Quick Facts
- Individual Rates: The OBBB Act makes 2017-era rate reductions permanent, effectively preserving the 37% top marginal rate.
- Standard Deduction: The expanded standard deduction remains in place and continues to be indexed for inflation.
- SALT Cap: A temporary increase to $40,000 is available for filers with modified adjusted gross income under $500,000 through 2029.
- Estate Exemption: The unified credit reaches a record $15 million per individual, providing long-term stability for wealth transfer.
- Business Expensing: Provisions for 100% bonus depreciation and Section 174A R&D expensing have been fully restored and made permanent.
- Family Incentives: The Child Tax Credit increases to $2,200 permanently, alongside the introduction of tax-advantaged Trump Accounts.
- Senior Benefits: A new $6,000 deduction is available for individuals aged 65 and older to offset rising costs of living.
The 2026 tax changes, driven by the OBBB Act, provide a new level of permanence for individual and business planning. Advisors must transition from sunset management to long-term architectural strategy. The 2026 tax changes are headlined by the One Big Beautiful Bill (OBBB) Act, which provides permanence to individual income tax rates and significantly expands the 2026 estate and gift tax exemption to $15 million while offering a $40,000 SALT deduction for many filers.
Individual Tax Brackets and the New SALT Reality
For years, the financial planning community prepared for a massive sunset at the end of 2025. Projections showed that approximately 62 percent of U.S. tax filers would have experienced a tax increase in 2026 if the original provisions were allowed to expire. The OBBB Act tax provisions have fundamentally shifted this outlook, moving the industry from a defensive "cliff" alert to a proactive era of multiyear tax modeling.
The primary shift involves the permanence of the 37 percent top marginal rate. While previous law would have seen income tax rates revert to pre-2018 levels, including a top rate of 39.6 percent, the new framework provides a reliable baseline for Roth conversion planning under the 2026 permanent tax rates. However, this permanence comes with structural nuances for high earners. Specifically, for those in the 37 percent bracket, there is now a 35 percent limit on the effective benefit of itemized deductions. This requires advisors to carefully calculate the "tax alpha" of charitable contributions and mortgage interest for high-net-worth households.
The State and Local Tax (SALT) deduction remains a focal point of 2026 tax changes. While the previous $10,000 cap was a major pain point, the new law introduces a tiered approach. For individuals with a modified adjusted gross income (MAGI) under $500,000, the cap increases to $40,000 through the 2029 tax year. This relief allows for significant income bracket management for mid-to-high earners in high-tax jurisdictions. Additionally, the Alternative Minimum Tax (AMT) exemption has been raised to $90,000 for single filers and $140,000 for those married filing jointly, significantly reducing the number of taxpayers caught in the AMT net.
Family Wealth: Trump Accounts and Child Credits
Preserving wealth across generations requires an understanding of how 2026 tax changes impact the average family. The OBBB Act introduces specialized savings vehicles and credits designed to bolster the financial planning tax strategies 2026 advisors present to their clients. One of the most notable additions is the creation of Trump Accounts, scheduled to launch on July 4, 2026. These accounts allow for a $5,000 annual contribution with tax-deferred growth specifically for children, bolstered by initial federal seed funding for qualified individuals.
Strategies for utilizing Trump Accounts and the $2,200 child credit should be integrated into every family's long-term plan. The Child Tax Credit, previously subject to a lower permanent baseline, has been locked in at $2,200 per child. This provides a clear path for wealth preservation strategies that focus on immediate cash flow as much as long-term growth.
Furthermore, the 2026 framework introduces temporary relief for specific types of earned income. Through 2028, income from tips and overtime is treated as tax-free up to $25,000 for each category. This creates a unique opportunity for tax-free tips and overtime income planning for 2026, especially for younger clients or those in service-oriented industries who are looking to front-load their savings. For older clients, the new $6,000 deduction for seniors aged 65 and over serves as a critical offset for healthcare and living expenses, reinforcing the OBBB Act tax provisions summary for financial planners.
Leveraging the $15 Million Estate Tax Exemption
Perhaps the most significant victory for legacy planning is the massive expansion of the unified credit. Originally, the federal estate tax exemption was expected to decrease significantly in 2026, falling to roughly $7 million per individual. Instead, the OBBB Act has established a record-breaking 2026 estate and gift tax exemption of $15 million per person, or $30 million for married couples.
This shift allows planners to move beyond the fear of the 2026 tax sunset and focus on high-level wealth transfer. Because the exemption is now permanently indexed for inflation, advisors can confidently recommend long-term gifting vehicles. Leveraging the 2026 $15 million estate tax exemption often involves the use of Grantor Trusts and Spousal Lifetime Access Trusts (SLATs). Given the IRS "No Clawback" rule, clients who make large gifts now can rest assured that those gifts will not be pulled back into the estate if exemption levels fluctuate in much later decades.
