Brush up on all the personal income tax changes in the “One Big Beautiful Bill” taking effect in 2026. Many of the changes extended previously established tax code provisions that were about to expire, but the legislation also made plenty of other revisions that could impact your federal income tax return for the 2026 tax year.

NEW TAX LAW CHANGES

The One Big Beautiful Bill that passed includes permanently extending tax cuts from the Tax Cuts and Jobs Act, including increasing the cap on the amount of state and local or sales tax and property tax (SALT) that you can deduct, makes cuts to energy credits passed under the Inflation Reduction Act, makes changes to taxes on tips and overtime for certain workers, reforms Medicaid, increases the Debt ceiling, and reforms Pell Grants and student loans. Updates to this article are in process. Check our One Big Beautiful Bill article for more information.

What is the “One Big Beautiful Bill”?

The “One Big Beautiful Bill” (OBBB), also known as the Working Families Tax Cut, is a major federal tax and spending bill that was signed into law on July 4, 2025.

When it comes to federal income taxes, the OBBB extended most of the changes made by the Tax Cuts and Jobs Act (TCJA) of 2017 that were set to expire in 2026. While this is one of the most notable features of the OBBB, the legislation did far more than just make TCJA revisions permanent. It added new tax breaks, repealed others, and made other significant changes throughout the U.S. tax code. Some of the extended TCJA provisions were even amended again.

While some of the OBBB tax provisions took effect in 2025, most of the bill’s changes don’t kick in until the 2026 tax year. So, let’s first take a look at the TCJA personal income tax changes that were set to expire in 2026, but were extended and made permanent by the OBBB instead. Then we’ll explore other OBBB tax law changes for individuals that will show up for the first time on 2026 federal income tax returns (which will be due April 15, 2027).

What TCJA provisions did the “One Big Beautiful Bill” extend?

The OBBB extended and made permanent several TCJA income tax changes that were scheduled to expire after the 2025 tax year, including (among other things) TCJA provisions that:

• lowered Individual Income Tax Rates
• increased the Standard Deduction
• eliminated the deduction for Personal Exemptions
• increased the Child Tax Credit
• created the Qualified Business Income Deduction
• raised the Alternative Minimum Tax exemption amounts and exemption phaseout thresholds
• eliminated Miscellaneous Itemized Deductions
• limited the Mortgage Interest Deduction
• restricted the Moving Expense Deduction to military personnel
• established the 60%-of-AGI cap on the Charitable Deduction for cash donations
• permitted an Exclusion for Employer-Paid Student Loans

How were the Tax Brackets impacted by the OBBB for 2026?

In addition to permanently extending the lower federal income tax rates enacted by the TCJA (10%, 12%, 22%, 24%, 32%, 35%, and 37%), the OBBB increased the 2026 inflation adjustments for the 10% and 12% tax brackets.

“Increasing the inflation adjustments for the 10% and 12% tax brackets will help reduce ‘bracket creep’ for lower-income taxpayers,” says Jeff Godwin, a CPA and taxassistant Expert in Carlsbad, California. “Bracket creep occurs when you move into a higher tax bracket than you were in the previous year, even though your income didn’t grow as much as the rate of inflation.”

Which Itemized Deductions were changed or added by the OBBB for 2026?

In addition to permanently extending several TCJA changes to itemized deductions reported on Schedule A, the OBBB made a number of other changes to itemized deductions starting with the 2026 tax year. For instance, the legislation either revised or added the:

• Charitable Gift Deduction
• Mortgage Interest Deduction
• Casualty Loss Deduction
• Educator Expense Deduction for Itemizers
• Gambling Loss Deduction

The OBBB also permanently eliminated the “miscellaneous itemized deductions” that were suspended by the TCJA from 2018 to 2025, including deductions for unreimbursed employee expenses, union dues, tax preparation fees, safe-deposit box charges, certain legal fees, and more. These costs were only deductible to the extent they exceeded 2% of your adjusted gross income (AGI).

