One Big Beautiful Bill: Every 2026 Tax Change You Need to Know

February 7, 2026·10 min read

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Congress passed the One Big Beautiful Bill Act (OBBBA) in 2025, and the changes hitting your 2026 tax return are significant. Some provisions already took effect for the 2025 tax year. Others kick in starting 2026. A few expire after a handful of years.

This article breaks down every major OBBBA provision that affects individual taxpayers, what the numbers look like in practice, and what you should do about it before the year is out.

What Is the One Big Beautiful Bill Act?

The OBBBA is sweeping tax legislation that extended and modified several provisions from the 2017 Tax Cuts and Jobs Act while adding new deductions and adjustments. For most households, the biggest headline is the SALT cap increase—but there are seven other changes that could affect your bottom line depending on where you live, what you own, and how old you are.

Key provisions effective for tax year 2025 (filed in 2026): SALT cap increase, senior additional deduction, retirement limits.

Key provisions effective for tax year 2026: PMI deductibility, charitable deduction for non-itemizers, auto loan interest deduction, standard deduction update.

Use the Tax Calculator as you work through these changes to see how each provision affects your actual tax liability.

1. SALT Cap Raised to $40,000

This is the biggest change for homeowners in high-tax states. The state and local tax (SALT) deduction cap jumps from $10,000 to $40,000 for tax year 2025.

The schedule going forward:

2025: $40,000
2026: $40,400 (1% increase)
2027: $40,804
2028: $41,212
2029: $41,624
2030: Returns to $10,000

That last point is critical. The higher cap is not permanent. Unless Congress acts again, you lose most of this benefit starting with your 2030 taxes.

The Income Phaseout

The expanded SALT deduction phases out for high earners. For every dollar of modified adjusted gross income (MAGI) over $500,000 (or $250,000 for married filing separately), the cap is reduced by 30 cents. The deduction can never drop below $10,000 no matter how high your income.

Example: If your MAGI is $600,000, you are $100,000 over the threshold. Your SALT cap is reduced by $30,000 (30% of $100,000), bringing it down to $10,000. At that income level, you are effectively back to the old cap.

Who Benefits Most

The big winners are homeowners in California, New York, New Jersey, Connecticut, and Illinois—states with high income taxes and high property taxes. If you own a home in one of these states and your combined state income tax plus property tax exceeds $10,000, you have been leaving money on the table since 2018.

Example: A married couple in New Jersey pays $18,000 in property taxes and $12,000 in state income taxes. Their total SALT is $30,000. Under the old cap, they could only deduct $10,000. Under the new cap, they can deduct all $30,000—an extra $20,000 deduction. At a 22% marginal rate, that is $4,400 in tax savings.

Run your own numbers with the Tax Calculator to see exactly how much the SALT change saves you.

For more on what homeowners can deduct, see Homeowner Tax Deductions in 2026: What to Track.

2. Auto Loan Interest Now Deductible (Up to $10,000)

Starting with purchases made in 2025 and beyond, you can deduct the interest paid on a loan for a new vehicle—up to $10,000 per year.

Eligible vehicles include:

Cars
Minivans
SUVs
Pickup trucks
Motorcycles

The key word is new. Used vehicles do not qualify. The vehicle must be purchased new, and the loan must be originated in 2025 or later.

This is a meaningful benefit for anyone financing a vehicle purchase. On a $40,000 car loan at 7% interest, your first-year interest charge is roughly $2,700. That is $2,700 you can now deduct. Over the first three years of a typical loan, you might deduct $7,000 to $8,000 in interest—savings of $1,500 to $1,750 at a 22% marginal rate.

This deduction applies even if you take the standard deduction, because it is classified as an above-the-line adjustment. Wait for IRS guidance to confirm the exact mechanics on your return.

Use the Vehicle Calculator to estimate total interest costs on your auto loan and understand what portion becomes deductible each year.

3. PMI Is Now Deductible as Mortgage Interest

Private mortgage insurance (PMI) is required when you put less than 20% down on a home purchase. Until now, its deductibility has been inconsistent—Congress kept letting the provision expire and then reinstating it temporarily.

The OBBBA makes PMI permanently deductible as mortgage interest starting in 2026. PMI is no longer a separate line item with its own income phase-outs and expiration dates. It is treated the same as the interest on your mortgage itself.

For buyers who put down 5% to 15%, PMI typically runs 0.5% to 1.5% of the loan amount per year. On a $350,000 loan, that is $1,750 to $5,250 annually. If you are itemizing, this entire amount is now deductible.

If you have been on the fence about buying a home with less than 20% down, the full deductibility of PMI makes the math slightly better. Pair this with the higher SALT cap and you may find itemizing makes sense for the first time.

Calculate your mortgage costs and see how PMI factors into the total picture with the Mortgage Calculator.

4. Charitable Deduction for Non-Itemizers

One of the OBBBA changes that benefits the widest range of taxpayers: starting in 2026, you can deduct charitable cash donations even if you take the standard deduction.

