One Big Beautiful Bill Act: 12 Key Tax Changes for 2026

reading time: 20 minute(s)

More than a year after the One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, its provisions are shaping real returns this filing season. Business owners face new deductions, reporting requirements, and planning opportunities. Tax professionals are fielding client questions about rules the IRS is still clarifying.

OBBBA made many Tax Cuts and Jobs Act (TCJA) measures permanent and added several new incentives, bringing more certainty and fresh planning opportunities.

Here are the 12 key changes business owners and tax professionals need to know, covering individual taxpayers, workers, and businesses.

OBBBA Changes for Individual Taxpayers

Business owners file individual returns too, so these provisions shape personal outcomes first. For tax professionals, they offer firmer ground for long-term planning.

1. Individual Tax Rates Are Permanent. TCJA’s individual tax rates (10%, 12%, 22%, 24%, 32%, 35%, and 37%) are now permanent, allowing for more confidence in long-term planning. Without this change, the top rate was scheduled to rise to 39.6% in 2026.
   
2. Standard Deduction Stays Higher. The TCJA’s larger standard deduction is also permanent and will continue receiving annual inflation adjustments, keeping filing simple for the majority of taxpayers who don’t itemize. OBBBA also bumped up the 2025 amounts slightly, to $15,750 for single filers and $31,500 for joint filers.
   
3. Child Tax Credit Rises to $2,200. The Child Tax Credit permanently rises from $2,000 to $2,200 per child starting in 2025, with inflation adjustments beginning in 2026, subject to eligibility and income limits. Both the qualifying child and the taxpayer claiming the credit now need a work-authorized Social Security number (on a joint return, at least one parent must have one), instead of just the child’s SSN as before.
   
4. New Trump Accounts for Kids. OBBBA also created Trump Accounts, tax-advantaged child savings accounts, which opened for contributions on July 4, 2026 (families enroll via IRS Form 4547). Kids born 2025–2028 get an automatic $1,000 government contribution that doesn’t count against the annual cap, and parents, employers (up to $2,500), and others can add up to $5,000 a year; funds are invested in a diversified U.S. stock index fund and grow tax-deferred until the child turns 18.
   
5. SALT Deduction Cap Rises to $40,000. The Act temporarily raises the federal SALT deduction cap to $40,000 for 2025, increasing one percent annually through 2029, and phasing down (but not below $10,000) for taxpayers with modified adjusted gross income above $500,000. This opens new planning opportunities for business owners and individuals in higher-tax states.
   
6. New Deduction for Seniors. Eligible taxpayers 65 and older can claim a new, temporary $6,000 above-the-line deduction ($12,000 if both spouses in a married couple qualify), running 2025–2028. It phases out for single filers with MAGI between $75,000–$175,000, and joint filers between $150,000–$250,000, relevant for owners nearing retirement and retired clients alike.

OBBBA Changes for Workers, Employers, and Payroll

Two of the Act’s most talked-about components are temporary deductions for employees, running from 2025 through 2028. They matter to the workers claiming them and to the business owners and payroll professionals reporting them.

7. No Tax on Tips, Up to $25,000. Eligible workers can deduct up to $25,000 of qualified tip income from federal taxable income, phasing out for MAGI above $150,000 (single) / $300,000 (joint), though this doesn’t change payroll withholding. The deduction applies only to an IRS-published list of about 70 traditionally tipped occupations, and excludes tips earned in specified service fields like health care, performing arts, and athletics.
   
8. No Tax on Overtime, Up to $25,000 for Joint Filers. Eligible workers can also deduct qualified overtime pay, capped at $12,500 for single filers and $25,000 for joint filers, with the same phase-out thresholds as the tip deduction. Starting with tax year 2026, employers must separately report qualified tips (including an IRS-assigned occupation code) and qualified overtime pay on Form W-2 or other information returns. The IRS treated 2025 as a penalty-free transition year while payroll systems caught up.

For business owners, that means updating payroll processes and W-2 workflows. For payroll professionals, expect more employee questions and continued IRS guidance.

OBBBA Changes for Businesses

Several provisions restore long-term certainty, ease reporting burdens, and encourage investment. That’s good news for business owners and useful talking points for the advisors guiding them.

9. Qualified Business Income Deduction Is Now Permanent. The QBI deduction under Section 199A (still 20% of qualified income) is now permanent, so owners of sole proprietorships, partnerships, and S corporations no longer have to plan around its expiration. Starting in 2026, the phase-in thresholds for the deduction’s limitations widen (to $75,000 above the threshold for single filers, $150,000 for joint filers), and a new $400 minimum deduction applies for taxpayers with at least $1,000 of qualified business income.
   
10. Bigger Investment Incentives. The legislation also expands business investment incentives: permanent 100 percent bonus depreciation for property acquired and placed in service after January 19, 2025, immediate expensing for domestic research and development (R&D) costs, and an enhanced Section 179 deduction, whose expensing limit is $2.5 million for 2025 ($2.56 million for 2026, inflation-adjusted) with a phase-out threshold of $4 million ($4.09 million for 2026). That combination could add tax benefits for owners already planning equipment, technology, or expansion investments.
    
11. 1099 Reporting Thresholds Change. Starting in 2026, the 1099-NEC/1099-MISC threshold jumps from $600 to $2,000 (inflation-adjusted from 2027), and the 1099-K threshold reverts to $20,000 and 200 transactions, retroactive to tax years after 2021. Business owners paying contractors or using payment apps will issue and receive fewer forms.
    
12. Estate and Gift Tax Exemption Rises to $15 Million. Effective 2026, the Act permanently raises the federal estate and gift tax exemption to $15 million ($30 million for married couples), a change that could influence succession and estate planning for family-owned businesses and high-net-worth individuals. Without it, the exemption was set to roughly halve to about $7 million in 2026.

Key Takeaways for Business Owners and Tax Professionals

Many provisions now offer long-term certainty, but others remain temporary or await further IRS guidance. Here’s how that’s playing out on the ground:

• Business owners are revisiting tax strategy, confirming which deductions and incentives apply, and checking that payroll and reporting reflect the new W-2 and 1099 requirements.
  
• Tax professionals are watching evolving IRS guidance, revisiting client strategies in light of the permanent changes, and flagging still-temporary pieces (like the tip, overtime, and senior deductions) that will need attention again before they expire.

Most of these changes affect tax planning more than tax reporting. IRS forms and publications continue to catch up with the law, and more updates are likely this season.

Wrapping It Up

The One Big Beautiful Bill Act remains one of the most significant tax updates in recent years, and its provisions are now routine practice for business owners and tax professionals alike.

As IRS guidance evolves, staying informed will help business owners and tax professionals maximize tax benefits while remaining compliant. We’ll keep tracking these developments at TaxBandits, sharing tax news, filing resources, and compliance updates.