In addition, starting with the 2026 tax year, the OBBB reduces the overall amount of itemized deductions for people in or close to the highest (37%) tax bracket. If you’re in this income category, your itemized deductions for the year will generally be reduced by 2/37 (which is slightly more than 5.4%) of whichever of the following amounts is smaller:

• your total itemized deductions
• your taxable income above the threshold for the 37% bracket, plus your total itemized deductions (see the current tax brackets for the threshold that applies to your filing status)

This new limitation replaces another limitation – commonly called the Pease limitation – that was suspended by the TCJA for the 2018 to 2025 tax years. And, again, it only applies to high-income taxpayers.

Now, here’s a rundown of how the OBBB extended, revised, and/or added each of the specific itemized deductions listed above.

How was the Charitable Gift Deduction changed by the OBBB?

Starting with the 2026 tax year, the OBBB amended the itemized deduction for charitable contributions by:

• making the 60%-of-AGI cap on cash donations permanent (it was set to drop to 50% in 2026)
• establishing a 0.5%-of-AGI “floor” (which means you can only deduct eligible donations that exceed 0.5% of your AGI)
• increasing the deduction for certain whaling captains

It also revived and increased the Charitable Deduction for Non-Itemizers that was available for the 2020 and 2021 tax years (more on this deduction later).

How was the Mortgage Interest Deduction changed by the OBBB?

The OBBB permanently extends the TCJA provisions that:

• allow the Mortgage Interest Deduction only for interest on the first $750,000 of debt ($375,000 for a married person filing separately)
• prevent the deduction of interest on home equity loans

In addition, starting with the 2026 tax year, the OBBB allows certain mortgage insurance premiums to be deducted as mortgage interest.

How was the Casualty Loss Deduction changed by the OBBB?

The TCJA limited the deduction for personal casualty losses in excess of personal casualty gains to losses stemming from a federally declared disaster. The OBBB made this limitation permanent, but also extended it to include state declared disasters (starting with the 2026 tax year).

What is the Educator Expense Deduction for itemizers?

Beginning with the 2026 tax year, the OBBB added a new itemized deduction for certain unreimbursed expenses of teachers and other educators, such as books, supplies, and equipment. This new deduction is similar to the existing above-the-line deduction for educator expenses, except:

• you have to itemize to claim the new deduction
• there are no dollar limits
• coaches and interscholastic sports administrators can claim it
• it can be claimed for non-athletic supplies for health or physical education classes
• items purchased by the teacher or other educator don’t have to be used in the classroom if they’re used as part of an instructional activity

“If you don’t itemize, and have qualified educator expenses, you can still claim the above-the-line deduction for educator expenses,” says Godwin. “However, you can’t use the same expenses to claim both the above-the-line deduction and the itemized deduction.”

How was the Gambling Loss Deduction changed by the OBBB?

Starting with the 2026 tax year, the OBBB limits the Gambling Loss Deduction to the lesser of:

• 90% of your wagering losses for the tax year
• your wagering gains for the tax year

The 90% limitation didn’t apply before the OBBB (that is, the deduction was only limited by your gambling winnings).

What Other Tax Deductions were impacted by the OBBB for 2026?

In addition to the changes described above to itemized deductions, the OBBB revised or added a few other federal income tax deductions for the 2026 tax year and later, including the:

• Moving Expense Deduction
• Qualified Business Income (QBI) Deduction
• Charitable Deduction for Non-Itemizers

How was the Moving Expense Deduction changed by the OBBB?

The OBBB permanently repeals the Moving Expense Deduction for everyone except military personnel on active duty who move under military orders for a permanent change of station (PCS).

In addition, starting with the 2026 tax year, the deduction is also available to an employee or new appointee of the intelligence community (other than a member of the U.S. military) who moves because of a change in assignment that requires relocation.

How was the Qualified Business Income Deduction changed by the OBBB?

In addition to making the QBI Deduction permanent, the OBBB:

• creates a minimum QBI Deduction
• expands the QBI Deduction’s “phase-in ranges”

Permanently extending the QBI Deduction means that qualified business owners (including self-employed people) will still be able to claim this valuable tax break after the 2025 tax year.

In addition, starting with the 2026 tax year, a minimum QBI Deduction of $400 is allowed for qualified taxpayers who have at least $1,000 of QBI from one or more businesses in which they materially participate (after 2026, the $400 and $1,000 amounts will be adjusted annually to account for inflation). This lets owners of very small businesses benefit from the deduction.

