Tax Law Changes for 2026 and 2027
The 2025 tax law made the 2017 cuts permanent, quadrupled the SALT cap for most itemizers, added four temporary deductions, restored 100% bonus depreciation, and rewrote charitable and AMT rules for 2026. Here is every major provision, when it applies, and what is scheduled for 2027.
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The One Big Beautiful Bill Act, Public Law 119-21, was signed July 4, 2025. Some of it applied immediately to 2025 returns, a second wave started January 1, 2026, and a few pieces are scheduled for 2027 and later. This page lists every major federal provision with its effective dates, what it means for 2026, and what is known about 2027, then points you to the page written for your situation.
The changes at a glance: 2025, 2026 and 2027
Every row is a federal provision of Public Law 119-21 (plus one SECURE 2.0 rule on the audience pages where it matters). Figures for 2026 come from IRS Rev. Proc. 2025-32. Where the IRS has not yet published 2027 inflation-adjusted amounts, the table says so.
| Provision | What changed | Effective dates | Who it affects | 2026 | 2027 |
|---|---|---|---|---|---|
| Tax brackets and standard deduction | The 10% to 37% bracket structure and the higher standard deduction became permanent instead of expiring after 2025. The law also raised the 2025 standard deduction to $15,750 single, $31,500 married filing jointly, $23,625 head of household. | Permanent, starting with 2025 | Every individual taxpayer. | Standard deduction $16,100 single, $32,200 joint, $24,150 head of household. The 37% rate starts at $640,600 single and $768,700 joint. | Indexed for inflation. IRS publishes these in late 2026. |
| SALT deduction cap | The itemized cap on state and local taxes rose from $10,000 to $40,000 ($20,000 married filing separately). It shrinks by 30% of modified AGI above $500,000, but never below $10,000. Entity-level PTET elections were left in place. | Tax years 2025 through 2029; drops back to $10,000 in 2030 | Itemizers in high-tax states; the phasedown hits households between $505,000 and about $606,333 of MAGI. | Cap $40,400. Phasedown starts at $505,000 of MAGI, and the cap reaches the $10,000 floor at about $606,333. | By statute, 101% of the 2026 amounts: about $40,804 cap and a $510,050 threshold. IRS confirms in late 2026. |
| Charitable deduction changes | Three changes for individuals: a deduction of up to $1,000 ($2,000 joint) of cash gifts for people who take the standard deduction; a floor so itemizers deduct only gifts above 0.5% of their contribution base (generally AGI); and, for the 37% bracket, a 2/37 haircut on itemized deductions that caps their value at about 35 cents per dollar. | Tax years beginning after December 31, 2025; no end date | Everyone who gives: non-itemizers gain a deduction, itemizers face a floor, top-bracket itemizers a cap. | All three rules apply for the first time. Gifts to donor-advised funds and supporting organizations do not count toward the non-itemizer deduction. | Same rules. A new federal scholarship tax credit of up to $1,700 for gifts to scholarship granting organizations starts January 1, 2027, in participating states. |
| Senior deduction | A new $6,000 deduction for each taxpayer age 65 or older ($12,000 if both spouses qualify), on top of the existing extra standard deduction for age 65. Each $6,000 shrinks by 6% of MAGI above $75,000 ($150,000 joint). Requires an SSN and a joint return if married. | Tax years 2025 through 2028 | Taxpayers 65 and older. | Same $6,000 and thresholds. The separate age-65 add-on to the standard deduction is $2,050 single or $1,650 per married person. | Same $6,000 and thresholds, not indexed. Ends after 2028. |
| No tax on tips | A new deduction of up to $25,000 of qualified tips, available whether or not you itemize. It phases out by $100 per $1,000 of MAGI over $150,000 ($300,000 joint). Requires a valid SSN and a joint return if married; tips in a specified service business do not qualify. | Tax years 2025 through 2028 | Workers in occupations that customarily receive tips. | Same $25,000 limit and phaseout thresholds. | Same rules; the limit and thresholds are not indexed. Ends after 2028. |
| No tax on overtime | A new deduction for the premium portion of overtime the FLSA requires (the "half" in time and a half), up to $12,500 ($25,000 joint). Same $150,000 / $300,000 MAGI phaseout as tips. | Tax years 2025 through 2028 | Non-exempt hourly and salaried workers paid FLSA overtime. | Same limits. Employers now report qualified overtime separately on 2026 W-2s. | Same rules, not indexed. Ends after 2028. |
| Car loan interest deduction | Up to $10,000 a year of interest on a loan for a new personal-use vehicle with final assembly in the United States, loan taken out after 2024. Phases out by $200 per $1,000 of MAGI above $100,000 ($200,000 joint). The VIN goes on the return. | Tax years 2025 through 2028 | Buyers financing a new U.S.-assembled personal vehicle. | Same $10,000 limit and thresholds. | Same rules, not indexed. Ends after 2028. |
| QBI deduction (Section 199A) | The 20% qualified business income deduction became permanent. The phase-in range above the income threshold widened from $50,000 to $75,000 ($100,000 to $150,000 joint), and a $400 minimum deduction was added for at least $1,000 of QBI from an active business. | Permanent; wider phase-in and minimum start with tax years beginning after December 31, 2025 | Owners of pass-through businesses and many rental real estate investors. | Threshold $201,750 ($403,500 joint). Phase-in ends at $276,750 ($553,500 joint). | Thresholds and the $400 and $1,000 minimum amounts are indexed. IRS publishes these in late 2026. |
