The tax landscape is shifting again. Several major provisions of the Tax Cuts and Jobs Act (TCJA) were set to expire after 2025, but they have now been extended or made permanent under the One Big Beautiful Bill (OBBB). As a result, many of the anticipated tax increases and deduction limitations originally projected for 2026 will not take effect.

With that said, meaningful changes remain for both individuals and business owners. Understanding what has been preserved, what continues to phase out, and where planning opportunities still exist is essential for navigating 2026 and beyond with confidence.

Why does early tax planning matter?

While the OBBB eliminated much of the uncertainty surrounding the Tax Cuts and Jobs Act (TCJA) sunset provisions, proactive tax planning remains critical. The focus has shifted from preparing for higher tax rates to optimizing within a more stable tax framework. Early planning allows taxpayers to:

• Model multi-year tax strategies with greater certainty.
• Time income, deductions, and capital investments are more effective.
• Reevaluate entity structures and compensation approaches under permanent rules.
• Align estate, retirement, and succession plans with long-term tax law stability.
• Avoid reactive decisions driven by future legislative or regulatory changes.
  
  

Individual Tax Provisions

Most TCJA provisions affecting individuals did not expire in 2025. The OBBB will preserve the current framework for 2026 and beyond:

Marginal Tax Rates

• The TCJA tax rate structure is made permanent. The top individual rate remains 37%, and existing income brackets continue with annual inflation adjustments.

Standard Deduction & Personal Exemptions

• Standard deduction levels remain permanently elevated:
  • 2025: $15,750 (single) / $31,500 (married filing jointly)
  • 2026: $16,100 (single) / $32,200 (married filing jointly)
• Personal exemptions are permanently eliminated, meaning the analysis between taking the standard deduction versus itemizing remains similar to recent years.

Itemized Deduction Rules

• Medical and dental expenses: Rules remain unchanged.
• State and local taxes (SALT):
  • Temporary $40,000 SALT cap beginning in 2025, with a phaseout for higher-income taxpayers.
  • Indexed increase to $40,400 in 2026, with adjusted phaseout thresholds.
• Mortgage interest: The TCJA limitation remains in place, with interest deductible on up to $750,000 of acquisition debt.
• Charitable Contributions:
  • Beginning in 2026, non-itemizers may claim an above-the-line charitable deduction of up to $1,000 ($2,000 for married filing jointly).
  • A new 0.5% floor applies to itemized charitable deductions starting in 2026.
• Miscellaneous itemized deductions: Permanently eliminated.
• Gambling losses: Starting in 2026, only 90% of gambling losses may be used to offset gambling income.
• Casualty losses: Deductions expand in 2026 to include certain state-declared disasters, in addition to federally declared disasters.
• Overall itemized deduction limitation: Beginning in 2026, the benefit of itemized deductions is capped at the 35% tax bracket.

New Provisions

Several new deductions are available temporarily (2025–2028):

• Enhanced senior deduction: A temporary $6,000 deduction for individuals age 65 and older (and eligible spouses), with phaseouts beginning at $75,000 AGI ($150,000 MFJ).
• “No tax on tips”: Temporary deduction of up to $25,000 for qualifying tip income, subject to income phaseouts.
• “No tax on overtime”: Temporary deduction of up to $12,500 ($25,000 MFJ) for qualified overtime compensation.
• Car loan interest deduction: Temporary deduction of up to $10,000 for qualified auto loan interest, subject to income limits.
• Trump accounts: New tax-advantaged savings accounts for U.S. citizen children under age 18, beginning July 4, 2026.

Credits and Threshold Adjustments

• The Child Tax Credit increases to $2,200 per qualifying child for 2025 and 2026.
• Higher AMT exemption amounts remain in place, continuing to limit alternative minimum tax exposure for many taxpayers.

Business Tax Changes for 2026 and Beyond

The OBBB permanently extends many TCJA business provisions, providing long-term certainty for planning:

Bonus Depreciation

• 100% bonus depreciation is permanently reinstated for qualifying property acquired and placed in service after January 19, 2025.
• A new 100% bonus provision applies to certain Qualified Production Property (QPP), subject to limitations.

Research and Development Costs

• Full expensing of U.S.-based research and experimental costs is permanently allowed beginning in 2025.
• A retroactive election is available for certain small taxpayers meeting the gross receipts test.

Interest Expense Limitations

• The EBITDA-based limitation is permanently restored, allowing depreciation and amortization addbacks when calculating adjusted taxable income.

Qualified Business Income (QBI) Deduction

• The 20% QBI deduction for pass-through entities is made permanent, with existing phaseouts still applicable.

Business Meals

• The 50% deduction for employee meals is eliminated in 2026.

Excess business losses

• The limitation on excess business losses is made permanent, with inflation-adjusted thresholds for 2025 and 2026.

With greater certainty around pass-through taxation, businesses can focus on long-term capital investment, financing strategies, and entity planning rather than short-term defensive moves.

Estate & Gift Tax Planning Considerations

One of the most significant changes under the OBBB is the elimination of the scheduled 2026 estate tax sunset.

• The federal estate and gift tax exemption will not be cut in half.
• Higher exemption levels (approximately $15 million per individual in 2025, indexed for inflation) are made permanent.

While this removes a major planning deadline, individuals with larger estates should still:

• Review and update estate plans.
• Evaluate lifetime gifting strategies.
• Reassess trusts, ownership structures, and succession plans.
• Coordinate estate planning with broader family and business goals.

The removal of the sunset allows for more thoughtful, long-term transfer planning rather than rushed gifting driven by legislative uncertainty.

Retirement Planning Updates

SECURE 2.0 provisions continue to roll out through 2026, impacting both individuals and employers, including:

• Expanded access to employer retirement plans.
• Mandatory automatic enrollment for certain new plans.
• Increased required minimum distribution (RMD) age.
• Enhanced catch-up contribution rules.
• Additional Roth-related requirements for higher-income earners.

Understanding how these changes interact with personal savings goals and employer plan design is critical for long-term retirement readiness.

Plan Ahead with Lutz

The One Big Beautiful Bill provides greater certainty around key tax provisions, but proactive planning remains essential. Permanent rate structures, evolving deduction limitations, and ongoing estate and retirement considerations mean a thoughtful strategy can still create meaningful tax savings.

Our tax professionals offer services that help individuals and businesses evaluate how these changes apply to their specific circumstances and plan confidently for what’s next. Contact us to learn more.