(Federal-level guidance only)
At HBI, our goal is to help you stay ahead of tax changes so you can plan with clarity and confidence. 2026 was expected to bring a dramatic shift in personal taxes, but the One Big Beautiful Bill (OBBB) signed into law on July 4, 2025, changed that trajectory in important ways.
Below, we’ve outlined the key updates that matter most for individual taxpayers, along with our practical guidance on how to prepare.
1. Your Tax Rates in 2026 Stay Stable — Good News
Under previous law, federal tax rates were scheduled to rise sharply in 2026, with the top rate increasing to 39.6%. That is no longer happening.
What you should know
- The top federal tax rate remains at 37%.
- All seven tax brackets stay in place.
- The income thresholds for each bracket will rise for 2026 due to normal IRS inflation adjustments.
Our guidance
Because tax rates are not increasing:
- There’s no need to rush income into 2025 out of fear of a 2026 rate jump.
- Review your withholding early in 2026 to ensure it reflects the new bracket thresholds.
- If you usually make estimated payments, we’ll help you adjust them for the updated 2026 brackets.
2. The Standard Deduction Remains High — No Cuts Coming
Many people expected the standard deduction to fall almost in half for 2026. OBBB ensures this does not happen.
What you should know
For 2026, the standard deduction increases slightly due to inflation:
- Around $16,000+ for single filers
- Around $32,000+ for married couples
- Around $24,000+ for heads of household
(The IRS will publish final figures later this year.)
Our guidance
- If you normally take the standard deduction, you will continue to do so in 2026.
- If you traditionally itemize (for example, because of mortgage interest or high property taxes), we’ll help you compare both methods to ensure you receive the largest benefit.
3. SALT Deduction Becomes More Generous — With a Few Conditions
Under OBBB, the cap on the State and Local Tax (SALT) deduction increases significantly.
What you should know
- The new SALT cap is $40,000 for married couples filing jointly.
- $20,000 for single filers.
- This benefit slowly phases out for higher-income taxpayers.
Our guidance
If you live in a high-property-tax or high-income-tax state, this is meaningful relief.
We recommend:
- Keeping records of your property tax and state income tax payments.
- Talking to us about whether you should itemize in 2026.
- Letting us model whether the higher SALT cap will lower your tax bill.
4. Child Tax Credit Will Be Higher in 2026
Contrary to earlier expectations, the Child Tax Credit (CTC) does not fall in 2026.
What you should know
- The credit for 2025 is $2,200 per qualifying child.
- It is indexed for inflation starting in 2026, so it will increase slightly.
- Up to $1,700is refundable for many families.
- Income phase-outs remain at $200k (single) and $400k (married filing jointly).
Our guidance
If you have children under 17:
- Expect a slightly larger credit in 2026.
- Update your 2026 W-4 or estimated payments to avoid overpaying or underpaying.
- Families with lower incomes should check eligibility for the refundable portion — we can help with that.
5. Estate & Gift Tax Exemption Remains High
One of the biggest misconceptions about 2026 was that the estate tax exemption would drop sharply.
What you should know
The federal estate tax exemption remains in its expanded form:
- Approximately $15 million per person in 2026 after inflation.
Our guidance
This is reassuring for families:
- You do not face a sudden estate tax cliff.
- Continue with your current estate planning timetable.
- Families with larger estates should still review gifting strategies with us annually.
6. AMT Will Not Expand in 2026
The Alternative Minimum Tax (AMT) threshold does not revert to pre-TCJA levels.
What you should know
2026 AMT exemptions remain high:
- $90,100 single
- $140,200 joint
Our guidance
Most individuals will not be pulled into AMT.
However:
- If you exercise incentive stock options (ISOs), please speak with us before doing so.
- AMT planning is still relevant for higher-income households with large deductions.
7. Medical Expense Deduction Threshold Stays at 7.5%
The AGI threshold for deducting medical expenses remains unchanged.
What you should know
- Medical expenses above 7.5% of your AGI are deductible if you itemize.
Our guidance
If you anticipate significant medical procedures:
- Consider grouping expenses into a single year.
- Health Savings Accounts (HSAs) remain one of the most effective tax tools.
8. Healthcare Premium Tax Credits — Plan Carefully
Marketplace healthcare subsidies continue, but income fluctuations can cause unexpected repayment obligations.
What you should know
Your eligibility for Premium Tax Credits (PTC) depends heavily on your income.
Our guidance
If you use Marketplace coverage:
- Estimate income cautiously.
- Let us run a PTC projection so you do not face a surprise bill at tax time.
- Compare Marketplace plans with employer options each year — many individuals overpay without realizing it.
9. New Temporary Tax Breaks You May Qualify For (2025–2028)
OBBB introduced several new deductions designed to benefit workers:
Tip Income Deduction
- You can deduct up to $25,000 of tip income (subject to income limits).
Overtime Premium Deduction
- The “premium pay” portion of overtime can be deducted
(up to $12,500 single / $25,000 joint).
Auto Loan Interest Deduction
- Up to $10,000 of interest on new personal vehicle loans may be deductible.
Our guidance
If you’re a tipped worker, hourly worker, or planning to buy a car:
- These deductions can meaningfully reduce your taxable income.
- Keep accurate pay records, especially for tips and overtime.
- Ask us to check your eligibility when preparing your return.
10. Retirement & Self-Employment — QBI Deduction Continues
Even if you are not a business owner, you should know:
- The 20% Qualified Business Income (QBI) deduction is now permanent.
Our guidance
If you earn any self-employment income on the side:
- You may qualify for a 20% deduction on that income.
- Even small freelance earnings can benefit from this.
SPECULATIVE ITEMS (NOT LAW TODAY, BUT WORTH WATCHING)
We keep an eye on developing proposals that might affect you:
1. Possible expansion of CTC refundability
Would especially help low-income families. Not enacted yet.
2. Potential changes to ACA subsidy formulas
Could shift Marketplace affordability tests.
3. Capital gains reform discussions
Occasionally proposed, especially for high earners; nothing enacted.
4. Retirement reforms (“SECURE 3.0” concepts)
Ideas include more savings incentives and simpler contribution rules.
If any of these move forward, we will update you promptly.
Our Final Advice for Taxpayers Preparing for 2026
Here are the most important actions we recommend:
✔ Review your withholding in early 2026
IRS will adjust the tax tables — your paycheck may change.
✔ Understand whether you should itemize or take the standard deduction
The SALT cap increase may make itemizing worthwhile again for some households.
✔ Make the most of family-related credits
CTC and Dependent Care Credit rules remain favourable.
✔ Revisit your health insurance choices
Small income changes can impact Premium Tax Credit eligibility.
✔ Track eligibility for the new temporary worker deductions
Tips, overtime, and vehicle loan interest can reduce your taxable income for 2025–2028.
✔ If you’re nearing retirement, evaluate Roth conversions carefully
Urgency around 2026 tax increases has gone — timing decisions now depend on your personal income trend rather than legislation.
At HBI, our role is to help you navigate these changes with clarity. If you’d like us to model how the 2026 rules affect your personal tax outcome, we’re here to support you.
