OBBBA 2026: 10 Biggest Tax Changes and How They Affect You
Quick Answer
The One, Big, Beautiful Bill Act (OBBBA) — Public Law 119-21, signed on July 4, 2025 — plus the 2026 inflation adjustments introduce ten changes affecting most taxpayers: (1) Overtime pay deduction (up to $12,500), (2) Car loan interest deduction (up to $10,000), (3) $6,000 senior deduction for age 65+, (4) SALT deduction cap raised to $40,400 for 2026, (5) Estate tax exemption permanently set at $15M per person, (6) 529-to-Roth rollovers (tax-free), (7) QBI deduction made permanent with a new minimum deduction, (8) Standard deduction increases, (9) Catch-up contributions at ages 60-63 under SECURE Act 2.0, and (10) RMD age of 73. Each change provides distinct tax savings for different taxpayer profiles.
Correction notice (updated 30 July 2026). Earlier versions of this page described an estate tax exemption of $13.61M "sunsetting" to about $7M, and misdated the cliff to January 1, 2027. Under TCJA the reversion would in fact have taken effect on January 1, 2026. Either way, that cliff no longer exists: OBBBA set the basic exclusion amount at $15,000,000 per person from 2026 and made it permanent, with inflation indexing beginning in 2027. If you accelerated a large gift on the strength of a deadline, speak to your estate attorney — the deadline was removed by legislation in July 2025.
The 10 Major 2026 Tax Changes
1. Overtime Pay Deduction (OBBBA)
Who benefits: W-2 and self-employed workers who receive qualified overtime compensation.
- What: Deduct the premium portion of overtime required by the Fair Labor Standards Act — the "half" of time-and-a-half, not the whole overtime payment.
- Amount: Up to $12,500 ($25,000 for joint filers).
- Income limit: Phases out above $150,000 MAGI ($300,000 MFJ).
- Years: 2025 through 2028 only.
- Availability: Both itemizers and non-itemizers. You must include your SSN, and file jointly if married.
Action: Your employer reports qualified overtime compensation on your Form W-2 or 1099; use that figure rather than computing it yourself.
2. Car Loan Interest Deduction
Who benefits: Buyers of new personal-use vehicles assembled in the United States.
- What: Deduct interest on a loan used to buy a qualified vehicle. This is not an EV-specific break — the test is US final assembly, not powertrain.
- Amount: Up to $10,000/year of interest.
- Requirements: Loan originated after December 31, 2024; new vehicle (original use starts with you); personal use; secured by a lien on the vehicle; gross vehicle weight rating under 14,000 lb; final assembly in the United States. Leases do not qualify.
- Income limits: Phases out above $100,000 MAGI ($200,000 MFJ).
- Years: 2025 through 2028.
Action: Check final assembly on the window sticker or via the NHTSA VIN Decoder, and put the VIN on your return — it is required.
3. $6,000 Senior Deduction for Age 65+
Two separate things apply at 65, and they are often confused:
The OBBBA senior deduction: $6,000 per qualifying individual aged 65+ ($12,000 for a couple where both qualify), for 2025 through 2028. It phases out above $75,000 MAGI ($150,000 MFJ), and is available whether or not you itemize.
The long-standing additional standard deduction under §63(f): for 2026 that is $2,050 for someone unmarried, or $1,650 per spouse who is 65+ on a joint return. It applies again for blindness.
2026 totals for a standard-deduction filer: single aged 65+ = $16,100 + $2,050 = $18,150; MFJ with both spouses 65+ = $32,200 + $3,300 = $35,500. The $6,000 senior deduction is claimed in addition to these — do not fold it into the standard deduction figure.
Action: Automatic if you're 65 by Dec 31, 2026, and your MAGI is under the threshold; tax software applies it.
4. SALT Deduction Cap Raised to $40,400 for 2026
Who benefits: Residents of high-tax states (CA, NY, NJ, IL, MA) who itemize.
- What: Deduct state/local income tax + property tax (combined).
- Amount: $40,400 for 2026 ($40,000 for 2025), rising 1% a year through 2029 — then back to $10,000 in 2030.
- Income limit: The cap is reduced by 30% of MAGI above $505,000 in 2026, but never below $10,000. A single filer with $600,000 of MAGI loses 30% × $95,000 = $28,500, leaving a $11,900 cap.
