How the OBBBA Could Impact Your 2026 Tax Season

Key Takeaways:

• The OBBBA introduces several changes to the U.S. tax code that could impact the 2026 tax season for many high earners.
• The SALT deduction cap increases to $40,000 in 2025 but phases down at higher income levels, making income projections, payment timing, and potential PTE elections critical for high earners and business owners.
• The higher standard deduction is now permanent, so running projections and strategically bunching deductions can determine whether itemizing improves your 2025 outcome.
• Lower AMT phaseout thresholds and a faster exemption reduction increase AMT risk for high earners, particularly those with equity compensation.
• New charitable giving rules in 2026 add a 0.5% AGI floor and cap the top-bracket benefit at 35%, increasing the value of thoughtful timing and bunching strategies.
• The $15 million lifetime estate and gift tax exemption is now permanent, reducing urgency around large transfers but warranting a review of existing estate strategies.

The 2026 tax season is the first under the One Big Beautiful Bill Act (OBBBA), which introduces several changes to the U.S. tax code. If you’re a high earner, receive equity compensation, or typically file a more complex return, these updates could meaningfully affect your 2025 filing.

The OBBBA makes the Tax Cuts and Jobs Act’s headline tax brackets permanent, reducing the likelihood of higher marginal rates for many high-income taxpayers. Even so, other rule changes may impact your deductions, exposure to additional taxes, and overall strategy. Paying attention to the right details now can help you avoid surprises and uncover planning opportunities before you file.

#1: State and Local Tax (SALT) Deduction

For years, high-income households in high-tax states were limited to a $10,000 cap on the state and local tax (SALT) deduction. The OBBBA raises that cap, but not everyone will benefit equally.

What changes for the 2026 tax season:

• Beginning in 2025, the SALT deduction cap increases from $10,000 to $40,000.
• The expanded deduction begins to phase down once modified adjusted gross income exceeds approximately $250,000 for single filers and $500,000 for joint filers.

Business owners should also pay close attention. While the OBBBA increases the individual SALT cap, it preserves state-level pass-through entity (PTE) tax elections. In many states, a PTE election can still provide meaningful tax savings beyond the individual SALT limit. Because these rules vary by state, careful coordination is essential.

Action Items:

• Review your projected 2025 income to determine whether you may fall within the SALT phase-out range.
• Coordinate the timing of state and local tax payments to maximize your eligible deduction.
• Evaluate whether a PTE election is available and advantageous in your state.
• Confirm your strategy with your CPA or financial planner before year-end to avoid missed opportunities.

#2: Higher Standard Deduction

The Tax Cuts and Jobs Act significantly increased the standard deduction, and the OBBBA makes those higher levels permanent. Many taxpayers will continue to use the standard deduction, but if you’re close to the threshold, planning can influence whether itemizing produces a better result.

What changes for the 2026 tax season:

• For the 2025 tax year, the standard deduction rises to $15,750 for single filers, $31,500 for married couples filing jointly, and $23,625 for heads of household.
• Taxpayers age 65 or older may qualify for an additional deduction of up to $6,000, or $12,000 if both spouses are 65 or older. This senior deduction begins to phase out at incomes above $75,000 for single filers and $150,000 for joint filers.

Action Items:

• Run projections to compare the standard deduction versus itemizing for 2025.
• Consider bunching charitable contributions or timing deductible expenses, such as property taxes, into specific years if you’re near the threshold.
• If you’re 65 or older, plan income distributions carefully to preserve the full senior deduction.

#3: Lower AMT Exemption Phaseout Thresholds 

The Alternative Minimum Tax (AMT) operates alongside the regular tax system to ensure higher-income households pay a minimum level of tax. If you’re a high earner with equity compensation or large one-time income events, your exposure to AMT may increase starting in 2026, even as other deductions expand.

What changes for the 2026 tax season:

• The income thresholds where the AMT exemption begins to phase out decrease to $1,000,000 for married couples filing jointly and $500,000 for all other filers, with annual inflation adjustments.
• The exemption is reduced by 50% of income above those thresholds, up from 25%, causing it to phase out more quickly.

Action Items:

• Run side-by-side projections of regular tax versus AMT, particularly before exercising Incentive Stock Options (ISOs).
• Factor AMT exposure into decisions around equity compensation and large income events.
• Incorporate SALT planning into your projections, since SALT deductions remain disallowed under AMT, even with the higher cap.

#4: New Charitable Giving Rules

The OBBBA changes how charitable deductions are calculated, making both timing and structure more important. If you regularly give meaningful amounts and itemize, 2025 may be one of the most deduction-friendly tax years you’ll see for some time.

What changes for the 2026 tax season:

• Beginning in 2026, itemized charitable deductions apply only to the portion of gifts that exceeds 0.5% of adjusted gross income.
• For taxpayers in the top bracket, the effective tax benefit of charitable deductions is capped at 35%, down from 37%, after applying the new floor and existing AGI limits.
• Taxpayers who take the standard deduction may claim an above-the-line deduction of up to $1,000 in cash gifts, or $2,000 for joint filers.

Action Items:

• If you plan to itemize, track and document your 2025 charitable contributions carefully to maximize the more favorable deduction rules while they’re still available.
• Beginning in 2026, consider concentrating giving into fewer, larger years to clear the new deduction floor and maximize the value of itemizing.

#5: Permanent Higher Lifetime Estate and Gift Tax Exemptions

For years, many families expected the estate tax exemption to drop sharply after 2025, which led to accelerated gifting and trust strategies to lock in higher limits. The OBBBA removes that near-term deadline, providing more flexibility in long-term estate planning.

What changes for the 2026 tax season:

• The higher lifetime estate and gift tax exemption is now permanent rather than scheduled to be cut roughly in half. The exemption is set at $15 million per person in 2026 and will continue to adjust for inflation.
• The annual gift tax exclusion remains in place at $19,000 per recipient, reducing pressure to make large transfers solely to preserve exemption amounts.

Action Items:

• Revisit any estate strategies implemented in anticipation of a 2026 exemption reduction.
• Confirm whether existing trusts or gifting plans still align with your broader goals.
• Coordinate with your estate attorney and financial planner to adjust your plan where appropriate.

Approach the 2026 Tax Season with Confidence

While the OBBBA keeps headline tax brackets intact, changes to deductions, phaseouts, and planning rules may significantly affect high-income households in 2026 and beyond. Addressing these updates early can reduce surprises and position you to make more informed decisions before you file.

At Simplicity Wealth Management, we work with high earners and busy tech professionals navigating equity compensation and evolving tax laws. We’ll help you understand how these changes apply to your specific situation and identify strategies that align with your income, investments, and long-term goals.

If you’re ready for personalized guidance, book a complimentary Simplicity Session. Together, we’ll build a plan designed to help you keep more of what you earn and put it to work with purpose.