The QBI Deduction phase-in ranges are used to calculate the deduction. Beginning with the 2026 tax year, they span $150,000 for joint filers (up from $100,000) and $75,000 for everyone else (up from $50,000). This means larger deductions for many business owners, including owners of a “specified service trade or business.”

How does the new Charitable Deduction for Non-Itemizers work?

For people who claim the Standard Deduction instead of itemized deductions, the OBBB allows a Charitable Deduction for Non-Itemizers for up to $1,000 of cash contributions to charitable, religious, educational, scientific, literary, and certain other eligible organizations (up to $2,000 for married couples filing a joint tax return). The deduction is available starting with the 2026 tax year.

Similar – but smaller – deductions were temporarily available for the 2020 and 2021 tax years.

Maximum Charitable Deduction for Non-Itemizers
Tax Year(s)	Married Couples Filing Jointly	Married Couples Filing Separately	All Other Taxpayers
2020	$300	$150	$300
2021	$600	$300	$300
2026 and beyond	$2,000	$1,000	$1,000

What Tax Exclusions were impacted by the OBBB for 2026?

The U.S. tax code contains several income tax exclusions, which are specific types of income that aren’t included in your gross income for tax purposes. Starting with the 2026 tax year, the OBBB made changes to the federal income tax exclusions for:

• Student Loan Forgiveness
• Student Loan Payments by an Employer
• Combat Pay

How was the Student Loan Forgiveness Exclusion changed by the OBBB?

Under the OBBB, student loan debt that is forgiven after 2025 is generally excluded from taxable income only if the loan is forgiven because of the student’s death or total disability.

Broader tax law provisions that excluded most student loan discharges from taxable income – regardless of whether the loan was forgiven because of the student’s death or disability – expired at the end of 2025. The OBBB did not extend those provisions.

The OBBB also requires you to provide your Social Security number on your tax return if you want to claim the exclusion. The Social Security number must be valid for employment in the U.S. and issued before the due date of your return (including any tax filing extensions).

How was the Employer Student Loan Payment Exclusion changed by the OBBB?

The exclusion from taxable income for up to $5,250 of student loan debt paid by your employer is extended by the OBBB. This tax break is part of the overall exclusion for employer-provided educational assistance. However, the student loan payment provisions were set to expire after the 2025 tax year.

In addition, the OBBB requires the overall $5,250 annual cap on employer-provided educational assistance to be adjusted for inflation each year, starting with the 2027 tax year.

How was the Combat Pay Exclusion changed by the OBBB?

The OBBB expands the list of “qualified hazardous duty areas,” which are treated as combat zones for purposes of the Combat Pay Exclusion available to active duty military personnel. In addition to the Sinai Peninsula in Egypt, the following locations are considered qualified hazardous duty areas beginning in 2026:

• Kenya
• Mali
• Burkina Faso
• Chad

Generally, the exclusion is available for compensation received by military personnel on active duty in the U.S. Armed Forces for time spent in a combat zone or qualified hazardous duty area. How much pay is excluded may depend on your rank.

Which Tax Credits were affected by the OBBB for 2026?

Starting with the 2026 tax year, the OBBB revised the following federal income tax credits:

• Child and Dependent Care Credit
• American Opportunity Credit
• Lifetime Learning Credit
• Premium Tax Credit
• Energy Efficient Home Improvement Credit
• Residential Clean Energy Credit
• Alternative Fuel Vehicle Refueling Property Credit

In addition, the tax credits for the purchase of new and used “clean vehicles” – such as electric and fuel cell vehicles – aren’t allowed for vehicles purchased after September 30, 2025 (they were previously set to expire after 2032). While the clean vehicle credits technically expired in 2025, you could still claim them for some qualifying vehicles purchased in 2025 before the cut-off date. However, the credits aren’t available for any vehicles bought in 2026. So, 2026 is the first full year in which the credits aren’t allowed.

The OBBB also created a new federal tax credit of up to $1,700 for contributions to a “scholarship granting organization” that uses the money for scholarships for eligible in-state students. However, the credit isn’t available until the 2027 tax year.

How was the Child and Dependent Care Credit changed by the OBBB?

Under the OBBB, the maximum percentage of eligible expenses you can claim increases from 35% to 50% when calculating the Child and Dependent Care Credit for the 2026 tax year and beyond.

