By Sheila Coomes, CPA
Several tax changes have gone into effect this year. Some stem from the One Big Beautiful Bill Act (OBBBA). While these tax updates may shape your planning decisions, it’s also important to remember that many benefits from 2025 are still on the table.
Here’s a quick overview of some of this year’s most important changes and benefits.
New Senior Deduction for Taxpayers Age 65 and Older
The OBBBA introduced a new deduction for seniors. From 2025 through 2028, filers 65 or older may claim an additional $6,000 deduction. That amount is per person, so a married couple where both spouses are 65 or older may claim $12,000. You can take it whether you itemize or not. Phase-outs start at a modified adjusted gross income (MAGI) of $75,000 for individual filers and $150,000 for married couples.
What you can do with this: Once you go over $75,000 filing on your own, or $150,000 with your spouse, the deduction starts shrinking. What you pull out of an IRA this year, or what you sell, can increase that income number. If you’re 70½ or older, you can instead send money straight from your IRA to a qualified charity, and it never counts as income at all and doesn’t impact this limit. Keep in mind, you only get this deduction for four years, so planning during this time is crucial to take advantage of this tax benefit while there’s still time to do something about it.
Changes in Charitable Contributions for Both Standard Deduction and Itemizing Taxpayers
For many, qualified charitable contributions are a key part of year-end tax strategy. Charitable deductions can help lower your tax bill, but starting in 2026, there are new rules for itemizers and non-itemizers.
If you itemize, there are now three layers to consider. First, you can’t deduct gifts up to 0.5% of your AGI. Second, itemizers may only deduct charitable contributions up to 60% of their AGI. Finally, if you’re in the 37% tax bracket, your charitable deduction benefit is capped at 35% (or 35 cents for every dollar you give).
There is an exciting change for those who take the standard deduction. You are now allowed to deduct up to $1,000 ($2,000 if married filing jointly) in qualifying charitable contributions. Yes! Even if you don’t itemize, you can take advantage of this benefit on top of the allowed standard deduction.
What you can do with this: Under the new 0.5% rule, giving a larger amount in one year may work out better than giving a little every year. Give a similar sum annually and you may lose that first half-percent every single time. Combine two or three years into one and you may only lose it once. If you’re 70½ or older, money sent straight from your IRA may skip the 0.5% rule completely. Now is the perfect time to start thinking about charitable giving if you haven’t yet and decide before early December.
Increased Standard Deduction Made Permanent
Speaking of the standard deduction, the Tax Cuts and Jobs Act of 2017 (TCJA) increased the standard deduction significantly, and the OBBBA made the increases permanent. They will continue to be adjusted for inflation annually.
What you can do with this: Many families are right on the edge of itemizing and taking the standard deduction, especially with the higher state and local tax limit and the new charitable deduction rule in the mix. If your itemized total is only a few thousand dollars short, you may try putting expenses together into one year. For example, you pay two years of property taxes and make two years of charitable gifts in the same calendar year. You itemize that year and take the standard deduction the next. Across both years, that may leave you better off than claiming the same deduction twice.
State and Local Tax (SALT) Deduction Cap Increased
Through 2029, you may be able to deduct more of the state and local taxes you pay when you file your federal return. The 2017 tax law capped this deduction at $10,000. The OBBBA raised it to $40,000 for 2025 and $40,400 for 2026, with a small increase each year after that. For future planning, keep in mind this is one that will drop back down to $10,000 in 2030.
Once your income passes $505,000 in 2026, the amount you can deduct falls by 30 cents for every dollar above that. It never goes below $10,000, which is where it settles once your income reaches about $606,000. That cutoff is the same whether you file on your own or with your spouse, so two people earning $300,000 each are already past it as a married couple.
What you can do with this: For Kansas families paying state income tax on top of property tax, this may open itemizing back up to people who haven’t itemized since 2018. Add the higher limit to your mortgage interest and your charitable giving and the total may now be above the standard deduction. Timing matters here. Making a property tax installment payment in December instead of January may be enough to make itemizing work that year. Unfortunately, this higher limit also has a time limit; it goes away after 2029.
Child Tax Credit Increased and Extended
The OBBBA increased the Child Tax Credit to $2,200 per eligible child. It also made the credit permanent and indexed to inflation.
What you can do with this: Grandparents, if a grandchild lives with you for more than half the year, you may be able to claim the Child Tax Credit yourself. Keep in mind that the child must be under age 17 at the end of the year. If your income is near the phase-out line ($200,000 for single filers or $400,000 if married), increasing pre-tax contributions to a 401(k) or health savings account (HSA) can lower your adjusted gross income (AGI) enough to preserve your credit.
