Each new year brings new and modified tax laws. As the end of 2026 approaches, tax preparer Maryann Reyes offers a rundown of the tax changes 2026 brought, and the tax changes 2027 will soon bring. The changes include numerous new and revised tax credits and deductions, altered tax brackets, and more.
What Taxpayers Should Know About 2026 and 2027
The One Big Beautiful Bill Act (OBBBA) passed in 2025, creating several new tax rules, some of which led to tax changes 2025 filers already know about, and some that will take effect in 2026 or 2027.
Notably, it made permanent the increased standard deduction and tax rates originally established by the 2017 Tax Cuts and Jobs Act and subsequently adjusted each year for inflation. Important: Washington will at some point in the future pass new rules that change these “permanent” rates—in government-lingo, “permanent” just means there’s no pre-set expiration date.
The OBBB added or altered a number of tax deductions and credits as well, though many of these are available only to taxpayers who meet specific income, filing status, and/or age requirements.
Don’t wait until you’re filing your 2026 tax forms in early 2027 to investigate these—in some cases, action must be taken before the end of 2026 to qualify.
Example: Under new 2026 rules, cash donations to charity of up to $2,000 (up to $1,000 for a single filer) can be deducted even by taxpayers who don’t itemize their returns, but those deductions must be made by December 31.
Tax Rate and Standard Deduction Changes
The federal income tax rates remain the same as they have been for nearly a decade—10%, 12%, 22%, 24%, 32%, 35%, and 37%—but the income thresholds that land taxpayers in each tax bracket are changing.
In 2026:
- The 10% bracket tops out at $24,800 for married couples filing jointly ($12,400 for single filers)
- The 12% bracket tops out at $100,800 ($50,400 for single filers)
- The 22% bracket tops out at $211,400 ($105,700 for single filers)
- The 24% bracket tops out at $403,550 ($201,775 for single filers)
- The 32% bracket tops out at $512,450 ($256,225 for single filers)
- The 35% bracket tops out at $768,700 ($640,600 for single filers)
- Income above the upper limit of the 35% bracket is taxed at 37%
The upper limits of the 10% and 12% brackets increased by about 4% from 2025, while the upper limits of the 22%, 24%, 32%, and 35% brackets increased by nearly 2.3%.
The 2027 brackets won’t be announced until autumn, but don’t expect any major tax reform here—Reyes anticipates modest increases comparable in size to those of 2026.
The standard deduction increased in 2026 as well, from…
- $31,500 to $32,200 for married filing jointly
- $15,750 to $16,100 for single filers
“If you’re looking at 2027, the increase will probably be similar,” says Reyes. “The increase for married filing jointly would be about another $700, which would make it around $32,900, but the final 2027 standard deduction remains to be seen.”
New twist for high earners: Starting in 2026, taxpayers in the 37% tax bracket are only allowed to deduct their itemized deductions at a maximum rate of 35%, not the 37% rate that would have applied in the past.
Credits and Deductions That Affect Families and Seniors
Several valuable tax credits and deductions related to children have been introduced or improved recently, as has a valuable but sometimes-misunderstood deduction for seniors.
The Child Tax Credit
The Child Tax Credit increased from $2,000 to $2,200 per child in 2025 and remains at that amount for 2026. It phases out for filers with Modified Adjusted Gross Income (MAGI) above $400,000 ($200,000 if single).
Children must be younger than 17 at year-end to qualify, and both the child and the taxpayer claiming the credit must have valid Social Security numbers. This credit will increase modestly in 2027 and the years that follow to keep pace with inflation.
Related: The Adoption Tax Credit increased slightly in 2026.
The Child and Dependent Care Tax Credit
This credit offers somewhat better benefits for low- and middle-income taxpayers in 2026 than it did in prior years. It can help cover the cost of care for a child under age 13 or another qualifying dependent while you work or look for work.
- Low-income taxpayers now might be eligible for a credit equal to as much as half of their childcare expenses, for example, up from a max of 35% in 2025.
- Taxpayers with moderate-to-high incomes can deduct between 20% and 35% of their childcare expenses.