The percentage gradually drops from 50% (but not lower than 35%) if your AGI is more than $15,000, and is further reduced (but not below 20%) if your AGI exceeds $75,000 ($150,000 for joint filers).

How were the American Opportunity Credit and Lifetime Learning Credit changed by the OBBB?

Starting with the 2026 tax year, the OBBB requires a taxpayer claiming the American Opportunity Credit or Lifetime Learning Credit to provide their Social Security number on their tax return for the year. In addition, if either credit is claimed for the education expenses of a student other than the taxpayer or the taxpayer’s spouse – such as for the taxpayer’s child – the other person’s Social Security number must also be provided.

In both cases, the Social Security number must be valid for employment in the U.S. and issued before the due date of your return (including any extensions).

Before this change, you could claim the American Opportunity Credit or Lifetime Learning Credit by providing either the student’s Social Security number or individual taxpayer identification number (ITIN). The OBBB no longer permits an ITIN to be used by either the taxpayer or the student.

How was the Premium Tax Credit changed by the OBBB?

Beginning in 2026, the Premium Tax Credit – which can help cover your premiums if you enroll in a health plan through the Health Insurance Marketplace – was impacted by the OBBB in the following ways:

• The credit is no longer available if your income is over 400% of the federal poverty level for a household of your size (the OBBB didn’t extend the temporary suspension of the 400% cap, which expired after 2025).
• Full repayment of advance credit payments that were more than the credit amount allowed is now required (the amount you had to pay back was previously capped, which meant partial repayment was allowed in some cases).
• People who aren’t U.S. citizens or U.S. nationals, but who are lawfully present in the U.S., can no longer claim the credit if they’re not eligible for Medicaid and their household income is below 100% of the federal poverty level.
• The credit is not available for people who enroll in a health plan during an income-based special enrollment period that isn’t connected to a change in other circumstances beyond just a change in income.

In addition, beginning in 2027, eligibility for the Premium Tax Credit is further limited by the OBBB for immigrants who are lawfully present in the U.S., but who aren’t an “eligible alien.” Generally, an eligible alien is someone who either:

• has a green card
• is a Cuban and Haitian entrant
• resides in the U.S. under a Compact of Free Association

Plus, starting with the 2028 tax year, you won’t be eligible for the Premium Tax Credit unless certain information is verified before you enroll in a health insurance plan. Information that must be verified will include your:

• household income
• immigration status
• health coverage status or eligibility for coverage
• place of residence
• family size
• other information determined to be necessary

Verification can be waived for someone who enrolls in a health plan during a special enrollment period because of a change in family size.

How was the Energy Efficient Home Improvement Credit changed by the OBBB?

The OBBB eliminated the Energy Efficient Home Improvement Credit for any eligible expenses after 2025. The credit was previously set to expire after 2032.

Before the 2026 tax year, homeowners could claim the credit for up to 30% of the cost of certain energy-efficient home improvements, such as exterior doors, windows, skylights, insulation, heat pumps, central air conditioning, water heaters, and home energy audits.

The credit was capped at $3,200 per year. However, the annual cap was broken down into subcategories. So, for example, the credit could be claimed for up to $1,200 of general improvements (like windows and insulation), and up to $2,000 for a heat pump.

How was the Residential Clean Energy Credit changed by the OBBB?

Under the OBBB, the Residential Clean Energy Credit is no longer available after the 2025 tax year. Before the OBBB, the credit was scheduled to expire after 2034.

The Residential Clean Energy Credit was generally equal to 30% of the costs of qualified clean energy property for your home, such as solar electric panels, solar water heaters, wind turbines, geothermal heat pumps, fuel cells, and battery storage technology.

There was no annual cap on the credit amount, except that the credit for fuel cell property was generally limited to $500 for each half kilowatt of capacity ($1,667 for each half kilowatt of capacity for all residents if more than one person lived in the home).

How was the Alternative Fuel Vehicle Refueling Property Credit changed by the OBBB?

The Alternative Fuel Vehicle Refueling Property Credit, which was available for electric vehicle chargers installed in your home, was eliminated by the OBBB for equipment placed in service after June 30, 2026. It was previously set to expire for property placed in service after 2032.

How was the Alternative Minimum Tax changed by the OBBB for 2026?