| Bonus depreciation | 100% first-year bonus depreciation was restored and made permanent for property acquired after January 19, 2025. Property acquired on or before that date stays on the old phasedown (40% in 2025). | Property acquired and placed in service after January 19, 2025; no end date | Businesses and real estate investors buying property. | 100%. Under the old schedule, 2026 would have been 20%. | 100%. Under the old schedule, 2027 would have been 0%. |
| Section 179 expensing | The Section 179 limit rose to $2,500,000, with the phaseout starting once qualifying purchases pass $4,000,000. | Property placed in service in tax years beginning after December 31, 2024; indexed after 2025 | Businesses buying equipment and qualifying building improvements. | $2,560,000 limit; phaseout begins at $4,090,000 of purchases. SUV cap $32,000. | Indexed for inflation. IRS publishes these in late 2026. |
| Alternative minimum tax | The higher AMT exemption became permanent, but the income level where it starts phasing out was reset lower ($500,000 single, $1,000,000 joint) and the phaseout rate doubled from 25% to 50%. | Tax years beginning after December 31, 2025 | Households with ISO exercises or large AMT preferences above $500,000 single or $1,000,000 joint. | Exemption $90,100 single, $140,200 joint. Fully phased out at $680,200 single and $1,280,400 joint. The 28% AMT rate starts above $244,500. | Exemption indexed; the $500,000 and $1,000,000 thresholds start indexing in 2027. IRS publishes these in late 2026. |
| Estate and gift tax exemption | Instead of falling to roughly half in 2026, the basic exclusion was set at $15,000,000 per person and made permanent, with inflation indexing after 2026. The GST exemption matches it. | Deaths and gifts after December 31, 2025 | Estates and lifetime gifts above $15,000,000 per person. | $15,000,000 per person ($30,000,000 per married couple with portability). Annual gift exclusion $19,000 per recipient. | Indexed from $15,000,000. IRS publishes these in late 2026. |
| Child and dependent care benefits | The child tax credit rose to $2,200 per child and became permanent. The dependent care FSA limit rose from $5,000 to $7,500, and 529 plans can cover up to $20,000 a year of K-12 costs. | Child credit from 2025; FSA and 529 K-12 limit from 2026 | Parents and employers offering dependent care benefits. | Child tax credit $2,200 ($1,700 refundable). Dependent care FSA $7,500. 529 K-12 limit $20,000. | Child tax credit indexed (IRS publishes in late 2026); FSA and 529 limits not indexed. |
| Trump accounts | A new tax-advantaged account for children under 18. Children who are U.S. citizens born from 2025 through 2028 can receive a one-time $1,000 federal deposit. Contributions from family and employers are capped at $5,000 a year combined, and up to $2,500 of that can come from an employer tax-free to the employee. | Accounts opened starting in 2026; contributions began July 4, 2026 | Families with children under 18, and employers. | First contribution year. $5,000 annual limit; $2,500 employer exclusion. | Same $5,000 limit (indexing starts after 2027). |
| Mortgage interest | The $750,000 acquisition debt limit became permanent, and home equity interest stays nondeductible unless the loan buys, builds, or improves the home. Mortgage insurance premiums are deductible as interest again. | Permanent; mortgage insurance from tax years beginning after December 31, 2025 | Homeowners who itemize. | $750,000 limit; mortgage insurance premiums count as interest for itemizers. | Same rules. |
| 1099 reporting thresholds | The Form 1099-NEC and 1099-MISC reporting threshold rose from $600 to $2,000. The Form 1099-K threshold went back to more than $20,000 and more than 200 transactions. | 1099-NEC and MISC: payments after December 31, 2025. 1099-K: retroactive | Businesses that pay contractors. | $2,000 threshold applies to 2026 payments (forms filed in early 2027). | The $2,000 base is indexed. IRS publishes the amount in late 2026. |
| Clean energy credits ended early | Several credits end years ahead of schedule: the new and used EV credits after September 30, 2025; the home efficiency and residential solar credits after 2025; the new energy-efficient home credit (45L) for homes acquired after June 30, 2026; and the 179D commercial building deduction for construction beginning after June 30, 2026. | Dates vary by credit, September 30, 2025 through June 30, 2026 | Homeowners, EV buyers, builders and commercial building owners. | 45L and 179D still available for qualifying homes acquired, or construction begun, by June 30, 2026. | Gone, apart from projects grandfathered under the begin-construction rules. |
| Opportunity zones | The program became permanent with a new rolling design: gains invested after 2026 are deferred five years, with a 10% basis increase (30% for rural funds), and the 10-year tax-free growth benefit stays. Zones are redrawn every 10 years. | New rules for gains invested after December 31, 2026; new zone map effective January 1, 2027 | Investors deferring capital gains. | Old rules still govern 2026 investments, and old-program deferred gains are recognized at the end of 2026. | New zone designations and the rolling deferral begin January 1, 2027. |
Worked example (hypothetical, illustrative round numbers)
How the new SALT cap moves with income, 2025 to 2027
A married couple itemizes and pays more than $40,000 a year of state income and property tax. The SALT cap they can deduct depends on their modified AGI, because the cap shrinks by 30% of MAGI above the threshold ($500,000 in 2025, $505,000 in 2026), never below $10,000.
