Upcoming tax law changes in 2026

The 2026 filing season is the first full year shaped by the One Big Beautiful Bill Act (OBBBA), passed on July 4, 2025. From shifted brackets and higher standard deductions to sunsetting clean energy incentives and extended business provisions, many rules familiar to taxpayers now come with new dollar amounts, timelines, and eligibility tests that make early planning especially important.

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IRS adjustments for 2026

401(k) and Roth changes

One Big Beautiful Bill Act (OBBBA) changes

Sunsetting clean energy tax incentives

How to stay aware of upcoming tax law changes

IRS adjustments for 2026

The IRS’s 2026 inflation adjustments arrive on top of significant structural changes from the One Big Beautiful Bill Act, reshaping how much income is taxed and how much is shielded. Key dollar amounts for the standard deduction, AMT, the earned income tax credit, and the estate tax credit all increased for the 2026 tax year.

Rise in standard deductions

For tax year 2026, the IRS inflation adjustments, as modified by OBBBA, raise the standard deduction again.

$16,100 for single filers and married filing separately
$32,200 for married couples filing jointly and surviving spouses
$24,150 for heads of households

These amounts apply to 2026 income tax returns filed in 2027 and reflect both regular inflation indexing and changes embedded in OBBBA’s extension of the post‑TCJA structure of the individual income tax.

For tax year 2025, the new OBBBA standard deductions are:

$15,750 for single filers and married filing separately
$31,500 for married filing jointly and surviving spouses
$23,625 for heads of households

According to Shaun Hunley, Executive Editor at Thomson Reuters, “Many taxpayers will continue to claim the standard deduction under the OBBBA, which generally eases the administrative burden for tax preparers. However, given the OBBBA’s increase to the state and local tax (SALT) deduction, some taxpayers may go back to itemizing in 2026.”

Alternative minimum tax (AMT) exemption

The 2026 AMT exemption amounts also increase. For tax year 2026, the exemption is $90,100 for single filers and $140,200 for married couples filing jointly. The phase‑out thresholds rise as well: for joint filers, the exemption begins to phase out at $1,000,000 of alternative minimum taxable income, while for single filers it phases out starting at $500,000.

Earned income tax credit

The earned income tax credit (EITC) for 2026 increases slightly across all family sizes. For example, the maximum EITC for taxpayers with no qualifying children rises to $664, while the maximum for those with three or more qualifying children increases to $8,231. Phase‑in and phase‑out ranges are also adjusted upward, so more low‑to‑moderate‑income workers can qualify for at least a partial credit.

These adjustments work in tandem with OBBBA’s broader focus on workers’ deductions and credits, such as new rules for tips and overtime pay to provide targeted relief through the income tax system.

Estate tax credits

The OBBBA’s amendments and inflation adjustments also affect the federal estate tax credit for 2026. The basic exclusion amount increases to $15 million per individual for decedents dying in 2026 (up from $13,990,000 for 2025 decedents).

While many taxpayers are far below these thresholds, high‑net‑worth families should reassess existing estate plans, especially those drafted under earlier, lower exclusion amounts, to determine whether formula clauses still operate as intended.

What isn’t changing?

Despite all the adjustments, some structural pieces remain in place for 2026.

The seven‑bracket individual income tax rate structure continues for 2026 without a rate increase, as OBBBA keeps the TCJA‑era schedule in place rather than letting it sunset after 2025.
The basic choice between claiming the standard deduction or itemizing deductions remains unchanged in form, even though the standard deduction amounts are higher.
The alternative minimum tax (AMT) still functions as a parallel system with its own exemption amounts and preference item rules.
Core definitional rules—such as who qualifies as a dependent for personal credits—remain the same for 2026, even though many dollar thresholds are updated for inflation.
As under the TCJA, the OBBBA prevents taxpayers from claiming miscellaneous itemized deductions, such as unreimbursed employee expenses and tax preparation fees.

401(k) and Roth changes

The IRS also announced higher contribution limits for retirement plans in 2026.

Elective deferral limit for 401(k), 403(b), most 457 plans, and the Thrift Savings Plan: $24,500 in 2026 (up from $23,500 in 2025)
Catch‑up contribution limit for employees age 50 and over in those plans: $8,000 in 2026 (up from $7,500 in 2025)
Traditional and Roth IRA annual contribution limit: $7,500 in 2026
IRA catch‑up contribution for those age 50 and over: $1,100 in 2026 (increased under an amendment to the SECURE 2.0 Act)

Income phase‑out ranges for deductible traditional IRA contributions and for Roth IRA eligibility are also adjusted for inflation, potentially opening the door for some households that were just above prior thresholds to contribute directly.

For employers and plan sponsors, these new limits may require updates to plan communications, payroll systems, and deferral election forms ahead of the 2026 plan year. For individuals, the higher limits create planning opportunities to coordinate 401(k), IRA, and taxable investment contributions, especially when combined with new OBBBA‑era rules that affect overall after‑tax income and deductions.

One Big Beautiful Bill Act (OBBBA) changes

OBBBA is now fully in effect for the 2026 tax year and reshapes both individual and business planning.

