As we move closer to 2026, taxpayers are beginning to feel the impact of recently passed tax legislation that builds on the foundation of the 2017 Tax Cuts and Jobs Act. This new law extends several key provisions, introduces temporary deductions, and adjusts certain long standing rules. While some changes are already in effect, others begin in 2026, making early planning especially important.
Extension of Lower Tax Rates and Standard Deductions
One of the most significant outcomes of this legislation is the continuation of lower individual income tax rates that were originally scheduled to expire at the end of 2025. By extending these provisions, Congress avoided automatic tax increases for many households. The current seven tax brackets remain in place, providing stability for tax planning.
The expanded standard deduction also remains intact. For 2025, the standard deduction is approximately $15,750 for single filers and $31,500 for married couples filing jointly. These amounts will continue to increase annually based on inflation.
Expanded State and Local Tax Deduction
Another major change is the temporary expansion of the state and local tax deduction. From 2025 through 2029, taxpayers who itemize may deduct up to $40,000 in qualifying state and local taxes. This is a substantial increase from the previous $10,000 cap. The benefit begins to phase out for higher income households and is scheduled to revert to the lower limit in 2030.
New Temporary Deductions for Workers and Retirees
Several new deductions are designed to provide relief to working individuals and retirees. Eligible taxpayers may deduct a portion of tip income and overtime pay, subject to income limitations. There is also a temporary deduction for interest paid on certain US assembled vehicle loans. In addition, taxpayers age 65 and older may qualify for an extra senior deduction through 2028. Each of these provisions is temporary and requires careful coordination to maximize the benefit.
Updates Affecting Families and Children
Families continue to receive support through modest adjustments to the Child Tax Credit, which increases slightly per qualifying child. A new savings account option is also available for children born between 2025 and 2028. These accounts are designed to encourage long term savings and may be used in the future for education, housing, or retirement related expenses.
Small Business and Investment Related Tax Benefits
Business owners see meaningful long term advantages under this law. The Qualified Business Income deduction is now permanent and has been modestly increased. Bonus depreciation remains at one hundred percent, allowing businesses to immediately expense qualifying investments. The corporate tax rate established in prior legislation remains unchanged, providing continued certainty for long term planning.
Changes to Student Loans and Education Provisions
Outside of the tax code, the law introduces adjustments to federal student loan programs. Certain repayment options are being phased out, borrowing limits are tightening for graduate students and parents, and deferment options are more limited. Unless future legislation intervenes, student loan forgiveness may once again be treated as taxable income beginning in 2026.
Other Notable Tax Changes to Be Aware Of
Additional provisions include changes to gambling loss deductions, which will be limited beginning in 2026, and updates to charitable contribution rules. For the first time, taxpayers who do not itemize may deduct a limited amount of cash charitable contributions, while higher income taxpayers may see reduced tax benefits from large donations.
Why Proactive Tax Planning Matters Going Forward
With many provisions phasing in and out over the next several years, proactive tax planning is essential. These changes create both opportunities and challenges, and thoughtful planning today can help avoid surprises tomorrow. Working closely with a trusted tax advisor can help ensure that decisions made now align with long term financial goals and take full advantage of available tax strategies.