The OBBB extends the increases to the Alternative Minimum Tax (AMT) exemption amounts made by the TCJA, but starting with the 2026 tax year it also:

• rolls back the exemption phaseout thresholds to 2018 levels
• doubles the rate at which the AMT exemption phases out

More specifically, the exemption phaseout thresholds for the 2026 tax year are reduced from $1,252,700 (2025) to $1 million for joint filers and surviving spouses, and from $626,350 (2025) to $500,000 for all other taxpayers. The new thresholds will be adjusted each year to account for inflation starting in 2027.

In addition, the AMT exemption phase-out rate will jump from 25% to 50% starting with the 2026 tax year.

“Following the OBBB’s changes to the AMT, many people will still be able to avoid the AMT because the higher exemption amounts are now permanent,” notes Godwin. “However, the reduced exemption phase-out thresholds and higher phase-out rate will likely result in more higher-income taxpayers owing the AMT.”

How are the filing requirements for Forms 1099-NEC and 1099-MISC changed by the OBBB for 2026?

The OBBB raises the reporting threshold for both Form 1099-NEC and Form 1099-MISC from $600 to $2,000 starting with the 2026 tax year. In addition, the $2,000 amount will be adjusted annually for inflation after 2026.

Form 1099-NEC is used to report compensation paid to a non-employee (such as a freelancer). Form 1099-MISC is used to report payments of rent, royalties, prizes and awards, and other items. Both the IRS and the person who receives the compensation or payment get a copy of the form.

How were Tax-Saving Employee Benefits affected by the OBBB for 2026?

The OBBB amendments to employee benefits that provide tax savings for workers include:

• raising the dependent care flexible spending account (FSA) contribution limit from $5,000 ($2,500 for married people filing separate tax returns) to $7,500 ($3,750 for married couples filing separately).
• permanently eliminating the exclusion of qualified bicycle commuting reimbursements from an employee’s income (the TCJA temporarily suspended this exclusion for the 2018 to 2025 tax years)
• adding an additional year of inflation adjustments in 2026 for remaining transportation fringe benefit exclusions for rides in a commuter vehicle between a worker’s home and work, transit passes, and parking

How did the OBBB improve or expand Tax-Advantaged Accounts for 2026?

Starting with the 2026 tax year, the OBBB added or modified several tax-advantaged accounts – which offer various tax breaks while you save for retirement, college, medical expenses, or other future expenses – by:

• creating Trump Accounts, which are a special type of traditional IRA for children (the U.S. government will also deposit $1,000 into the Trump Account of eligible U.S. citizens born from 2025 through 2028)
• increasing the annual limit on the use of 529 plan funds for elementary, middle, or high school expenses from $10,000 to $20,000
• permanently allowing:
  • additional contributions to ABLE accounts by the account beneficiary
  • beneficiaries who contribute to their ABLE account to claim the Saver’s Credit
  • tax-free rollovers from 529 plans to ABLE accounts

Also note that, starting in 2027, the OBBB increases the amount of ABLE Account contributions eligible for the Saver’s Credit from $2,000 to $2,100. In addition, as required by earlier tax law changes, contributions to retirement accounts won’t qualify for the Saver’s Credit anymore after the 2026 tax year. Instead, contributions to retirement accounts may be eligible for a “Saver’s Match,” which is an additional contribution by the government to your account.

How are taxes on the Sale of Farmland impacted by the OBBB for 2026?

Under a new tax code section added by the OBBB, farmers can elect to pay the federal income tax on gains from the sale or exchange of certain farmland in equal installments over a four-year period. The first installment must be paid by the due date for the tax return covering the year of sale. The remaining payments must be made by the tax return due date for each of the next three years.

The buyer has to be an active farmer. In addition, the property must have been used for farming for at least 10 years before the sale, and it must be subject to restrictions that require it to be used for farming for at least 10 years after the sale.

The new rules apply to sales or exchanges of farmland in tax years beginning after July 4, 2025 – which means the 2026 tax year for most individual taxpayers.

“It’s important to remember that the new law doesn’t reduce the amount of tax owed when eligible farmland is sold or exchanged for a profit,” says Godwin. “It only defers payment of three-fourths of the tax, since the first installment is due with the return for the year of sale. However, this allows farmers to spread the tax on a potentially large capital gain over four tax years, which can help improve cash flow during that period.”