Business tax law changes

On the business side, one of the most widely discussed changes is the revival of 100% bonus depreciation. Qualified property placed in service within the specified time window may again be fully expensed in the year of acquisition, restoring a powerful timing benefit that had been phasing down under prior law.

In addition, Section 179 expensing limits are increased, allowing small and mid‑sized businesses more flexibility to expense equipment, machinery, and certain improvements rather than depreciating them over time. For tax year 2025, the Section 179 expensing limit is $2.5 million, and in 2026, it will be $2,560,000.

Pass‑through business owners also see renewed opportunity via OBBBA’s treatment of the qualified business income (QBI) deduction under Section 199A. The Act effectively stabilizes the availability of the QBI deduction rather than allowing it to vanish after 2025, though it retains guardrails such as limitations for specified service trades or businesses at higher income levels.

“By making the QBI deduction permanent, the OBBBA added more certainty when implementing tax planning strategies for small business owners,” Hunley said. “On top of that, the OBBBA added a $400 minimum QBI deduction for 2026, assuming the taxpayer has at least $1,000 of QBI. That will help those historically limited by income or other considerations.”

Coupled with enhanced bonus depreciation and Section 179 rules, the sustained QBI deduction makes entity choice, compensation levels, and capital expenditure timing central topics in 2026 tax planning discussions for S corporations, partnerships, and sole proprietors.

Individual tax law changes

For individuals, OBBBA touches a broad array of deductions and credits. The child tax credit (CTC) is expanded relative to pre‑OBBBA law, including a higher maximum credit amount of $2,200 per qualifying child. Additionally, starting in tax year 2025, up to $5,000 of the adoption credit may be refundable.

Seniors age 65 and older gain targeted relief through a “senior deduction” structure layered on top of the regular standard deduction. These provisions are tied to income thresholds and filing status, so older taxpayers need to review filing choices carefully.

OBBBA also reshapes the state and local tax (SALT) deduction. The Act increases the SALT cap from $10,000 to $40,000 starting with the 2025 tax year, with a scheduled 1% annual increase through 2029 before reverting to $10,000 in 2030. High‑income taxpayers must also contend with phaseouts beginning for individuals with modified adjusted gross income above $500,000. Those living in high‑tax states may find that more of their property and income taxes are deductible in 2026 than under prior law, but the benefit tapers off at higher incomes, requiring careful modeling for estimated tax and withholding decisions.

Collectively, these changes increase the need for accurate recordkeeping and contemporaneous documentation, as the IRS is expected to pay close attention to compliance in these areas.

Sunsetting clean energy tax incentives

OBBBA significantly reshapes the lifecycle of several clean energy tax incentives that were originally expanded under the Inflation Reduction Act. The law advanced several expiration dates. For tax professionals and project sponsors, the main takeaway is timing: credits that once seemed available for many years may now have shorter windows or stricter qualifying criteria.

Residential and commercial clean energy credits

Energy Efficient Home Improvement Credit (Section 25C): Expires after December 31, 2025.
Residential Clean Energy Credit (Section 25D): Expires after December 31, 2025.
New Energy Efficient Home Credit (Section 45L): Expires after June 30, 2026.
Energy efficient commercial buildings deduction (Section 179D): Expires after June 30, 2026.

Clean vehicle credits

New Clean Vehicle Credit (Section 30D): Expires after September 30, 2025.
Used Clean Vehicles Credit (Section 25E): Expires after September 30, 2025.
Alternative Fuel Vehicle Refueling Property Credit (Section 30C): Expires after June 30, 2026.
Qualified Commercial Clean Vehicle Credit (Section 45W): Expires after September 30, 2025.

Many clean energy incentives are now on a short clock. With such compressed timelines, taxpayers and project sponsors need to treat 2025-2026 as a final window for many projects and confirm that installation, placed‑in‑service dates, and other requirements line up with each credit’s specific sunset date.

“When it comes to expiring energy credits, communication is the key,” said Hunley. “Tax preparers will need to be proactive in reaching out to clients who may be interested in these types of credits. Clients don’t want to learn about the expiration of potentially valuable tax credits after the fact.”

How to stay aware of upcoming tax law changes

2025 illustrates how quickly tax law can move. Within a single year, OBBBA has changed individual, business, retirement, and energy‑related provisions, while the IRS has layered on new inflation adjustments and administrative guidance.

For practitioners, this means workflows and planning assumptions that were valid for 2024 or even early 2025 may not hold for returns filed in 2027. Keeping up-to-date with tax law changes is no longer a once‑a‑year exercise; it is a continuous process that must be woven into client service and internal training.

Tax professionals themselves say this is a pain point. In the Thomson Reuters Institute 2025 State of Tax Professionals Report, tax pros listed “Keeping up with tax law and government regulation” as a top challenge. That concern is magnified when a law as broad as OBBBA interacts with pre‑existing regimes like TCJA and traditional retirement and estate rules, on top of new guidance from the IRS that continues to arrive throughout the year.

Firms that treat OBBBA not just as a technical change but as a catalyst to upgrade research, training, and advisory processes will be better positioned to help clients make sound decisions.

To go deeper on the One Big Beautiful Bill Act and access resources like OBBBA TaxWatch training for CPE credits, webinars hosted by tax experts, special reports, and more, visit the Thomson Reuters OBBBA resource center.