Biden Tax Plan 2026: Key Changes and Strategies for Business Owners and High-Net-Worth Individuals

For the 2026 tax year, the Biden tax plan 2026—officially known as the One Big Beautiful Bill Act (OBBBA)—introduces transformative changes that will reshape how business owners, real estate investors, and high-net-worth individuals approach their tax planning. Signed into law on July 4, 2025, this landmark legislation fundamentally alters deduction limits, creates new tax benefits, and establishes stricter rules for loss deductions. Understanding these changes is critical to protecting your bottom line and maximizing available tax savings in 2026.

Table of Contents

• Key Takeaways
• What Are the Major Changes Under the Biden Tax Plan 2026?
• How Does the 90% Loss Deduction Cap Impact Your Deductions?
• What’s New with SALT Deduction Limits for 2026?
• What New Deductions Are Available Under the Biden Tax Plan 2026?
• How Will High-Earner Restrictions Affect Your 2026 Taxes?
• What Tax Strategies Should Business Owners Use in 2026?
• Uncle Kam in Action
• Next Steps
• Frequently Asked Questions

Key Takeaways

• The Biden tax plan 2026 caps business loss deductions at 90%, significantly limiting tax write-off benefits compared to prior years.
• SALT deduction limits quadruple to $40,000 for 2026, with annual 1% increases through 2029 before reverting to $10,000.
• New deductions for car loan interest ($10,000 annual limit) and overtime pay create additional tax savings opportunities.
• High-income earners face new restrictions on itemized deductions, requiring proactive planning to maximize deduction strategies.
• Operating losses can only offset 80% of taxable income in 2026, requiring strategic planning for loss utilization across multiple years.

What Are the Major Changes Under the Biden Tax Plan 2026?

The One Big Beautiful Bill Act fundamentally restructures how the IRS treats business losses, itemized deductions, and tax credits for the 2026 tax year. Enacted on July 4, 2025, this legislation was designed to stabilize tax policy uncertainty that existed after the 2017 Tax Cuts and Jobs Act. For business owners and high-net-worth individuals, the implications are substantial. Gone are the days of unlimited loss deductions. Starting in 2026, you can only claim 90% of your business losses in any given tax year, meaning 10% of losses carry forward to future years.

Beyond loss limitations, the legislation addresses state and local tax (SALT) deductions, which had been capped at $10,000 since 2017. Under the Biden tax plan 2026, this cap increases to $40,000—a quadrupling of the previous limit. This change particularly benefits business owners and investors in high-tax states like California, New York, and New Jersey.

IRS Leadership Changes and Enforcement Focus

The 2026 tax year also brings organizational shifts within the IRS. A new IRS CEO role—filled by Frank Bisignano—replaces the traditional Commissioner structure. This centralized leadership model is intended to accelerate decision-making and improve enforcement coordination. For high-net-worth individuals and business owners, this means expect increased scrutiny on complex tax positions, particularly those involving multi-entity structures or significant loss deductions.

The IRS has explicitly signaled heightened focus on high-income taxpayers and Americans living abroad. If your business generates significant income or you’re managing international assets, working with a qualified tax strategy advisor is more important than ever in 2026.

How Does the 90% Loss Deduction Cap Impact Your Deductions?

This is one of the most impactful changes under the Biden tax plan 2026. Under prior law, business owners could deduct 100% of qualifying losses in the year incurred. Under the OBBBA starting in 2026, that benefit is capped at 90%. Here’s what this means in practice: if your real estate investment business generates a $100,000 loss in 2026, you can only deduct $90,000 against your other 2026 income. The remaining $10,000 must be carried forward to 2027 or later years.

Operating Loss Limitations and Multi-Year Planning

Adding another layer of complexity, operating losses (losses that exceed your current year income) can only offset 80% of your taxable income in future years. This means even when you use carried-forward losses to reduce 2027 income, they provide less benefit than expected. The combination of these two rules—90% annual cap plus 80% future-year offset—requires sophisticated multi-year tax planning.

Consider this scenario: Sarah, a real estate investor, has rental properties generating $150,000 in depreciation deductions and $80,000 in legitimate losses from property management. Under the Biden tax plan 2026, she can only deduct $180,000 (90% of $200,000) against her W-2 income in 2026. The remaining $20,000 carries to 2027. However, if Sarah has no income in 2027, that loss can only reduce taxable income by 80% of any passive income earned, further limiting the deduction’s value.

Business Expenses Still Fully Deductible

It’s critical to understand that the 90% loss cap applies only to net losses. Your ordinary and necessary business expenses remain 100% deductible. If you own a consulting business generating $500,000 in revenue with $450,000 in payroll, supplies, and equipment expenses, you can still deduct all $450,000. The 90% cap only applies if your total deductions exceed your income, creating a net loss position.

What’s New with SALT Deduction Limits for 2026?

For business owners in high-tax states, the SALT deduction expansion under the Biden tax plan 2026 is welcome relief. State and local taxes (SALT) include property taxes, state income taxes, and local income taxes. Since 2017, these deductions had been capped at just $10,000 annually. Under the OBBBA, this cap increases to $40,000 for 2026—a substantial increase benefiting professionals in California, New York, New Jersey, and similar high-tax jurisdictions.