This credit is capped at $3,000 in expenses for one qualifying child or $6,000 for families with multiple qualifying children.
Trump Accounts
Trump Accounts are a new way for parents to save for their children’s futures. These accounts are sometimes compared to IRAs for their kids, offering tax-deferred long-term investment growth.
Parents can contribute up to $5,000 in after-tax dollars per year per eligible child. Children with US citizenship born between 2025 and 2028 are eligible for a $1,000 federal grant to their account.
529 Accounts
529 accounts feature improved distribution flexibility beginning in 2026. Up to $20,000 per year can now be removed from a 529 plan to pay for eligible K-12 costs—an increase from $10,000 in years prior.
Updated 529 rules also allow 529 distributions to be used to pay for a wider range of education-related costs, such as professional licensing and certification programs. In addition, certain unused 529 funds can be rolled over into an Achieving a Better Life Experience (ABLE) account for a beneficiary with a disability, subject to applicable limits.
The Senior Deduction
This deduction, which debuted in 2025, remains available through 2028. Most taxpayers age 65 or up can claim an additional $6,000 deduction—$12,000 for married senior couples filing jointly.
This deduction can be claimed together with the standard deduction, so taxpayers don’t need to itemize to qualify. It phases out for seniors whose Modified Adjusted Gross Income (MAGI) exceeds $150,000 if married filing jointly in 2026 ($75,000 for single filers).
Seniors should be wary of a common source of confusion—Social Security benefits are still taxed. “This deduction was kind of advertised as ‘your Social Security income will no longer be taxable’,” says Reyes. “But what it actually is is ‘you’re entitled to a deduction that’s supposed to offset the taxation of your Social Security income’.”
Changes to Itemized Deductions
New rules affect taxpayers who itemize their returns rather than claim the standard tax deduction.
The State and Local Tax (SALT)
The SALT deduction cap has increased. As recently as 2024, the maximum amount a taxpayer could deduct in state and local taxes, such as property taxes and state income taxes, was $10,000.
That figure shot up to $40,000 in 2025, and a 1% annual increase bumps it to $40,400 in 2026 and $40,804 in 2027. It will continue creeping up in 2028 and 2029. The SALT deduction phases out for high earners whose MAGIs exceed $505,000 in 2026 or $510,050 in 2027.
Private Mortgage Insurance (PMI)
Private Mortgage Insurance is once again tax deductible. Starting in 2026, taxpayers who itemize can deduct their PMI payments in addition to their mortgage interest, something that had not been allowed during the prior four tax years. This deduction phases out for taxpayers with incomes above $100,000, however.
Charitable giving tax deductions
There’s now a charitable gift deductibility floor. Starting in 2026, only the portion of charitable gifts that exceed 0.5% of a taxpayer’s Adjusted Gross Income is eligible for itemized deduction.
Related: “Even if you take the standard deduction, you’re now allowed to deduct $1,000 in charitable donations if you’re single,” says Reyes, “$2,000 for joint returns.”
Income-Specific Tax Breaks
Among the new and recently updated deductions that affect earnings, loans, and more…
Tips and overtime pay
Tax deductions for tips and overtime pay that took effect in 2025 remain in place through 2028—taxpayers don’t even have to itemize their returns to deduct these.
These relatively new tax rules allow many workers to deduct up to $12,500 in tip income, or up to $25,000 for married couples filing jointly, and to deduct the portion of their overtime pay attributable to higher overtime pay rates. Both of these deductions phase out for workers with MAGIs above $300,000 ($150,000 if filing single).
Auto loan interest
Auto loan interest is now deductible, even for taxpayers who don’t itemize. Car buyers can deduct up to $10,000 per year in auto loan interest from 2025 through 2028, though only if the auto loan was taken out after 2024, and the loan is for a new vehicle assembled in the US and driven mainly for personal use.
This deduction phases out if the taxpayer’s MAGI exceeds $200,000 ($100,000 if single).
Qualified business income deduction
The qualified business income deduction lives on. This tax deduction, which allows many self-employed people and small-business owners to deduct up to 20% of their business income from their federal taxes, was scheduled to end after 2025.
