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New Tax Laws for 2026 – As we approach the new year, understanding the upcoming tax laws for 2026 is crucial for effective financial planning. With the implementation of provisions from the One Big Beautiful Bill Act (OBBBA) and various state-level adjustments, taxpayers can expect shifts in deductions, brackets, and rates. This comprehensive guide breaks down the major federal and state tax changes effective January 1, 2026, drawing from official sources like the IRS and expert analyses. Whether you’re a single filer, a family, or a senior, these updates could affect your 2026 tax return—filed in 2027.
Federal Tax Changes Under the One Big Beautiful Bill Act
The OBBBA, signed into law, introduces several taxpayer-friendly provisions while making some permanent adjustments from previous reforms. Key highlights include increased standard deductions, new above-the-line deductions, and inflation-adjusted tax brackets.
Updated Standard Deductions
For tax year 2026, the standard deduction amounts have been inflated and permanently expanded under OBBBA:
- Single filers and married filing separately: $16,100
- Married filing jointly or qualifying surviving spouses: $32,200
- Heads of households: $24,150
These increases aim to simplify filing by reducing the need to itemize. Seniors aged 65 or older get an additional boost: an extra $6,000 deduction ($12,000 if both spouses qualify), though it phases out for higher incomes.
2026 Federal Income Tax Brackets
The IRS has released inflation-adjusted brackets for 2026, maintaining the seven-tier progressive system. Here’s a breakdown by filing status:
| Tax Rate | Single Filers | Married Filing Jointly | Heads of Household |
|---|---|---|---|
| 10% | Up to $12,400 | Up to $24,800 | Up to $18,600 |
| 12% | $12,401 – $50,400 | $24,801 – $100,800 | $18,601 – $75,600 |
| 22% | $50,401 – $105,700 | $100,801 – $211,400 | $75,601 – $158,550 |
| 24% | $105,701 – $201,775 | $211,401 – $403,550 | $158,551 – $302,663 |
| 32% | $201,776 – $256,225 | $403,551 – $512,450 | $302,664 – $384,338 |
| 35% | $256,226 – $640,600 | $512,451 – $768,700 | $384,339 – $960,750 |
| 37% | Over $640,600 | Over $768,700 | Over $960,750 |
Note: Head of Household brackets are estimated based on standard IRS scaling; confirm with official IRS guidance. These brackets apply to taxable income after deductions, potentially lowering your effective tax rate.
New Deductions and Credits
OBBBA introduces several “no tax on” provisions to reward work and spending:
- Overtime Pay Deduction: Deduct up to $12,500 ($25,000 for joint filers) in qualified overtime earnings, phasing out above $150,000 AGI.
- Tips Deduction: Up to $25,000 in qualified tips for service workers and content creators, with similar phase-outs.
- Vehicle Loan Interest Deduction: Deduct up to $10,000 in interest on loans for new U.S.-assembled vehicles purchased after 2024.
- Adoption Credit: Maximum of $17,670, with up to $5,120 refundable.
- Charitable Contributions: Starting 2026, an above-the-line deduction up to $1,000 for qualifying gifts.
Additionally, the estate tax exclusion rises to $15 million, benefiting high-net-worth individuals. Health-related expansions include HSA compatibility for more plans and permanent telehealth flexibility.
Other Federal Updates
- Remittance Excise Tax: A new 1% tax on cash-based international transfers, collected by providers.
- Trump Accounts: New savings vehicles for children, with federal seed money and tax-advantaged growth.
- Expiring Credits: Clean vehicle and home energy credits end in late 2025.
State Tax Changes for 2026
While federal changes apply nationwide, several states are slashing income taxes to attract residents and businesses. Nine states will implement individual income tax cuts starting January 1, 2026:
- Georgia: Rate drops to 5.09% (from 5.19%), continuing toward 4.99%.
- Indiana: Flat rate to 2.95% (from 3%).
- Kentucky: To 3.5% (from 4%).
- Mississippi: To 4% (from 4.4%), with plans for further reductions.
- Montana: Top rate to 5.65% (from 5.9%), expanding lower brackets.
- Nebraska: To 4.55% (from 5.2%).
- North Carolina: Flat rate to 3.99% (from 4.25%).
- Ohio: Flat 2.75% for income over $26,050 (from 3.125%).
- Oklahoma: Top rate to 4.5% (from 4.75%), consolidating brackets.
Other states may have increases, such as Hawaii’s transient accommodations tax rising to 11%. Check your state’s department of revenue for specifics.
How These 2026 Tax Laws Affect You and Preparation Tips
These changes could mean bigger refunds for many, especially workers with overtime or tips, families adopting, or buyers of American-made cars. However, expiring clean energy credits might accelerate purchases in 2025.
To prepare:
- Review your withholding using the IRS Tax Withholding Estimator.
- Consult a tax professional for personalized advice.
- Track new forms like 1099-DA for crypto or 1098-VLI for vehicle loans.
Staying informed on these new tax laws for 2026 ensures you maximize benefits and avoid surprises. For the latest updates, visit IRS.gov or your state’s tax site.