OBBBA changes to keep an eye on for 2026

Published July 14, 2026 9:30 AM

1 Min Read

Taxpayers and tax professionals have already dealt with many changes from the One Big Beautiful Bill Act on 2025 tax returns. However, many OBBBA provisions are effective for the first time in 2026. Other provisions that impacted 2025 returns have differing impacts in 2026. This does not even include those OBBBA provisions that simply extended or made permanent provisions of the Tax Cuts and Jobs Act that had been scheduled to expire at the end of 2025.

Below are some of the more significant OBBBA changes that are effective for 2026.

INDIVIDUAL: 2026 charitable contributions

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Several OBBBA charitable contribution changes became effective for 2026. For tax years beginning after Dec. 31, 2025, non-itemizers can claim a deduction of up to $1,000 for single taxpayers ($2,000 for married filing jointly). The deduction is a below-the-line deduction, after calculation of adjusted gross income.

For itemized charitable deductions, a new 0.5% floor applies on charitable contributions for tax years beginning after Dec. 31, 2025.

The limit on charitable contribution deductions with respect to expensing related to subsistence bowhead whaling activities by native Alaskans is also increased from $10,000 to $50,000 starting in 2026.

Itemized deduction limitation

A provision in OBBBA effective for tax years beginning after Dec. 31, 2025, limits the benefit of the overall itemized deduction for taxpayers in the 37% tax bracket to only a benefit as if in the 35% tax bracket.

Estate and gift tax exclusion

For decedents dying and gifts made after Dec. 31, 2025, the estate and gift tax exclusion amount is set at $15 million for 2026 and adjusted for inflation in later years.

Excise tax on overseas remittances

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A new 1% excise tax is imposed on certain remittance transfers made after Dec. 31, 2025. The excise tax applies only to transfers of cash or similar instruments.

Trump accounts

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Although eligible children born in 2025 through 2028 can receive a $1,000 federal government contribution to a Trump account, and taxpayers filing 2025 tax returns could submit a Form 4547 with the return to set up a Trump account, Trump accounts could not officially be put into operation until July 4, 2026.

The $5,000 annual contribution limit applies starting in 2026. Contributions to Trump accounts can be made for qualifying children under age 18. Contributions from employers, state and local governments, or charitable organizations count toward the $5,000 annual contribution limit. The IRS has recently clarified how contributions are treated for gift tax purposes.

529 plan withdrawals

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Although several OBBBA expansions of expenses eligible for qualified 529 plan distributions were available starting July 4, 2025, the expansion of distributions for K-12 expenses from $10,000 to $20,000 was effective for tax years beginning after Dec. 31, 2025.

Gambling loss limitation

For tax years beginning after 2025, gambling losses are limited to 90% of the amount of losses incurred that do not exceed gambling winnings. Congress has considered eliminating this limit but has not yet done so.

Itemized deduction for educator expenses

In addition to the continuing above-the-line deduction for our-of-pocket teacher expenses, beginning in tax years after 2025, an itemized deduction is allowed for educator expenses.

Dependent care assistance

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Effective for tax years beginning after 2025, the dependent care assistance limit is increased to $7,500 from $5,000.

High-deductible health plans

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Effective after 2025, bronze and catastrophic plans can be treated as high-deductible health plans. Also, after 2025, individuals with a high-deductible health plan can enroll in a direct primary care arrangement.

Child and Dependent Care Credit

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After 2025, the maximum Child and Dependent Care Credit percent is increased to 50% from 35%.

AOTC and Lifetime Learning Credit

Effective after 2025, a Social Security number is required for any child with respect to which the American Opportunity Tax Credit or Lifetime Learning Credit is claimed.

BUSINESS AND CORPORATE: Qualified tip and overtime reporting

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The new deductions for qualified tips and qualified overtime were effective for 2025. However, the IRS gave business and employers a one-year grace period for reporting qualified tips and overtime to their employees. Employers should be making sure their payroll systems are capable of isolating what constitutes qualified tips and qualified overtime under OBBBA and IRS guidance and make sure they are ready to report these sums on Form W-2, Box 12 – Code TP for qualified tips and TT for qualified overtime.

Corporate charitable contribution limit

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For tax years beginning after Dec. 31, 2025, a corporation is allowed a charitable contribution deduction only to the extent that the total charitable contributions exceed one percent of the corporation's taxable income. The 10% limitation on corporate charitable contribution deductions was retained.

Code Sec. 179 expensing

The limits on Code Sec. 179 expensing are increased for 2026 to a $2.5 million expensing limit and a $4 million investment limit. The numbers are adjusted for inflation after 2026.

Bonus depreciation for sound recordings

The special expensing provision for qualified film and television productions is expanded to apply to qualified sound recording productions commencing in tax years that end after July 4, 2025. However, property qualifying for bonus depreciation is only expanded to include qualified sound recording produced after 2025.

Clean energy tax break phase-outs

The OBBBA phase-out of various clean energy tax breaks from the Inflation Reduction Act continues, with some provisions already phased out and other provisions phasing out through 2026 and later years. The energy efficient commercial building deduction expires for property beginning construction after June 30, 2026.

With respect to the Clean Electricity Production Credit, the amendments relating to the restrictions on construction of a qualified facility including material assistance from a prohibited foreign entity apply to facilities for which construction begins after Dec. 31, 2025.

With respect to the Advance Manufacturing Investment Credit, the increase in the credit percentage to 35% from 25% applies to property placed in service after Dec. 31, 2025.

With respect to the Clean Fuel Production Credit, the amendments relating to the determination of emissions rates apply to emission tables published for tax years beginning after Dec. 31, 2025. Also, the amendments terminating the special credit rates for sustainable aviation fuels apply to fuels produced after Dec. 31, 2025.

The Alternative Fuel Vehicle Refueling Property Credit terminated after June 30, 2026.

Employee compensation deduction limit

After Dec. 31, 2025, a new aggregation rule applies to the $1 million limit on deducting employee compensation.

International tax provisions

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The several changes to the international tax provisions in OBBBA generally apply to tax years beginning after Dec. 31, 2025.

Publicly traded partnerships

An expansion of qualifying income of publicly traded partnerships is effective after 2025.

Residential construction contracts

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The percentage of completion method is no longer required for residential construction contracts for tax years beginning after 2025.

Reporting requirements

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For payments made after Dec. 31, 2025, the dollar threshold for Forms 1099-MISC and 1099-NEC is increased from $600 to $2,000.

The OBBBA also restored retroactively the $20,000 gross receipts and 200 transactions tests for Form 1099-K reporting requirements for third-party payment providers. There was no penalty for overreporting for 2025 if businesses did not adjust their systems in time. The IRS had been gradually lowering the threshold to delay going to a $600 threshold, with $2,500 selected for 2025. Third-party payment providers now officially can use the new $20,000 gross receipts and 200 transactions test for 2026.