Deductions for Qualified Tips and Overtime Income
Whether you itemize or claim the standard deduction, you may be able to deduct up to $25,000 in qualifying tips from your taxes. This benefit starts to phase out at a MAGI of $150,000, or $300,000 for married filing jointly.
If you receive overtime pay, you may also deduct the extra amount you earn above your regular hourly rate. The most you can deduct is $12,500, or $25,000 if you’re married and file jointly. The same income limits for qualifying tips as stated above also apply.
What you can do with this: If you own a business, you now have to list qualified tips and overtime separately on W-2s. If you have hourly or tipped employees, call your payroll company now and make sure they’re tracking it correctly. If you are an employee, make sure you review your W-2 at tax time to ensure these amounts are reported correctly.
Auto Loan Interest Deduction
Are you financing a vehicle or have plans to? You may be able to deduct up to $10,000 in interest from your taxes if you meet the following criteria:
- The loan must have originated in 2025 or later.
- It must be for a new car.
- The car’s final assembly must have happened in the U.S.
- The car must be for personal use.
Income phaseouts start at a MAGI of $100,000 ($200,000 for married filing jointly).
What you can do with this: Two groups may still qualify: someone in early retirement whose income has dropped under $200,000, or a family buying a car for a college-age child who doesn’t earn much yet.
Expiration of Energy Credits
The OBBBA has phased out many clean energy credits. For instance, you won’t be able to claim the new energy-efficient home credit for a home you purchased after June 30, 2026.
What you can do with this: If you installed something in 2025 that qualified and it never made it onto your return, you can typically file a corrected amended return for up to three years after the original due date of your return to take advantage of this credit.
Individual Tax Rates Made Permanent
Before the OBBBA, many filers worried about tax rate hikes. However, the new law makes current individual tax rates permanent.
What you can do with this: The rate increase that had people considering Roth IRA conversions isn’t coming. For retirees, income is usually lowest after you stop working, but before Social Security and required withdrawals begin, when converting may cost the least. If your plan was built around the 2026 expiration, now may be a good time to take another look.
Estate and Gift Tax Exemption Permanently Increased
The lifetime gift and estate tax exclusion amount has been permanently increased to $15 million.
What you can do with this: For many families, income tax now may matter more here than estate tax. When your children inherit stock or land, the IRS treats them as though they bought it at its value the day you died, so a lifetime of growth never gets taxed. Give them that same stock while you’re alive and they take on what you originally paid, owing tax on all of that growth when they sell. Holding an appreciated asset may do more for your family than gifting it. One more thing: older wills and trusts often divide an estate using the exemption as the dividing line, and that number has tripled. It may be crucial to now review yours with your attorney or financial advisor.
Not Sure How Tax Updates Impact You?
As an independent, fee-only practice, CGN Advisors is committed to helping our clients strike a balance between enjoying life now and planning for tomorrow. We can help you understand how these changes may apply to you this year and start proactively planning for next.
If you want to see how we may be able to assist you, get in touch today. To schedule a meeting, call (785) 340-3434.
Frequently Asked Questions
What are the biggest tax changes for 2026?
Some of the most notable 2026 tax changes include new charitable-deduction rules, a higher state and local tax deduction cap, deductions for certain tips and overtime income, an increased Child Tax Credit, and a higher estate and gift tax exemption. Several provisions also have income limits or expiration dates, so their impact will depend on your filing status, income, and financial situation.
How will the 2026 tax changes affect retirees?
Retirees may be affected by the new senior deduction, charitable-giving rules, Roth conversion decisions, and changes to itemized deductions. Income from IRA withdrawals, investment sales, and Social Security could also influence eligibility for certain tax benefits. The CGN Advisors team can help you evaluate how these provisions fit into your retirement-income and year-end tax-planning strategy.
What should I do now to prepare for the 2026 tax changes?
Start by estimating your 2026 income, reviewing potential deductions and credits, and identifying decisions that must be made before year-end. This may include timing charitable gifts, retirement-account withdrawals, property tax payments, or pre-tax contributions. CGN Advisors can work with you and your tax professional to identify planning opportunities and determine which changes may apply to your finances.
About Sheila
Sheila Coomes, CPA, is a Tax Advisor at CGN Advisors. With more than 22 years of experience spanning public accounting, industry leadership, and higher education, Sheila specializes in tax strategy and business advisory services for individuals and small business owners. At CGN, Sheila supports clients with tax preparation and works collaboratively with the firm’s financial advisors to deliver thoughtful, proactive tax planning.
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