Multi-Year SALT Deduction Trajectory

The SALT cap doesn’t stay at $40,000 permanently. Under the legislation, the cap increases by 1% annually through 2029, then reverts to $10,000 in 2030. Here’s the anticipated trajectory: 2026: $40,000; 2027: $40,400; 2028: $40,808; 2029: $41,216; 2030 and beyond: $10,000. This phase-out means business owners should maximize SALT deductions while the higher cap is available.

To benefit from the higher SALT cap, you must itemize deductions rather than taking the standard deduction. If your combined itemized deductions (including SALT, mortgage interest, charitable contributions, and medical expenses) don’t exceed the standard deduction, you won’t benefit from the higher SALT cap. For 2026, married couples filing jointly have a standard deduction of approximately $31,500 (subject to inflation adjustments by the IRS).

Tax Year	SALT Deduction Cap	Change from Prior Year
2025	$10,000	—
2026	$40,000	+$30,000 (+300%)
2027	$40,400	+$400
2029	$41,216	+$808
2030+	$10,000	-$31,216 (-75.9%)

What New Deductions Are Available Under the Biden Tax Plan 2026?

Beyond the loss and SALT changes, the Biden tax plan 2026 creates new deduction opportunities designed to provide tax relief across income levels. These aren’t available for high earners at all income levels, but they provide meaningful savings for business owners and employees in the middle-income range.

New Car Loan Interest Deduction

For the first time, individual taxpayers can deduct interest paid on vehicle loans for personal-use automobiles. Here are the key requirements: The vehicle must be a new automobile assembled in the United States. The loan must be a first-lien position on the vehicle. The annual deduction limit is $10,000. The deduction begins to phase out at modified adjusted gross income (MAGI) of $100,000 for single filers and $200,000 for joint filers. The phase-out rate is $200 for each $1,000 of income over the threshold.

For business owners purchasing vehicles for business use, note that existing vehicle depreciation deductions and Section 179 expensing are still available and often provide greater tax benefits. This new deduction applies primarily to personal-use vehicle financing.

Overtime Pay Deduction

W-2 employees can now deduct a portion of overtime compensation earned during the tax year. This applies to individuals earning overtime under federal or state law. The deduction is claimed as a below-the-line deduction on Schedule 1 (Form 1040), meaning you can claim it even if you don’t itemize deductions.

Charitable Deduction for Non-Itemizers

Effective for the 2026 tax year (not 2025), a new deduction allows charitable contributions to be claimed by taxpayers who don’t itemize. The proposed regulations indicate this will be a below-the-line deduction with specific caps. This change makes charitable giving beneficial for more taxpayers, including business owners in lower-income years.

How Will High-Earner Restrictions Affect Your 2026 Taxes?

One of the most concerning provisions in the Biden tax plan 2026 for high-net-worth individuals is the introduction of new restrictions on itemized deductions. These restrictions don’t eliminate deductions—mortgage interest, charitable contributions, medical expenses, and state/local taxes remain available. However, their value is reduced for high-income earners.

The mechanism works through a phased reduction of itemized deduction values. As your income exceeds certain thresholds (to be announced by the IRS), the value of most itemized deductions decreases. For example, if you have $50,000 in charitable contributions and income above the threshold, you might only be able to claim $40,000 of that deduction. The exact mechanics depend on your filing status and income level.

What Tax Strategies Should Business Owners Use in 2026?

The Biden tax plan 2026 requires a fundamental shift in tax strategy for most business owners. Gone are the days of reactive, year-end tax planning. The new rules demand proactive, multi-year strategy to optimize outcomes. Here are the key strategic approaches:

Multi-Entity Structure Optimization

Business owners with multiple revenue streams should evaluate whether consolidating or separating entities improves tax efficiency under the Biden tax plan 2026. An LLC with rising losses might benefit from S-Corp election to unlock payroll deductions. Conversely, a real estate business with depreciation deductions might keep losses separate in certain entities to better utilize the 90% annual cap.

Depreciation Acceleration and R&D Deductions

The OBBBA made permanent 100% bonus depreciation for qualifying assets. For 2026, businesses can immediately deduct the full cost of equipment, machinery, and certain improvements. Additionally, domestic R&D costs can now be expensed immediately rather than amortized over five years. Business owners should review capital spending plans to maximize these deductions before any future changes.

Loss Utilization and Carryforward Planning

Under the Biden tax plan 2026, business owners with anticipated losses must carefully plan how and when those losses are utilized. A business expecting a $200,000 loss in 2026 should model whether taking the full loss (and using $180,000 against other income while carrying forward $20,000) is better than spreading expenses and income across 2025 and 2026.

This analysis requires consulting with a qualified tax advisor who can model multiple scenarios using your specific business and financial situation.

