The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, will have varying impacts on taxpayers in 2026 depending on their income levels. The bill will have the most sizable benefit for lower and middle-income taxpayers, especially those age 65 and above. For higher-income families, the impact is more mixed – there are some benefits, but many of the law's more generous provisions phase out as income rises.
For this commentary, we have simplified things where possible while keeping enough detail to be meaningful. We have also excluded many of the law's changes for the sake of brevity — this is not intended to be comprehensive, but a summary. (Note: all figures quoted apply to the 2026 tax year).
Tax Brackets Made “Permanent”
At the highest level, the OBBBA preserves the tax brackets put in place by the first Trump administration in 2018. The current tax rates — ranging from 10% up to 37% — are now permanent (or as permanent as anything in the tax code can be).
Additionally, the income thresholds at which each bracket begins have been adjusted upward slightly, which means all taxpayers will see modestly lower taxes regardless of income level. Those in the lower brackets will see the largest relative benefit.
Standard Deductions / Deductions for Seniors
Standard deductions for 2026 will be roughly $16,000 for single filers and $32,000 for married couples filing jointly — slightly higher than before. Beyond this, taxpayers aged 65 and older qualify for an additional standard deduction of about $2,000 for single filers and $1,600 per spouse for married filers.
There is also a new "senior bonus" deduction that can provide up to $6,000 for single filers or $12,000 for married couples where both spouses qualify. This deduction phases out for those with higher incomes.
Importantly, this senior bonus is available whether you take the standard deduction or itemize. For a qualifying single filer with modest income, the combined senior and standard deductions could exceed $23,000; for a married couple, the total could approach $47,000. (Note that this senior bonus is temporary and expires after 2028).
Charitable Giving
If you take the standard deduction, you can now also deduct up to an additional $1,000 ($2,000 for married couples) in charitable gifts. This is a nice addition for those who give smaller amounts to charity but don't itemize.
For those who do itemize, the rules get a bit more complicated. There is now a floor equal to 0.5% of your income — meaning if your charitable gifts fall below that threshold, you won't be able to deduct them at all. For example, someone earning $300,000 would need to give more than $1,500 before any deduction kicks in.
Limitations on Itemized Deductions
For those in the top 37% tax bracket, their overall itemized deductions will be reduced. The effect is to lower the tax benefit of deductions from 37 cents on the dollar to about 35 cents. Once again, higher earners will see some reduction in the value of their itemized deductions compared to current law.
SALT Deduction Phaseout for High Earners
Good news to many, the maximum deduction for state and local taxes (SALT) increased to $40,000 starting in 2025 — a meaningful increase from the prior $10,000 cap.
However, this benefit phases out for higher earners. The deduction begins shrinking once income exceeds $500,000, and by the time income reaches $600,000, the maximum SALT deduction drops back to just $10,000.
By their nature, many of these tax changes are complex. Please do not hesitate to contact your CPA or advisor if you wish to learn more about how they may impact you in 2026. We can offer general guidance, put the changes into context, and help you plan with greater clarity for the year ahead.
Additionally published in North Bay Business Journal