OBBBA 2026: 10 Biggest Tax Changes and How They Affect You
Quick Answer
The Opportunity for Broader Business-by-Business Advancement (OBBBA) and related 2026 tax provisions introduce ten major changes affecting most taxpayers: (1) Overtime pay deduction ($4,160 avg), (2) Car loan interest deduction ($1,500 cap), (3) $6,000 senior deduction for age 65+, (4) SALT deduction raised to $40,000, (5) Estate tax exemption of $13.61M (sunsets 2027), (6) 529-to-Roth rollovers (tax-free), (7) QBI deduction expansion, (8) Standard deduction increases (inflation), (9) Catch-up contributions at age 60-63 under SECURE Act 2.0, and (10) RMD age increases to 73. Each change provides distinct tax savings for different taxpayer profiles.
The 10 Major 2026 Tax Changes
1. Overtime Pay Deduction (OBBBA)
Who benefits: W-2 hourly workers earning overtime.
- What: Deduct overtime premium (1.5× rate difference) above $40 hours/week.
- Amount: $3,000–$5,000 average deduction.
- Income limit: Under $125,000 (single), $200,000 (MFJ).
- Tax savings: ~$600–$1,100 at typical rates.
Action: Document overtime hours on pay stubs; multiply by premium rate.
2. Car Loan Interest Deduction
Who benefits: EV/PHEV/efficient combustion car buyers with loans.
- What: Deduct interest paid on loans for new vehicles (2023–2026 purchase).
- Amount: Up to $1,500/year.
- Requirements: New vehicle only, qualified lender, efficiency standards met.
- Income limits: Phase-out starts $100K (single), $160K (MFJ).
- Tax savings: ~$330–$360/year.
Action: Gather loan statements; confirm vehicle is new and meets efficiency standards.
3. $6,000 Senior Deduction for Age 65+
Who benefits: Retirees age 65+.
- What: Additional standard deduction ($1,950 single, $1,550 per spouse MFJ).
- Amount: Total standard deduction $16,550 (single), $32,300 (MFJ, both 65+).
- Income limit: None.
- Tax savings: $200–$400/year depending on income level.
Action: Automatic if you're 65 by Dec 31, 2026; tax software applies it.
4. SALT Deduction Cap Raised to $40,000
Who benefits: Residents of high-tax states (CA, NY, NJ, IL, MA).
- What: Deduct state/local income tax + property tax (combined).
- Amount: Up to $40,000/year (vs. $10,000 previously).
- Income limit: None.
- Tax savings: $3,000–$15,000+ for affected filers.
Action: Sum state income tax + property tax; compare itemized deductions to standard deduction.
5. Estate Tax Exemption Remains at $13.61M (2026 Only)
Who benefits: High-net-worth individuals ($7M+) and couples ($14M+).
- What: Can give away $13.61M (individual) or $27.22M (couple) tax-free in 2026.
- Sunset: Exemption drops to ~$7M on Jan 1, 2027 (cliff drop).
- Action needed NOW: Make large gifts in 2026 to lock in exemption.
- Tax savings: $2M–$10M+ depending on gifting strategy.
Action: Consult estate attorney immediately if net worth $7M+.
6. 529-to-Roth Rollover (Tax-Free)
Who benefits: Families with excess 529 college savings.
- What: Roll unused 529 balances to Roth IRA ($7,000/year limit).
- Requirements: 529 account 15+ years old; tax-free rollover.
- Tax savings: Roth earnings grow tax-free (lifetime).
Action: Check 529 opening date; if 2011 or earlier, eligible for rollovers.
7. QBI Deduction Expansion
Who benefits: Self-employed, business owners, partners.
- What: Deduct up to 20% of qualified business income (QBI).
- Changes in 2026: Enhanced limits for pass-through entities; simplified depreciation rules.
- Income limit: Phase-outs start $230K (MFJ), $182.5K (single), vary by entity type.
- Tax savings: $3,000–$20,000+ depending on business income.
Action: Work with 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.
- 2026 amounts: $14,600 (single), $29,200 (MFJ), $21,900 (HoH).
- vs. 2025: Increase ~$600–$800 depending on filing status.
- Tax savings: ~$130–$175 at 22% rate.
Action: Automatic; tax software includes updated deduction.
9. Age 60-63 Catch-Up Contributions (SECURE Act 2.0)
Who benefits: Ages 60, 61, 62, 63 with high income.
- What: Contribute additional $5,000–$10,000 to 401(k) beyond catch-up limits.
- Age trigger: At age 60, you can start increased contributions (vs. previously age 50).