- Tax savings: $3,000–$12,000+ for affected filers.
Action: Sum state income tax + property tax; compare itemized deductions to the $16,100 / $32,200 standard deduction.
5. Estate Tax Exemption Permanently Set at $15M
Who benefits: High-net-worth individuals and couples.
- What: You can transfer $15,000,000 per person — $30,000,000 for a married couple — free of federal estate and gift tax. The generation-skipping transfer exemption is the same $15,000,000.
- Permanence: OBBBA set this figure and made it permanent. There is no 2027 cliff; the amount is inflation-indexed starting in 2027.
- Annual gift exclusion: $19,000 per recipient for 2026, unchanged from 2025 and separate from the lifetime exclusion.
- Top estate tax rate: 40%.
Action: Estate planning is no longer deadline-driven. Review your plan on its merits, not against an expiry date.
6. 529-to-Roth Rollover (Tax-Free)
Who benefits: Families with excess 529 college savings.
- What: Roll unused 529 balances to the beneficiary's Roth IRA — up to $7,500 in 2026, and $35,000 over the beneficiary's lifetime.
- Requirements: The 529 must have been maintained 15+ years; the beneficiary needs earned income at least equal to the rollover; the rollover shares the annual IRA limit with any regular IRA contributions the beneficiary makes.
- Origin: SECURE 2.0 (December 2022), effective for distributions after 2023 — not an OBBBA provision.
Action: Check the 529 opening date; if 2011 or earlier, it clears the 15-year test in 2026.
7. QBI Deduction Made Permanent
Who benefits: Self-employed, business owners, partners.
- What: Deduct up to 20% of qualified business income (QBI). OBBBA made §199A permanent rather than letting it expire after 2025.
- New for 2026: a $400 minimum deduction if you have at least $1,000 of QBI from an active trade or business.
- 2026 thresholds: phase-in begins at $403,500 (MFJ), $201,750 (all other returns), $201,775 (MFS), and completes $150,000 / $75,000 higher.
- Tax savings: $3,000–$20,000+ depending on business income.
Action: Work with a CPA to calculate QBI on Schedule C or K-1.
8. Standard Deduction Increases (Inflation-Adjusted)
Who benefits: All taxpayers (standard deduction filers).
- What: Standard deduction adjusts for inflation. OBBBA also made the higher TCJA-era amounts permanent, so there is no reversion to pre-2018 levels.
- 2026 amounts: $16,100 (single and MFS), $32,200 (MFJ), $24,150 (HoH).
- vs. 2025: up from $15,750 / $31,500 / $23,625 — about 2.2%.
- Tax savings: ~$77–$154 at 22% rate.
Action: Automatic; tax software includes updated deduction.
9. Age 60-63 Catch-Up Contributions (SECURE Act 2.0)
Who benefits: Employees aged 60, 61, 62 and 63.
- What: A larger catch-up contribution for four years only.
- How it works: the ages 60-63 catch-up replaces the age-50 catch-up — it does not stack on top of it. For 2026 the age-50 catch-up is $8,000 and the ages 60-63 catch-up is $11,250.
- 2026 maximums: $24,500 + $8,000 = $32,500 at ages 50-59 and 64+; $24,500 + $11,250 = $35,750 at ages 60-63. At 64 you drop back to $32,500.
- Tax savings: the extra $3,250 of room at ages 60-63 is worth $780 a year at a 24% marginal rate; the full catch-up of $11,250 is worth $2,700.
- Roth requirement: if your prior-year wages from that employer exceeded $150,000, your catch-up contributions must be designated Roth.
Action: Ask your employer whether your 401(k) plan has adopted the age-60-63 provision (not all have).
10. RMD Age of 73
Who benefits: Retirees with IRAs and 401(k)s.
- What: Required Minimum Distributions begin at age 73, not 72. This is a SECURE 2.0 change that took effect in 2023, not a new 2026 provision — it is here because it still governs 2026 planning. The age rises again to 75 in 2033.
- Benefit: One more year of tax-deferred growth than under the old rule.
- Tax savings: $2,000–$10,000+ depending on portfolio size (avoided RMD tax).
- Applies to: Traditional IRAs, SEP-IRAs, 401(k)s, 403(b)s.