- Before the 2025 law, any income
- $10,000
- 2026, MAGI $400,000
- $40,400
- 2025, MAGI $530,000: $40,000 minus 30% of $30,000
- $31,000
- 2026, MAGI $530,000: $40,400 minus 30% of $25,000
- $32,900
- 2027, MAGI $530,000, statutory 1% formula
- about $34,800
- 2026, MAGI $580,000: $40,400 minus 30% of $75,000
- $17,900
- 2026, MAGI $650,000
- $10,000 floor
Below the threshold, the cap is four times what it was. In the phasedown band, each extra $1,000 of income removes $300 of deduction, which acts like a higher marginal rate on that income. Above the band, nothing changed. The cap rises 1% a year through 2029 and returns to $10,000 in 2030.
Details on the SALT deduction page.
Illustrative only. Real results depend on your full return, state rules, and facts this example leaves out. It is not a promise of any tax outcome.
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What the 2025 Law Changed, by Audience
Pick the page that matches your situation
The same law reads very differently depending on how you earn. Each page below has its own summary table, worked example and FAQs for 2025, 2026 and 2027.
- Physicians →
W-2 and 1099 doctors: the SALT phasedown band, PTET, QBI for practices, and why the overtime deduction rarely applies.
- Real estate investors →
Permanent 100% bonus depreciation, the excess business loss cap, SALT for landlords, and opportunity zones in 2027.
- Business owners →
Permanent QBI with a wider phase-in, Section 179 and bonus, R&D expensing, PTET, and new W-2 reporting.
- High-income W-2 and equity comp →
The faster AMT phaseout for ISOs, the 2/37 itemized rule, charitable floors, QSBS and RSU withholding.
- Retirees and pre-retirees →
The $6,000 senior deduction, Roth conversions under permanent rates, giving, and estate planning.
The Changes That Reach Almost Everyone
Rates, the standard deduction, and the child tax credit
The 2017 rate cuts were scheduled to expire after 2025. Public Law 119-21 made them permanent: the seven brackets from 10% to 37%, the larger standard deduction, the $750,000 mortgage interest limit, and the repeal of personal exemptions. The standard deduction got an extra bump, to $15,750 single and $31,500 joint for 2025, and is $16,100 and $32,200 for 2026.
The child tax credit is $2,200 per child for 2025 and 2026 ($1,700 refundable in 2026), now permanent and indexed. Charitable rules change for everyone in 2026, as the summary table shows. Our standard deduction guide has the full tables.
The Temporary Deductions: 2025 Through 2028
Tips, overtime, car loan interest, and seniors
Four new deductions run only from 2025 through 2028. All four are available whether or not you itemize, require a valid Social Security number, and require a joint return if you are married. None of their limits or income thresholds are indexed.
- Tips: up to $25,000, phasing out above $150,000 of MAGI ($300,000 joint). How it works.
- Overtime: the FLSA overtime premium, up to $12,500 ($25,000 joint), same phaseout. How it works.
- Car loan interest: up to $10,000 on a new U.S.-assembled vehicle, phasing out above $100,000 ($200,000 joint). How it works.
- Seniors: $6,000 per person 65 or older, phasing out above $75,000 ($150,000 joint). How it works.
What Is New for Tax Year 2026
Rules that apply for the first time this year
Several provisions were written to start in 2026 rather than 2025:
- The charitable changes: the $1,000 / $2,000 non-itemizer deduction, the 0.5% floor, and the 2/37 limit in the 37% bracket.