- Limit: Additional $7,500 beyond age 50+ catch-up (total $38,500 at age 60+).
- Tax savings: $1,650–$2,310 per year in tax deduction value.
Action: Ask employer if your 401(k) plan allows age-60+ provisions (not all do).
10. RMD Age Increased to 73 (from 72)
Who benefits: Retirees with IRAs and 401(k)s.
- What: Delay Required Minimum Distributions (RMDs) until age 73 (vs. 72).
- Benefit: One more year of tax-deferred growth.
- 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 | Hourly workers, <$125K income | $600–$1,100 | Claim on Sch 1 |
| Car loan interest | EV buyers, <$150K income | $330–$360/yr | Gather loan statements |
| Age 65+ deduction | Retirees 65+ | $200–$400 | Automatic in software |
| SALT cap $40K | High-tax state residents | $3K–$15K+ | Itemize, gather tax docs |
| Estate tax $13.61M | Net worth $7M+ | $2M–$10M+ | Gift in 2026, consult attorney |
| 529-to-Roth | Excess college savings | Tax-free Roth growth | Roll by year-end 2026 |
| QBI deduction | Business owners | $3K–$20K+ | Work with CPA |
| Standard deduction increase | All filers | $130–$175 | Automatic |
| Age 60-63 catch-up | Ages 60-63, high income | $1,650–$2,310/yr | Ask employer |
| RMD age 73 | Age 72+, 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 age 60+ (maximize catch-up).
- Max out age 50+ catch-up in traditional accounts.
- If net worth $7M+: Consult estate attorney for gifting strategy.
By September 2026:
- Review estimated tax payments (quarterly dates: Apr 15, Jun 15, Sep 15, Jan 15).
- Execute large gifts (if planning for estate tax exemption sunset).
- 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 made large gifts >$18K 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:
| Provision | Applicable? | Benefit | Tax Savings |
|---|---|---|---|
| Overtime deduction | No (salaried) | — | $0 |
| Car loan interest | No | — | $0 |
| Age 65+ deduction | No (not yet 65) | — | $0 |
| SALT deduction ($40K) | Yes | CA income tax ~$25K + property tax ~$12K = $37K deductible | $6,660 (at 24% rate) |
| Estate tax exemption | No (under $7M) | — | $0 |
| 529-to-Roth | No (kids in college) | — | $0 |
| QBI deduction | Yes | 20% × $50K self-employment = $10K deduction | $2,200 (at 22% rate) |
| Standard deduction increase | N/A (itemizing) | SALT covers it | Part of SALT savings |
| Age 60+ catch-up | Yes | Contribute extra $7,500 to 401(k) | $1,650–$1,800 (tax deduction value) |
| RMD age 73 | No (not 72 yet) | — | $0 |
| Total Tax Savings | ~$10,710 |
This family saves over $10,700 by taking advantage of 2026 provisions (mostly SALT cap expansion + QBI + 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: Estate Tax Exemption Sunsets Dec 31, 2026
The $13.61M exemption is gone after 2026. If you're planning a $10M+ gift, it MUST close before Jan 1, 2027, or you lose the exemption forever.
Action: Don't procrastinate; execute by Dec 15, 2026.
Gotcha 3: Age 60+ Catch-Up Requires Employer Plan
Not all 401(k)s support age 60-63 increased contributions. Your employer plan must adopt this provision.
Action: Ask HR/benefits department if your plan allows age-60+ provisions.
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:
- Overtime deduction: Yes, each year (if you earn overtime).
- SALT: Yes, each year (annual deduction).
- Standard deduction: Yes, each year (increases with inflation).
- RMD age 73: Yes, ongoing (applies to all age 73+).
- Estate tax $13.61M: NO. Once Jan 1, 2027 arrives, the exemption drops to $7M permanently.
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:
- High net worth ($7M+): Estate planning (#5) is urgent.
- Hourly worker: Overtime deduction (#1).
- High-tax state, high income: SALT cap (#4).
- Business owner: QBI deduction (#7).
- Age 60-63: Catch-up contributions (#9).
Bottom Line
2026 is a banner year for tax changes. The OBBBA and other provisions offer substantial tax savings for most households—if you know about them and plan accordingly. The critical change is the estate tax exemption cliff at year-end 2026 (this is urgent for wealthy families). For everyone else, optimize around your specific situation: itemization vs. standard deduction, business income treatment, catch-up contributions, and strategic gifting. Work with a CPA or tax professional to coordinate all provisions and maximize your 2026 tax benefits.