Action: Coordinate Roth conversions before age 73 to minimize RMD burden later.
Summary Table: 2026 Tax Changes Impact
| Change | Who Benefits | Tax Savings | Action by |
|---|---|---|---|
| Overtime deduction | Overtime earners, MAGI <$150K ($300K MFJ) | Up to $12,500 deducted | Claim on Sch 1 |
| Car loan interest | Buyers of new US-assembled vehicles, MAGI <$100K ($200K MFJ) | Up to $10,000 of interest deducted | Gather loan statements, record the VIN |
| $6,000 senior deduction | Age 65+, MAGI <$75K ($150K MFJ) | $6,000 per person deducted | Automatic in software |
| SALT cap $40,400 | High-tax state residents who itemize | $3K–$12K+ | Itemize, gather tax docs |
| Estate tax $15M/person | Estates above $15M | 40% rate avoided on sheltered amounts | Review plan; no deadline |
| 529-to-Roth | Excess college savings | Tax-free Roth growth | $7,500 in 2026, $35,000 lifetime |
| QBI deduction | Business owners | $3K–$20K+ | Work with CPA |
| Standard deduction increase | All filers | $77–$154 | Automatic |
| Age 60-63 catch-up | Ages 60-63 | $780/yr more than the age-50 catch-up | Ask employer |
| RMD age 73 | Age 73+, retirement accounts | $2K–$10K+ | Plan Roth conversions |
Filing Timeline for 2026 Tax Year
January 2026:
- Track income sources (W-2s, 1099s, K-1s).
- Document itemizable expenses (SALT, charitable, mortgage interest).
- If self-employed: Track QBI-eligible income and deductions.
By June 2026:
- Increase 401(k) contributions if aged 60-63 (the $11,250 catch-up replaces the $8,000 one).
- Max out the age 50+ catch-up if you are 50-59 or 64+.
- If your estate exceeds $15M per person: consult an estate attorney. There is no longer a year-end deadline.
By September 2026:
- Review estimated tax payments (quarterly dates: Apr 15, Jun 15, Sep 15, Jan 15).
- Set up 529-to-Roth rollover (direct transfer) if eligible.
By December 2026:
- Confirm all year-end income and deductions.
- Finalize Roth conversions before Dec 31.
- Make final charitable contributions if planning to itemize.
By March 2027:
- Gather all tax documents (W-2s, 1099s, K-1s, loan interest statements).
- Organize receipts and documentation (SALT, charitable, mortgage).
By April 15, 2027:
- File 2026 tax return with all eligible deductions.
- File Form 709 (if you made gifts to any one person above the $19,000 annual exclusion).
Real-World Example: Impact on a Typical Family
Family Profile:
- Married couple, both age 50.
- W-2 income: $200,000.
- Self-employed side income: $50,000.
- Rental property income: $30,000.
- Live in California.
- Net worth: $5 million.
2026 Tax Impact:
Their taxable income is around $240,000, which puts them in the 24% MFJ bracket for 2026 ($211,401–$403,550). Every figure below uses that rate.
| Provision | Applicable? | Benefit | Tax Savings |
|---|---|---|---|
| Overtime deduction | No (salaried) | — | $0 |
| Car loan interest | No | — | $0 |
| $6,000 senior deduction | No (not yet 65) | — | $0 |
| SALT deduction ($40,400 cap) | Yes | CA income tax ~$25K + property tax ~$12K = $37K deductible, vs $10K under the old cap — $27,000 of extra deduction | $6,480 |
| Estate tax exemption | No (net worth well under $15M) | — | $0 |
| 529-to-Roth | No (kids in college) | — | $0 |
| QBI deduction | Yes | 20% × $50K self-employment = $10K deduction | $2,400 |
| Standard deduction increase | N/A (itemizing) | SALT covers it | Part of SALT savings |
| Age 50+ catch-up | Yes | $8,000 of extra 401(k) room (they are 50, not 60-63, so the $11,250 tier does not apply) | $1,920 |
| RMD age 73 | No (decades away) | — | $0 |
| Total Tax Savings | $10,800 |
This family saves $10,800 by taking advantage of 2026 provisions (mostly the SALT cap expansion, plus QBI and catch-up contributions).