The limits:

Single filers: up to $1,000
Married filing jointly: up to $2,000

Only cash gifts to qualified charities count. This means direct donations to 501(c)(3) organizations. Donations of goods, stock, or services do not qualify for this above-the-line deduction.

This provision is straightforward. If you give $1,000 to your church, local food bank, or other qualified charity, you deduct it regardless of how you file. At a 22% marginal rate, that is $220 back in your pocket.

The practical implication: if you have been casually donating and assuming it did not affect your taxes because you take the standard deduction, it now does. Start keeping records of cash donations immediately.

5. Senior Additional Deduction: $6,000 for Age 65+

Taxpayers age 65 and older receive an additional $6,000 deduction for tax years 2025 through 2028. This is on top of the existing elderly and blind additional standard deduction that seniors already receive.

For a retired couple where both spouses are 65 or older, that is $12,000 in additional deductions. At a 22% marginal rate, the two of them save $2,640 in federal taxes.

Important limitations to watch for:

This provision expires after 2028 unless extended
An income phase-out likely applies at higher income levels—verify current thresholds with the IRS as final guidance is issued

If you or a parent are in this age group, this deduction alone could be worth hundreds to thousands of dollars per year. Factor it into estimated tax payment calculations to avoid overpaying throughout the year.

6. Retirement Contribution Limits Increase

The IRS raised contribution limits for 2026. These are not OBBBA-specific changes—they are standard inflation adjustments—but they matter for your planning:

401(k), 403(b), 457 plans: $24,500 (up from $23,500)
Traditional and Roth IRAs: $7,500 (up from $7,000)

If you are not already maxing out contributions, 2026 is the year to try. The higher limits combined with higher SALT deductions means more paths to reduce your taxable income.

Be aware that catch-up contribution rules changed significantly under SECURE 2.0. High earners over 50 may face mandatory Roth catch-up requirements. Read the full breakdown: 2026 Retirement Contribution Limits: New Rules Could Block Your Catch-Up Contributions.

7. Standard Deduction Increases to $16,100 for Single Filers

The standard deduction for single filers rises to $16,100 for 2026 (the married filing jointly amount increases proportionally).

This matters because it raises the bar for itemizing. To benefit from itemizing, your total deductions must exceed the standard deduction. With the SALT cap at $40,400 and PMI now deductible, more homeowners in high-tax states will clear that bar. But for renters and homeowners in low-tax states, the higher standard deduction likely still wins.

Run both scenarios before deciding. The Tax Calculator lets you input your itemized deductions and compare them directly against the standard deduction so you always know which option saves you more.

Does the SALT Change Make Itemizing Worth It for You?

Here is a quick framework to decide:

Itemizing likely wins if you:

Own a home in California, New York, New Jersey, Connecticut, or Illinois
Pay more than $10,000 in combined state income and property taxes
Have significant mortgage interest
Have PMI on your loan
Have substantial charitable contributions

Standard deduction likely wins if you:

Rent your home
Own a home in a low-tax state (Texas, Florida, Nevada, Wyoming, etc.)
Have a paid-off mortgage
Have total deductions under $16,100 (single) or the MFJ equivalent

Do the math every year. The right answer changes when your mortgage balance drops, when you pay off the house, or when your income shifts you into or out of the SALT phase-out range.

What to Do Before December 31, 2026

Tax law changes only help you if you plan for them. Here is your action list:

1. Check whether you should start itemizing. Add up your projected SALT (state income tax plus property taxes), mortgage interest, PMI, and charitable contributions. Compare to the standard deduction with the Tax Calculator.

2. Prepay state estimated taxes if you are in a high-tax state. If you have the option to pay your Q4 state estimated tax before year-end, it increases your 2026 SALT deduction.

3. Track all PMI payments starting January 1, 2026. Your lender should provide a year-end summary, but keep your own records.

4. Document cash charitable donations immediately. You now have a reason to track every donation, even if you end up taking the standard deduction.

5. Verify your age qualifies for the senior deduction. If you turn 65 in 2026, you get the full $6,000 for the year.

6. Run your auto loan interest. If you financed a new vehicle in 2025 or plan to in 2026, calculate your annual interest and add it to your deduction estimates.

7. Max out retirement contributions. With limits at $24,500 for 401(k) and $7,500 for IRAs, there is no excuse not to hit the max if cash flow allows.

8. Plan for the SALT cliff in 2030. The cap reverts to $10,000 in 2030 unless Congress extends it. Do not make permanent financial decisions—like choosing a state to live in or a home price to pay—based on a provision that may expire.

Sources and Further Reading

The provisions in this article are based on the One Big Beautiful Bill Act as passed. For official IRS guidance as it is released, consult IRS.gov. For analysis of the SALT changes and their distributional effects, see the Bipartisan Policy Center's SALT cap analysis. H&R Block and AARP have both published detailed breakdowns of the 2026 changes for consumers.

Tax law changes frequently and this article reflects information available as of February 2026. Verify current rules before filing and consult a qualified tax professional for advice specific to your situation.