- The AMT phaseout reset to $500,000 / $1,000,000 at a 50% rate.
- The wider QBI phase-in range and the $400 minimum deduction.
- The $15,000,000 estate and gift exemption.
- The $2,000 threshold for Forms 1099-NEC and 1099-MISC on 2026 payments.
- A $7,500 dependent care FSA limit and a $20,000 annual 529 limit for K-12 costs.
- Trump account contributions, which began July 4, 2026.
- Mortgage insurance premiums deductible as interest again.
Several energy credits went the other way and ended after 2025, and the 45L and 179D incentives end for homes acquired, or construction begun, after June 30, 2026.
What Is Scheduled for 2027 and Later
Indexing, new programs, and the sunset dates
Most 2027 dollar amounts are inflation adjustments: brackets, the standard deduction, AMT exemptions, QBI thresholds, Section 179, the estate exemption, and the excess business loss limit. IRS publishes these in late 2026, usually in an October or November revenue procedure.
Three things are scheduled by statute rather than by inflation tables:
- The SALT cap rises 1% to about $40,804, with the phasedown threshold at about $510,050.
- The redesigned opportunity zone program and a new map of zones start January 1, 2027.
- A federal tax credit of up to $1,700 for gifts to scholarship granting organizations starts January 1, 2027, in states that opt in.
After that: the four temporary deductions end after 2028, the SALT cap returns to $10,000 in 2030, and everything else covered on this page is permanent unless Congress changes it.
States Decide for Themselves
Federal changes do not automatically flow to your state return
Each state chooses whether and when to adopt federal changes. Many states never followed federal bonus depreciation, and the new tips, overtime, car loan and senior deductions are federal deductions that a state may or may not mirror. Expect your state return to differ from the federal one on several of these items. Our bonus depreciation page tracks state conformity for that provision.
Frequently Asked Questions
Tax Law Changes: common questions
What is the One Big Beautiful Bill tax law?
It is Public Law 119-21, signed July 4, 2025. It made the 2017 tax cuts permanent, raised the SALT cap, created temporary deductions for tips, overtime, car loan interest and seniors, restored 100% bonus depreciation, set the estate exemption at $15 million, and changed charitable, AMT and QBI rules. IRS releases in 2026 also refer to it as the Working Families Tax Cuts.
What are the biggest tax law changes for 2026?
For individuals: the charitable changes (a deduction for non-itemizers, a 0.5% floor and a 35% value cap for the top bracket), the faster AMT phaseout, the $15 million estate exemption, and a $40,400 SALT cap. For businesses: the wider QBI phase-in, the $400 minimum QBI deduction, the $2,000 1099 threshold, and new W-2 reporting for tips and overtime.
Which provisions of the 2025 tax law expire?
The tips, overtime, car loan interest and senior deductions apply for 2025 through 2028. The higher SALT cap applies through 2029 and returns to $10,000 in 2030. The brackets, standard deduction, QBI deduction, 100% bonus depreciation and estate exemption are permanent.
When will the IRS publish 2027 tax brackets and limits?
The IRS typically releases the next year’s inflation adjustments in October or November in a revenue procedure. Until then, 2027 amounts are not official; the 2026 figures on this page come from Rev. Proc. 2025-32.
Does the 2025 tax law change my state taxes?
Not automatically. States decide whether to conform to federal changes, and many do not follow federal bonus depreciation or the new federal deductions. Your state return may differ from your federal return on several items.
Is no tax on tips and overtime permanent?
No. Both deductions apply for tax years 2025 through 2028 only, and both phase out above $150,000 of MAGI ($300,000 joint).
Go deeper on a single provision
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Authoritative Sources
- Public Law 119-21 (H.R. 1, 119th Congress), enrolled text on Congress.gov
- IRS: One, Big, Beautiful Bill provisions
- IRS Rev. Proc. 2025-32: 2026 inflation adjustments
- IRS: Tax inflation adjustments for tax year 2026
- IRC Section 164(b)(6) and (b)(7): SALT limitation and phasedown
- IRS Notice 2026-11: interim guidance on 100% bonus depreciation
- IRS: Tax deductions for working Americans and seniors (tips, overtime, car loan interest, seniors)
- IRC Section 151(d)(5)(C): temporary senior deduction
- IRC Section 68: limitation on itemized deductions (2/37 rule from 2026)
- IRC Section 170: charitable contributions, including the 0.5% floor in 170(b)(1)(I)
- IRS: Trump accounts
- IRS Rev. Proc. 2025-28: domestic research expensing under Section 174A
Citations reflect U.S. federal tax law as of the article's last reviewed date.