medical practices, and households. The enhanced federal matching incentive for states newly adopting Medicaid expansion ended, and the law imposes work requirements and more frequent eligibility redeterminations for Medicaid expansion enrollees in the coming years. On the Affordable Care Act marketplace side, the caps that protected lower-income enrollees from repaying excess advance premium tax credits were removed, premium tax credits are no longer available for enrollments through the income-based special enrollment period, and eligibility for premium tax credits was narrowed among lawfully present noncitizens. Separately, new federal student loan caps for professional students, including a $50,000 annual and $200,000 aggregate limit with an overall $257,500 borrowing ceiling, take effect July 1, 2026; these limits generally apply to borrowers subject to the post-July 1, 2026 rules, and statutory transition exceptions preserve prior limits for certain students already enrolled and borrowing in an existing program. The American Medical Association projects substantial coverage losses over the coming decade, and employers should anticipate employee questions while medical and dental practices should prepare for shifts in payer mix.
Part IV: Putting It Together
Planning Priorities for the Remainder of 2026
The 2026 landscape rewards deliberate sequencing. Individuals should re-test the itemization decision under the higher SALT cap, apply bunching and appreciated property strategies to charitable giving above the new floor, position income to preserve the temporary tip, overtime, and senior deductions, and revisit estate documents in light of the $15 million exclusion. Business owners should confirm that payroll systems produce compliant W-2 reporting for tips and overtime, time equipment purchases against the permanent expensing regime, model the qualified business income deduction against reasonable compensation, adjust vendor systems to the new 1099 thresholds, and, for multinationals, restructure around the NCTI and FDDEI rules. Employers should complete benefit plan amendments, budget for immigration costs, and prepare communications on the health coverage changes their workforces will encounter. The Tax Foundation maintains a publicly available OBBBA tax calculator that individuals may find useful for estimating their own liability under the new rules. As always, the interaction of these provisions with state conformity rules and each taxpayer’s particular facts determines the outcome, and proactive planning during the year, rather than reaction at filing time, captures the value the statute makes available.
Marschall Accounting Services LLC provides federal and state tax advisory, compliance, and planning services to individuals, businesses, and fiduciaries nationwide. Jessica I. Marschall, CPA, is President and CEO of Marschall Accounting Services LLC, The Green Mission Inc., Probity Appraisal Group, and GM-ESG. This article is for informational purposes only and does not constitute tax, legal, or accounting advice; readers should consult their own advisors regarding their particular circumstances.
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