Well, here we are, the special time of year that we all know and dread. . . tax time! While the immediate focus is no doubt currently on the 2025 tax year, now is a good time to do some preliminary planning for 2026 and factor in some of the changes that may impact your income tax.
Major Individual Tax Law Changes Beginning in 2026 Under OBBBA
The Tax Cuts and Jobs Act (TCJA) enacted in 2017 contained many temporary individual tax provisions scheduled to expire after 2025.
The One Big Beautiful Bill Act (OBBBA)—passed in 2025—prevents many of those expirations by making key TCJA changes permanent, while also modifying several other provisions.
(All points reflect provisions made permanent or modified by the OBBBA beginning after Dec. 31, 2025.)
- Income Tax Rates & Brackets
The 2026 sunset for TCJA’s individual tax brackets has been eliminated and the individual brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) are now permanent.
This eliminates the scheduled change back to the higher pre‑2018 rates. The 2026 brackets have also been increased from 2025 due to inflation adjustments and the brackets will continue to be indexed annually for inflation.
- Standard Deduction Enhancements
Most filers claim the standard deduction vs. itemizing. The standard deduction enhancements introduced in TCJA were scheduled to sunset in 2026. Under OBBBA, the higher standard deductions are now permanent.
The 2025 standard deductions are increased due to inflation adjustments as follows:
$16,100 for single filers, $32,200 for married filing jointly and $24,150 for heads of household. Note that deduction amounts will change annually due to inflation adjustments.
- New Senior Deduction
OBBBA introduces a temporary (available for tax years 2025–2028, impacting returns filed 2026–2029) additional deduction of up to $6,000 per qualified individual age 65+. The deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers). This deduction is available for those who use the standard deduction and those who itemize.
- Vehicle Loan Interest Deduction
New tax laws let you deduct up to $10,000 of interest paid on loans for new vehicles* purchased for personal use between 2025 and 2028. This deduction is available even if you don’t itemize your deductions. Used vehicles, leases, and refinanced loans are not eligible for this deduction.
The full $10,000 is deductible if your income is under $100,000 (or $200,000 if Married Filing Jointly). If your income is higher, the deduction is phased out.
*Car, SUV, van, truck or motorcycle under 14,000 lbs.
- State & Local Tax (SALT) Deduction
The SALT cap increases from $10,000 to $40,000 starting with the 2025 tax year. The cap is scheduled to increase 1% annually through 2029. In 2026 the deduction will be $40,400.
The SALT deduction will be phased out for high income taxpayers with modified adjusted gross income above $500,000. In 2030 the deduction reverts back to $10,000.
- Roth 401(k) Catch-Up Rule
401(k) participants age 50 and older who had wages exceeding $150,000 in 2025** will no longer be able to make tax-deductible catch-up contributions to their 401(k) account. The contributions will be deemed to be made on an after-tax basis to a Roth 401(k) account.
**The wage index will be increased by inflation annually.
Conclusion
With several significant tax law changes taking effect in 2026, now is the ideal time to move beyond tax compliance and toward proactive tax planning. Understanding how these provisions—from permanent tax brackets to new deductions and contribution rules—may impact your personal financial situation can help you make informed decisions well ahead of next year.
The BaldwinClarke team is here to help you navigate these changes, identify planning opportunities, and align your tax strategy with your long-term financial goals. We encourage you to reach out to your advisor to discuss how these updates may affect you and to begin planning with confidence for the years ahead.
Please note: Tax laws are complex and subject to change. This article is for informational purposes only and should not be considered tax advice.
Scott D. LaValley, CFP®, CVA®, MSFS, ChFC, CLU
Managing Director – Financial Planning
Baldwin & Clarke Advisory Services, LLC
Email: scott@baldwinclarke.com
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