Beginning in tax year 2026, several significant federal tax changes enacted under the One Big Beautiful Bill will take effect, reshaping deductions, credits, and planning opportunities for individuals, families, and business owners. Many of these provisions are permanent, making them especially important for long-term tax and financial planning.
Private Mortgage Insurance (PMI) Deduction
Private mortgage insurance (PMI) premiums will once again be treated as deductible mortgage interest beginning in 2026, providing additional relief for homeowners who carry PMI.
Expanded Charitable Giving Opportunities
Charitable contributions receive several enhancements starting in 2026. Taxpayers who do not itemize deductions will permanently regain a partial charitable contribution deduction for cash gifts. The maximum deduction is $1,000 for single filers and $2,000 for married couples filing jointly.
Itemized Deductions and the Return of Limitations
Beginning in 2026, a Pease-like limitation (a new itemized deduction limitation framework) reduces itemized deduction benefits for certain high-income taxpayers.
Expanded Educator Expenses
Beginning in 2026, the educator expense deduction is expanded by removing the cap, but the benefit is generally tied to itemizing (Schedule A), which may limit its value for taxpayers who take the standard deduction. Teachers may deduct up to $300 annually without itemizing.
Expanded Section 529 Plan Benefits
Section 529 education savings plans see a major expansion starting in 2026. The annual qualified expense cap increases from $10,000 to $20,000 and is broadened to include additional K-12 and homeschool expenses. Qualified expenses now also include trade certifications, vocational training, and continuing education required to maintain professional credentials, significantly expanding the usefulness of 529 plans beyond traditional college costs.
Flexible Spending Account Increases
For dependent care flexible spending accounts, contribution limits increase beginning in 2026. Taxpayers may contribute up to $7,500 annually, while married couples filing separately are limited to $3,750. These accounts continue to operate under the “use-it-or-lose-it” rule. No changes apply for tax year 2025.
Alternative Minimum Tax Permanency
The higher AMT exemptions previously set scheduled to sunset in 2026 have been made permanent. The law makes the higher AMT exemption framework permanent but tightens phaseout mechanics for higher-income taxpayers, with phaseout thresholds commonly cited around $500,000 (single) and $1,000,000 (joint), and a steeper phaseout rate.
Estate and Gift Tax Exemption Expansion
One of the most impactful changes for high-net-worth families takes effect in 2026: the federal estate and gift tax exemption increases to $15 million per individual, indexed for inflation, and is made permanent. This significantly expands wealth transfer planning opportunities and reduces uncertainty around future exemption levels.
Casualty Loss Deduction Limitations
The limitation on personal casualty loss deductions to federally declared disasters is made permanent starting in 2026. In addition, casualty losses related to certain state-declared disasters may now qualify if federal severity criteria are met, modestly expanding relief eligibility.
Gambling Loss Deduction Limitation
Beginning in 2026, gambling losses are capped at 90% of gambling winnings. While losses remain deductible only up to winnings, this change effectively ensures that at least 10% of gambling winnings remain taxable, even for taxpayers with offsetting losses.
ABLE Account Enhancements
ABLE accounts are permanently extended starting in 2026. In addition, contributions to ABLE accounts now qualify for the Saver’s Credit, enhancing their value as a savings and planning tool for eligible individuals with disabilities. Separate legislation also expands ABLE eligibility beginning in 2026 (including a higher age-of-onset limit), which may broaden who can use these accounts.
Student Loan and Employer Assistance Reform
Employer-provided student loan repayment assistance is made permanently excludable from income, subject to a $5,250 annual limit. Beginning July 1, 2026, the program begins transitioning toward two core repayment options, including a new Repayment Assistance Plan (RAP), with phase-ins and transition rules for existing borrowers. Public service loan forgiveness remains available under the new system.
Updated 1099-NEC & 1099-MISC Reporting Thresholds
For Forms 1099-NEC and 1099-MISC, the reporting threshold increases from $600 to $2,000 beginning in 2026. Starting in 2027, this threshold will be indexed annually for inflation, reducing reporting burdens for small-dollar payments over time.
Qualified Business Income Deduction Enhancements
The qualified business income deduction (QBID) is extended and enhanced beginning in 2026. Phase-in thresholds for income-based limitations increase to $75,000 for single filers and $150,000 for married couples filing jointly. In addition, qualifying active businesses are eligible for a guaranteed minimum QBID of $400, provided the taxpayer has at least $1,000 of qualified business income and materially participates in the business.
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