Instead, it has been made permanent, with more forgiving phase-outs than before.
Gambling
Gambling has become less attractive from a tax perspective. Historically, gamblers have been allowed to subtract their gambling losses from their winnings when calculating whether there’s a tax bill due.
Under new rules taking effect in 2026, the gambling loss deduction is capped at 90% of the gambler’s total loss.
Example: If you win $5,000 on a fun Friday in Vegas, then lose that $5,000 back to the casino on a sad Saturday, then you’ll owe taxes on $500 in income even though your gambling weekend generated no net income—only $4,500 of your loss can be used to offset your previous win.
Business Tax Changes to Watch
Business owners and the self-employed should be aware of some recent tax changes as well.
1099 reporting
The 1099 reporting threshold climbed from $600 to $2,000 in 2026, and it will creep up further in future years to keep pace with inflation.
For businesses, that higher threshold means fewer forms to distribute, but for independent contractors it increases the risk of accidentally failing to report income.
Earn under $2,000 from a client in 2026, and that client no longer has to send you a 1099, but tax is due on income whether or not it reaches the 1099 reporting threshold. It’s taxpayers’ responsibility to track and report their income.
Bonus depreciation
Bonus depreciation, which allows businesses to deduct the full purchase price of many assets in the first year that they’re placed in service rather than spread those deductions over multiple years, has been revived.
“The One Big Beautiful Bill restored bonus depreciation,” explains Reyes. “It was supposed to phase out, but instead it’s still intact for 2026.”
Related: Starting in 2025, businesses can deduct 100% of their qualified domestic research and development expenses in the year in which they’re incurred.
Excess business loss limitation
There are stricter thresholds for excess business loss limitation. No more than $512,000 in business losses can be used to offset other income on a tax return in 2026 (no more than $256,000 if single), down from $626,000 ($313,000 if single) in 2025.
Losses above the $512,000/$256,000 limits can generally be carried forward as a net operating loss (NOL) to offset income in future years.
Opportunity Zones
New tax-saving opportunities from Opportunity Zones will begin in 2027. Opportunity Zones allow investors to gain substantial tax advantages by investing in economically distressed communities.
The program was essentially nearing its end, but instead, new rules will soon revitalize it. “It’s making a comeback,” says Reyes. “There’s a new 10-year cycle, which will run from January 1st of 2027 through the end of 2036.”
Retirement, Savings, and Estate Planning Changes
New tax rules affect saving for the future or passing money to heirs.
IRA contribution limits
Put more into your IRA. IRA contribution limits rise from $7,000 to $7,500 in 2026. The limit climbs from $8,000 to $8,600 for taxpayers age 50 and up.
Estate taxes
Leave more to your heirs without facing estate taxes. The lifetime federal estate tax exemption increased to $15 million in 2026, and it will continue to slowly increase in the years that follow to keep pace with inflation.
This steep exemption means the vast majority of families won’t have to pay federal estate taxes.
What You Can Do Now
Review your financial situation and the new tax rules before year-end to get a sense…
- Whether you’re likely to owe money to the IRS or receive a refund. If it’s the former, it might be worth increasing your withholding or estimated tax payments…if it’s the latter, it might be worth reducing those.
- Whether your tax rate is likely to be significantly higher or lower than usual this year. If it’s the former and you’re retired, for example, this might be a good year to make a Roth IRA withdrawal rather than make taxable withdrawals from other accounts, although required minimum distributions (RMDs) still must be taken from applicable retirement accounts. If it’s the latter and you’re eligible, consider doing a Roth conversion.
- Whether you’re near the income caps or phase-outs for any valuable tax credits and deductions. If so, it might be worth trying to remain below these caps or phase outs to preserve the tax break.
- Whether your state has made any significant tax changes. “I wouldn’t assume that whatever changes apply to the federal will be mimicked on the state level,” says Reyes.
If you’re not certain how specific tax changes affect you, speak with your tax preparer before the end of the year.
“Stop and kind of think back about what happened income-wise in the first three quarters of the year to see if you need to do tax planning,” says Reyes. “You want to make sure you’re not surprised in April by your tax bill.”
