You might have heard the news: Congress finally reached an agreement, and our income tax system will be changing in some fairly significant ways. But deciphering a 1,000-page law can be a tedious process, and even the experts have yet to comb through the bill’s intricacies. So, most of us aren’t completely sure how the new tax laws will affect us. Here is what we do know, at the moment…
Your basic tax rate might have fallen. The new bill preserved our current seven income brackets (with some changes to their income thresholds). However, the tax rates for some of those brackets was reduced slightly. For example, those in the top bracket now pay at a 37 percent rate, rather than the previous 39.6 percent. Note: these lower rates were originally set to expire at the end of 2025, but the One Big Beautiful Bill Act (OBBBA), signed into law in 2025, made the current seven-bracket structure and rates permanent.
Many deductions were lost or limited. Slightly lower tax rates might sound like good news, but the flip side is that some deductions were eliminated or limited. Of particular concern was the popular deduction for state and local taxes (SALT), which the original 2017 law limited to $10,000. That cap has since changed: OBBBA temporarily raised the SALT deduction cap to $40,400 for 2026 (up from $10,000), rising roughly 1% per year through 2029 before it’s scheduled to revert to $10,000 in 2030. It also phases down for higher earners, starting around $500,000 in income. The mortgage interest deduction remains limited to interest paid on up to $750,000 of home debt; buy a more expensive home, and you can’t deduct the interest on the amount over that limit.
Other deductions were eliminated completely, such as many concerning job expenses or transportation, investment fees, and tax preparation.
But one deduction was expanded. Previously, you could only deduct medical expenses that exceeded 10 percent of your gross income. That threshold was lowered to 7.5 percent under the 2017 tax law, and OBBBA has since made the 7.5 percent threshold permanent.
You might elect to take your standard deduction, anyway. Standard deductions for all filing statuses were nearly doubled from their previous levels. The large majority of taxpayers take the standard deduction rather than itemizing, and the standard deduction for 2026 is $16,100 for single filers and $32,200 for married couples filing jointly (plus an additional temporary ‘senior deduction’ of up to $6,000 for those 65 and older through 2028).
Of course, the best way to assess your own tax situation is to work closely with your tax professional. Each situation is unique, and you need advice geared toward you specifically.
We can also help with tax-friendly financial planning strategies. Call us for an appointment, and we will evaluate options like qualified retirement funds (which can earn you valuable tax deductions) or methods to pursue tax-free income in retirement.