06 Feb RECENT TAX LAW CHANGES AND WHAT THEY MEAN FOR YOU

As we enter the 2026 tax season, several major changes in federal tax law are now in effect that could impact individuals, families, and small business owners alike. Much of this stems from the sweeping tax legislation enacted in 2025 — often referred to as the One Big Beautiful Bill Act — along with updates from the IRS and inflation-driven adjustments to tax brackets and deductions.

1. Permanent TCJA Extensions & Modified Provisions

The new legislation extends many Tax Cuts and Jobs Act (TCJA) provisions that were set to expire at the end of 2025 — but with important enhancements:

• Tax rates and brackets originally lowered by the TCJA are now made permanent, avoiding rate increases slated for 2026.
• The standard deduction continues at higher levels (e.g., $15,750 for singles; $31,500 for joint filers), which reduces taxable income for most households.
• The child tax credit has been raised and remains adjusted for inflation.

These extensions provide greater certainty for taxpayers and help many families keep more of their earnings each year.

2. Expanded Deductions & Credits for Individuals

Several new or expanded deductions can affect your 2025 return:

• Expanded SALT Deduction Cap — The cap on state and local tax deductions increased substantially (up to $40,000 for many taxpayers through 2029), offering relief in high-tax states.
• Tip and Overtime Deductions — Eligible tipped workers and hourly employees can now claim new “above-the-line” deductions for reported tip income and overtime pay up to certain limits.
• Elderly Tax Deduction — Seniors (65+) may qualify for additional deductions in recognition of fixed or retirement income.

These changes can lower taxable income and result in higher take-home refunds for qualifying individuals.

3. Small Business & Entrepreneur Benefits

Small business owners and self-employed taxpayers are also seeing meaningful tax changes:

• Permanent Qualified Business Income (QBI) Deduction: The popular 20% deduction for pass-through business income (LLCs, S-Corps, sole proprietors) is now permanent, offering ongoing tax relief.
• Bonus Depreciation & Expensing: Businesses can deduct 100% of the cost of qualifying equipment and property immediately in the year it’s placed in service — a valuable benefit for capital investments.
• Increased 1099-Informing Thresholds: Thresholds for certain IRS reporting forms (such as 1099-K) for small online sellers and contractors remain relaxed, reducing paperwork burdens.

These provisions help reduce tax burdens, support business growth, and improve cash flow for reinvestment.

4. IRS Updates & Filing Considerations

Alongside legislative changes, IRS operations and tax filing processes are evolving:

• The IRS has discontinued its Direct File tool, pushing many taxpayers to alternative e-filing services.
• Inflation-adjusted tax brackets, credit limits, and deduction levels have been updated for 2026, which affects how much tax you owe in future years.
• Ongoing IRS workforce reductions may affect customer service and processing times, so filing early and carefully reviewing returns is recommended.

What This Means for You

These tax law changes present both opportunities and complexities for individuals and small business owners:
✅ Many taxpayers will benefit from higher deductions and credits
✅ Small businesses have greater flexibility and immediate tax relief
⚠️ Some provisions introduce new forms or filing steps that require careful planning

Tip for Tax Season

Always consult with a tax professional or trusted advisor to ensure you understand how specific changes apply to your situation — especially if you’re self-employed, own a business, or have significant deductions and credits.