While headlines in 2025 were dominated by varying uncertainties, the tax world was one of the few areas that demonstrated relative clarity, with the enactment of the One Big Beautiful Bill Act (“OBBBA”). While much of the public focus has been on the law’s macroeconomic implications, the legislation introduces several meaningful changes that will directly impact individual taxpayers starting in 2026. Understanding these provisions is key to tax strategy for the years ahead.
The new law extends and modifies many provisions from the Tax Cuts and Jobs Act of 2017 while introducing new deductions and credits. At the same time, it phases out certain green energy incentives and introduces revenue-raising measures such as taxes on specific items and reductions in some deductions.
The list below includes a non-comprehensive list of some key items.
- State and Local Tax (SALT) Deduction Cap. The $10,000 SALT deduction limit has been increased to $40,000 (with annual inflation adjustments). However, earners with gross income exceeding $500,000 will see this deduction reduced by 30% of the excess amount, though a minimum $10,000 floor remains guaranteed.
- Senior Standard Deduction Boost. Individuals aged 65 or older will receive an automatic additional $6,000 deduction, or $12,000 for qualifying married couples. This additional deduction is available to both itemizers and non-itemizers. Of note, the increases have adjusted gross income limits of $75,000 for single filers and $150,000 for those married filing jointly.
- Car Loan Interest Deduction. Taxpayers can now deduct up to $10,000 in interest paid on loans for U.S.-assembled vehicles purchased after December 31, 2024. This deduction is also subject to income phase-out limits.
- Charitable Giving Modifications. Non-itemizers can now deduct up to $1,000 for single filers, or $2,000 for those married filing jointly, in cash donations to public charities. For itemizers, charitable deductions now require exceeding 0.5% of adjusted gross income, and high-income taxpayers in the 37% bracket face a cap limiting their effective deduction rate to 35%. Previously, non-itemizers did not have the ability to deduct charitable contributions, and itemizers did not have to meet a threshold before their charitable deductions kicked in.
- Estate Exemption. Perhaps one of the most significant changes for wealth planning was related to the estate tax exemption, which was set to revert to pre-2017 figures. The higher exemption amount was made permanent and increased to $15 million per person for 2026, with annual inflation-adjusted increases thereafter. This provision of the law provides substantial clarity for estate planning strategies that have been in limbo, some since the 2017 law was enacted.
Of course, not all changes brought by the OBBBA are favorable. Several green energy credits expired in 2025, including the electric vehicle tax credit and residential energy installation credits. Additionally, new revenue measures take effect in 2026, such as a 1% excise tax on certain international fund transfers.
Nevertheless, all individual circumstances vary significantly, and the tax law changes may affect households differently depending on income levels, deductions, and overall financial situations. As always, we encourage you to keep Howland Capital apprised of any changes in your financial affairs so that we can ensure our advice reflects your unique situation.
References and Citations
Internal Revenue Code (IRC) Sections:
§ 62(a)(25)–(26); § 63(c)(7); § 163(h)(2)(F); § 164; § 165(d); § 170(b)(1)(I); § 170(p); § 5000D; §§ 25D, 25E, 30D, 45E; § 68.
IRS Guidance and Documentation:
Fact Sheets: FS-2025-03
Information Releases: IR-2025-110; IR-2025-114; IR-2025-117
Notices: Notice 2025-57
Forms: Draft Schedule 1-A; Draft Form 4547; Form 4137