Coordination and Planning Gotchas
Gotcha 1: SALT Cap Interacts with Other Phase-Outs
Lowering AGI via SALT deduction can affect:
- Medicare IRMAA thresholds (benefits possible).
- Net Investment Income Tax thresholds.
- Education credit eligibility.
Action: Calculate full return impact, not just the SALT savings.
Gotcha 2: The Estate Tax Sunset You May Have Been Told About Was Repealed
Before July 2025 the exemption was scheduled to be roughly halved on January 1, 2026 when the TCJA provisions expired. OBBBA cancelled that. The basic exclusion amount is $15,000,000 per person, permanently, indexed from 2027.
The real gotcha is now the opposite one: advice written before July 2025 — including earlier versions of this page — still describes a deadline that does not exist, and some of it recommends irreversible gifting to beat it.
Action: Date-check any estate planning advice you are relying on. If it mentions a 2026 cliff or a ~$7M figure, it predates the law.
Gotcha 3: The Ages 60-63 Catch-Up Replaces the Age-50 One, and Requires a Plan Amendment
Two traps here. First, the $11,250 catch-up at ages 60-63 is instead of the $8,000 age-50 catch-up, not in addition to it — the maximum deferral is $35,750, not $43,750. Second, not all 401(k)s have adopted the provision; your employer's plan must include it.
Action: Ask HR/benefits whether your plan allows the age-60-63 catch-up, and check whether your prior-year wages exceeded $150,000 (if so, your catch-up must be Roth).
Gotcha 4: 529-to-Roth Requires 15-Year-Old Account
If your 529 opened after 2011, you can't do a Roth rollover yet.
Action: Check opening date; plan accordingly.
FAQ
Q: Can I claim all 10 changes? A: Unlikely. Most taxpayers benefit from 5–7, depending on situation. For example, a rural single young worker may only benefit from standard deduction + RMD rules (when they eventually retire). A high-income CA couple benefits from SALT, QBI, catch-up contributions, and estate tax planning.
Q: If I don't take advantage of these in 2026, can I use them later? A: Most are annual provisions, but several have end dates:
- Overtime deduction: each year 2025 through 2028 only.
- Car loan interest: each year 2025 through 2028 only.
- $6,000 senior deduction: each year 2025 through 2028 only.
- SALT: each year, but the cap steps up only 1% a year through 2029 and then drops back to $10,000 in 2030.
- Standard deduction: each year (increases with inflation; the higher amounts are now permanent).
- RMD age 73: ongoing (rises to 75 in 2033).
- Estate tax $15M per person: permanent, and indexed for inflation from 2027. There is no expiry to plan around.
Q: Do these changes affect state taxes? A: Some do:
- Overtime deduction: Federal only (most states don't conform).
- SALT deduction: Federal only (doesn't reduce state tax owed).
- QBI: Most states conform; consult state CPA.
- Estate tax exemption: Federal only (states have separate estate taxes).
Q: Should I do all of these or just a few? A: Prioritize based on income and situation:
- Overtime earner: Overtime deduction (#1) — but note it ends after 2028.
- High-tax state, high income: SALT cap (#4) — it reverts to $10,000 in 2030.
- Business owner: QBI deduction (#7).
- Age 60-63: Catch-up contributions (#9).
- Estates above $15M per person: estate planning (#5), now without a deadline.
Bottom Line
The One, Big, Beautiful Bill Act (P.L. 119-21, signed July 4, 2025) and the 2026 inflation adjustments offer substantial tax savings for most households—if you know about them and plan accordingly. The genuinely time-limited items are the four new deductions that expire after 2028 (overtime, tips, car loan interest, and the $6,000 senior deduction) and the SALT cap, which reverts to $10,000 in 2030. The estate tax exemption is not on that list: it is permanent at $15M per person, and any advice telling you to gift before a 2026 or 2027 deadline is out of date. For everyone else, optimize around your specific situation: itemization vs. standard deduction, business income treatment, and catch-up contributions. Work with a CPA to coordinate all provisions.
Sources: IRS Fact Sheet FS-2025-03 (overtime, car loan interest, senior deduction); 26 U.S.C. §164(b)(7) as amended by OBBBA §70120 (SALT); Rev. Proc. 2025-32 (2026 standard deduction, estate exclusion, QBI thresholds, gift exclusion); Notice 2025-67 (2026 retirement plan limits).