Advisors must remain vigilant regarding IRS reporting requirements. Even with a higher exemption, the filing of IRS Form 706 (Estate Tax Return) and IRS Form 709 (Gift Tax Return) remains a cornerstone of fiduciary advice. Furthermore, state-level variations continue to complicate the landscape. While the federal limit is $15 million, states like New York maintain much lower thresholds, such as $7.35 million, and may lack spousal portability.
Asset Strategy Matrix: Estate Transfer Comparison
| Strategy | Benefit | Recommended Asset Type | IRS Compliance Focus |
|---|---|---|---|
| SLAT | Spousal access during lifetime | High-growth equities | Form 709 Gifting |
| Grantor Trust | Estate reduction via tax payment | Closely held business interest | Grantor status verification |
| Direct Gifting | Immediate basis shifting | Cash or depreciated assets | Annual exclusion limits |
| QTIP Trust | Spousal portability and control | Diverse portfolios | Form 706 Portability |
Business Strategy: 100% Bonus Depreciation and R&D Expensing
The business landscape for 2026 is defined by a restoration of growth-oriented incentives. The permanence of Section 199A, which provides a 20% qualified business income deduction, is a major win for pass-through entities. This stability allows business owners to make long-term capital allocation decisions without the cloud of an expiring deduction.
Equally important are the updates to business tax strategies for permanent Section 199A and bonus depreciation. The 100 percent bonus depreciation rule, which had been phasing down under previous law, is fully restored. This permits businesses to deduct the full cost of eligible equipment and machinery in the first year of service, significantly impacting asset depreciation schedules.
Research and development (R&D) expensing under Section 174A has also been liberalized, allowing for a 100% immediate deduction rather than mandatory five-year amortization. For capital-intensive firms, the reinstatement of more favorable Section 163(j) interest deduction limits (calculated using EBITDA rather than EBIT) provides a much-needed buffer in a higher interest rate environment. Planners should also note that certain energy-related incentives, like the Section 179D deduction for green building improvements, have specific windows—reviewing construction schedules prior to the June 30, 2026, deadline is essential for maximizing these credits.
FAQ
What tax provisions expire at the end of 2025?
Nearly all individual provisions from the 2017 Tax Cuts and Jobs Act were scheduled to expire, including the lower tax brackets and the higher standard deduction. However, the OBBB Act has stepped in to make many of these provisions permanent or replace them with even more generous limits for 2026.
How will the 2026 tax law changes affect individual tax brackets?
The 2026 tax law changes effectively lock in the lower rates established in 2017. The top marginal rate remains at 37 percent rather than reverting to 39.6 percent. However, high earners should be aware of the new 35 percent cap on the value of itemized deductions.
Will the standard deduction decrease in 2026?
No, the standard deduction will not decrease. The OBBB Act preserves the expanded standard deduction and ensures it continues to be indexed for inflation annually, providing continued relief for the majority of filers who do not itemize.
Will the estate tax exemption amount change in 2026?
Yes, it changes significantly but in a positive direction for taxpayers. Instead of dropping to $7 million as previously feared, the unified 2026 estate and gift tax exemption will rise to $15 million per individual, providing the highest level of shielding in history.
Is the Qualified Business Income deduction ending in 2026?
The Section 199A deduction for qualified business income has been made permanent under the OBBB Act. This ensures that owners of sole proprietorships, partnerships, and S-corporations continue to benefit from the 20% deduction on qualified income.
What steps should I take to prepare for the 2026 tax sunset?
The "sunset" has largely been replaced by the OBBB Act "permanence." Planners should focus on an adviser guide for the 2026 tax landscape transition by reviewing long-term gifting strategies, modeling the new SALT cap for clients under $500,000 MAGI, and opening Trump Accounts for younger family members.
Adviser Implementation Checklist
To effectively navigate the 2026 tax landscape transition, advisors should follow a tiered approach to client service and compliance.
Start Here
- Identify clients in the 37% bracket to model the 35% itemized deduction limit.
- Review all existing estate documents for portability and state-level exemption mismatches.
- Confirm that any business clients are correctly utilizing the restored 100% bonus depreciation for 2026 purchases.
Next Steps
- Initiate the opening of Trump Accounts for clients with minor children or grandchildren starting in Q3 2026.
- Execute large-scale gifting to SLATs or Grantor Trusts while the "No Clawback" protections are in full effect.
- Re-calculate SALT deductions for clients with MAGI under $500,000 to utilize the new $40,000 cap.
Ongoing
- Perform multiyear tax modeling for Roth conversions to take advantage of the permanent lower tax brackets.
- Monitor Section 174A compliance for any R&D-heavy clients to ensure 100% immediate expensing is captured.
- Schedule bi-annual reviews for senior clients over age 65 to ensure the $6,000 special deduction is reflected in their estimated payments.
