- The state and local tax deduction cap is $40,400 for 2026, up from $40,000 in 2025.
- Non-itemizers may deduct up to $1,000 in cash gifts, or $2,000 on a joint return.
- The child and dependent care credit rises to up to 50% of eligible expenses for 2026.
Checked against the IRS
Six federal tax provisions will affect returns for tax year 2026, filed in 2027. The One Big Beautiful Bill Act changed deductions and tax rules for workers, older taxpayers, donors and families paying child-care costs.
The provisions take effect at different times, and some apply only to taxpayers who meet specific requirements.
Higher deductions and permanent rates reshape the 2026 tax calculation
The six changes are the higher standard deduction and permanent tax rates, the senior deduction, the higher state and local tax deduction cap, the charitable deduction for non-itemizers, deductions for qualified tips and overtime, and the increased Child and Dependent Care Credit. The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, establishes the senior, state and local tax, charitable, tips and overtime provisions, and the care credit increase. The IRS’s Revenue Procedure 2025-32 establishes the 2026 inflation-adjusted standard deduction amounts and rate schedules. The tips and overtime provisions are deductions for qualified amounts.
The IRS’s inflation adjustments set the standard deduction amounts for 2026 by filing status. The seven federal income-tax rates, ranging from 10% to 37%, are permanent under OBBBA.
| Filing status | 2026 amount |
|---|---|
| Single or married filing separately | $16,100 |
| Head of household | $24,150 |
| Married filing jointly | $32,200 |
Taxpayers age 65 or older may also qualify for an additional $6,000 deduction each. A married couple can claim $12,000 if both spouses meet the age requirement. The provision applies for tax years 2025 through 2028, whether or not taxpayers itemize.
The added deduction shrinks as modified adjusted gross income rises above $75,000 for single filers or $150,000 for joint filers. It phases out by 6 cents for each dollar above those thresholds. It is a deduction, not a tax credit.
The state and local tax deduction cap also rises for 2026. It reaches $40,400, compared with $40,000 in 2025, and phases down for modified adjusted gross income above $505,000, but not below $10,000. The higher limit is scheduled to return to $10,000 after 2029.
Tip and overtime deductions continue under temporary rules
Eligible workers may deduct qualified tips and overtime premium pay. Both provisions cover tax years 2025 through 2028, so they are not limited to 2026 returns.
The maximum deduction for qualified tips is $25,000. The overtime deduction is capped at $12,500, or $25,000 for joint filers. Its phaseout begins above $150,000 for individuals and $300,000 for joint filers.
Only qualified amounts count. The overtime provision applies to the premium portion, not all overtime wages. A deduction lowers the income subject to tax; it does not reduce a tax bill dollar for dollar.
Cash gifts and child-care expenses get separate tax treatment
Taxpayers who claim the standard deduction can deduct cash contributions of up to $1,000, or $2,000 on a joint return, starting in 2026 under IRC § 170(p). Contributions to donor-advised funds do not qualify for this deduction.
Itemizers face a separate limit: charitable gifts are subject to a floor of 0.5% of adjusted gross income. The non-itemizer provision applies to cash gifts, not every type of donation.
The child and dependent care credit also increases for 2026. It can cover up to 50% of eligible child-care expenses, compared with 35% under the prior rate. The percentages describe a credit, unlike the deductions for gifts, tips or overtime.
The Child Tax Credit is $2,200 per child under 17 for 2025 and 2026, and is now permanent. It phases out above $200,000 of income ($400,000 joint). Both the child and the claiming parent need a Social Security number.
The IRS has already set a different set of figures for 2027
The IRS released Rev. Proc. 2026-35 on November 5, 2026, setting inflation adjustments for tax year 2027. Those amounts apply to returns filed in 2028, not the 2026 returns filed in 2027. The single-filer deduction for 2027, for example, is $16,600. The IRS’s tax-year 2027 adjustment announcement lists those later figures.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional or CPA about your specific situation.