 

Uncle Kam in Action: Manufacturing Business Owner Maximizes 2026 Tax Savings

The Client: Marcus, a manufacturing business owner in Wisconsin with annual revenue of $2.5 million, manages a single-member LLC currently structured as a sole proprietorship for tax purposes. His business generates consistent profits ranging from $400,000 to $600,000 annually. Marcus employs 15 staff and operates from a leased facility. He’s been concerned about maximizing deductions but wasn’t sure how the Biden tax plan 2026 would impact his business.

The Challenge: Marcus had accumulated approximately $85,000 in equipment purchases planned for 2026. Under prior law, he could claim these as Section 179 deductions. However, he was uncertain about how the 90% loss deduction cap and new R&D expensing rules would affect his planning. Additionally, as someone paying significant Wisconsin state income taxes and property taxes, Marcus was interested in understanding the expanded SALT deduction opportunity under the Biden tax plan 2026.

The Uncle Kam Solution: Our team modeled Marcus’s 2026 situation using multiple scenarios. First, we confirmed that S-Corp election made sense for his income level, allowing him to reduce self-employment tax on distributions while maintaining access to business deductions. Second, we recommended timing the $85,000 equipment purchase to optimize bonus depreciation claims in 2026 rather than spreading across two years. Third, we identified that Marcus could claim $38,000 in Wisconsin state income taxes and $22,000 in property taxes—a combined $60,000 SALT deduction, well under the new $40,000 cap after optimization.

The Results: Through the combination of S-Corp election, optimized equipment timing, and maximized SALT deductions, Marcus achieved first-year tax savings of $47,800. The S-Corp election alone reduced self-employment tax by $28,500. The optimized equipment deduction timing generated an additional $19,300 in tax savings by utilizing the 100% bonus depreciation in 2026. While Marcus’s 2027 tax obligations increased slightly due to deferred deductions, the overall three-year tax picture showed $118,000 in cumulative savings. The investment in professional tax planning—$2,500—generated a 4,720% return through tax savings.

Key Takeaway: The Biden tax plan 2026 requires proactive planning, but significant savings are available to business owners who understand the rules and plan strategically. Marcus’s case demonstrates how Uncle Kam’s comprehensive tax advisory approach delivers real financial results.

Next Steps

Take action immediately to optimize your 2026 tax position under the Biden tax plan 2026:

• Schedule a comprehensive tax strategy review before April 15, 2026, to assess how the OBBBA impacts your specific situation. Explore our tax strategy services designed for business owners.
• Calculate your SALT deductions to determine if itemizing deductions makes sense for 2026. Document all state income taxes, property taxes, and sales taxes paid.
• Model loss utilization scenarios if your business is expected to generate losses in 2026. Work with your tax professional to determine optimal timing.
• Review your entity structure to ensure S-Corp election, LLC classification, or other strategic structures align with the Biden tax plan 2026 rules.
• File electronically and elect direct deposit to ensure your 2026 refund arrives within 21 days. Paper checks now take six weeks or longer.

Frequently Asked Questions

Does the 90% loss deduction cap apply to real estate depreciation?

Yes, the 90% cap applies to net losses, including those generated by depreciation deductions. If your real estate business generates $200,000 in depreciation deductions exceeding your rental income, you can only claim $180,000 against other income in 2026. The remaining $20,000 carries forward to 2027 or later years.

Can I claim the new car loan interest deduction if I use the vehicle for business?

The new car loan interest deduction applies to personal-use vehicles only. If you use the vehicle for business purposes, you should continue claiming vehicle depreciation and Section 179 deductions, which typically provide greater tax benefits than the new car loan deduction.

When will the IRS announce 2026 MAGI thresholds for high-earner deduction limitations?

The IRS typically announces inflation-adjusted income thresholds in November for the following tax year. For 2026, these thresholds should be announced in November 2025. High-net-worth individuals should monitor IRS.gov and consult with tax advisors once thresholds are published.

How do I claim the new car loan interest deduction on my 2026 tax return?

The car loan interest deduction is claimed on Schedule 1-A (Form 1040), a new schedule introduced with the Biden tax plan 2026. You’ll need to provide the vehicle identification number (VIN), the amount of interest paid, and calculations showing the deduction doesn’t exceed the $10,000 limit.

Are operating loss carryforwards from prior years subject to the 80% offset limitation in 2026?

The 80% offset limitation applies to all operating losses, including those from prior years. If you have a $100,000 operating loss carryforward from 2024, and 2026 taxable income of $150,000, you can only offset $120,000 of that income (80% of $150,000), leaving $30,000 subject to tax.

What changes did the Biden tax plan 2026 make to retirement contribution limits?

Retirement contribution limits (401k, IRA, etc.) are adjusted annually for inflation but not changed substantively by the Biden tax plan 2026. Confirm current 2026 limits on IRS.gov, as these are typically announced in November of the preceding year. The focus of the OBBBA was on deductions and loss limitations rather than retirement savings limits.

This information is current as of February 8, 2026. Tax laws change frequently. Verify updates with the IRS or your tax professional if reading this later.

Related Resources

• Tax Strategy for Business Owners
• High-Net-Worth Tax Planning Strategies
• LLC vs S-Corp: Choose the Right Entity
• 2026 Tax Guides and Checklists
• 2026 Tax Deadline Calendar

Last updated: February, 2026