Trump Tax Overhaul Updates for 2026: Complete Guide to OBBBA Changes for Business Owners and Self-Employed Professionals

For the 2026 tax year, the One Big Beautiful Bill Act (OBBBA) brings significant trump tax overhaul updates that fundamentally reshape how business owners, self-employed professionals, and high-net-worth individuals calculate their tax obligations. Signed into law on July 4, 2025, these changes affect standard deductions, child tax credits, business depreciation, and retirement contributions. Understanding these 2026 trump tax overhaul updates is essential for maximizing your tax savings and planning your financial strategy effectively.

Table of Contents

• Key Takeaways
• What Are the 2026 Standard Deduction Changes Under OBBBA?
• How Does the Enhanced Child Tax Credit Impact Your Refund?
• What Business Tax Benefits Are Available for 2026?
• How Does the OBBBA Impact Self-Employment Tax for Freelancers?
• What New Deductions and Credits Are Available in 2026?
• How Can Seniors Benefit from the 2026 Trump Tax Overhaul Updates?
• Uncle Kam in Action
• Next Steps
• Frequently Asked Questions

Key Takeaways

• Standard deductions increased for 2026, with MFJ filers receiving $31,500 and single filers receiving $15,750.
• Child tax credit increases to $2,200 per child for 2025, with inflation indexing beginning in 2026.
• Permanent 100% bonus depreciation and immediate R&D expensing save business owners thousands in taxes.
• New deductions for tips ($25,000), overtime ($12,500), and vehicle loan interest benefit freelancers and employees.
• Senior taxpayers gain a $6,000 deduction, allowing 88% of seniors to avoid federal tax on Social Security.

What Are the 2026 Standard Deduction Changes Under OBBBA?

The One Big Beautiful Bill Act preserved the expanded standard deduction amounts established in previous legislation while providing targeted increases for specific groups. Understanding your 2026 standard deduction is the first step in planning your tax strategy, as this amount reduces your taxable income and determines whether you should itemize deductions.

2026 Standard Deduction by Filing Status

Filing Status	2026 Standard Deduction
Single	$15,750
Married Filing Jointly	$31,500
Head of Household	$23,625
Married Filing Separately	$15,750

If you’re age 65 or older, or if you’re blind, you can claim an additional standard deduction. Married taxpayers age 65 or older can add $1,600 per person, while unmarried taxpayers can add $2,000. This means a single filer who is 65 or older can claim $17,750 for 2026.

Who Benefits from Itemizing vs. Standard Deduction?

The OBBBA significantly increased the standard deduction, making it more advantageous for most taxpayers compared to itemizing. You should itemize only if your allowable deductions (mortgage interest, charitable gifts, state and local taxes capped at $40,000, and medical expenses) exceed your standard deduction. For a married couple filing jointly, this means you’d need over $31,500 in itemized deductions to benefit from itemizing.

How Does the Enhanced Child Tax Credit Impact Your Refund?

One of the most significant OBBBA provisions affecting families is the enhanced child tax credit. The maximum credit increased from $2,000 to $2,200 per child for the 2025 tax year, and this amount will be adjusted for inflation starting in 2026. This means families filing their 2025 returns during the current 2026 filing season could see a $200 per-child increase in their refund compared to 2024.

Refundable Portion and Income Limits

Even if you owe no federal income tax, you can claim a refundable portion of the child tax credit, known as the Additional Child Tax Credit (ACTC). For 2026, the refundable portion is limited to $1,700 per child. This means lower-income families who owe no taxes can still receive a check of up to $1,700 per qualifying child. The credit begins to phase out for higher earners: single filers with income over $200,000 and married couples filing jointly with income over $400,000 see the credit reduced by $50 for each $1,000 of income above these thresholds.

To qualify, children must be under age 17 at the end of 2026 and have a valid Social Security number. For married couples claiming the credit, at least one spouse must also have a valid Social Security number.

Inflation Indexing Starting in 2026

Beginning in 2026, the child tax credit will be adjusted annually for inflation. This means families will benefit from larger credits in future years, protecting the credit’s value against rising costs. Inflation indexing ensures that tax provisions remain meaningful as the economy changes.

What Business Tax Benefits Are Available for 2026?

The One Big Beautiful Bill Act delivers major tax benefits for business owners, making permanent several provisions that were previously temporary. These changes reduce the amount of taxable income for pass-through entities, S Corporations, partnerships, and sole proprietorships, resulting in significant annual tax savings.

100% Bonus Depreciation and Asset Expensing

The OBBBA makes permanent the 100% bonus depreciation provision, allowing business owners to immediately deduct the full cost of qualifying business assets in the year they’re placed in service. This applies to equipment, machinery, vehicles, and other tangible property. For example, if you purchase $100,000 in manufacturing equipment for your business, you can deduct the entire amount in 2026 rather than depreciating it over several years. This accelerates your tax deductions and improves cash flow by reducing your tax liability immediately.

Immediate Expensing of Domestic R&D Costs

Previously, businesses had to amortize research and development (R&D) costs over five years. The OBBBA eliminates this requirement for domestic R&D costs beginning in 2025. You now have the option to either expense the full amount immediately, spread the deduction between 2025 and 2026 for optimal tax planning, or continue amortizing. This flexibility allows you to strategically plan your deductions based on your anticipated tax situation. For technology companies, manufacturers, and innovative enterprises, this provision can save tens of thousands of dollars annually.

How Does the OBBBA Impact Self-Employment Tax for Freelancers?

Self-employed professionals and 1099 contractors face self-employment tax obligations on all net business income. Self-employment tax includes both the employer and employee portions of Social Security and Medicare taxes, totaling approximately 15.3% of net earnings. The OBBBA introduces several new deductions that directly reduce your self-employment tax burden.

New Tax-Free Income Categories for 1099 Contractors

Under the new trump tax overhaul updates, income from tips and overtime is now tax-free up to specific thresholds. Tip income up to $25,000 is exempt from federal income tax, and overtime pay up to $12,500 (or $25,000 for married filing jointly) avoids federal taxation. This change significantly reduces tax liability for contractors and service workers. For example, a self-employed contractor who earns $50,000 from contract work and $15,000 in tips would only owe taxes on the $50,000 of contract income, not the $15,000 in tips. This translates to approximately $2,295 in federal income tax savings on the tip income alone (assuming a 15.3% self-employment tax rate).

Calculate your precise self-employment tax savings using our Self-Employment Tax Calculator for West Virginia to understand your specific tax benefits for 2026.

Self-Employed Health Insurance and Quarterly Payments

Self-employed individuals can continue deducting health insurance premiums as an above-the-line deduction, reducing both income tax and self-employment tax. Additionally, quarterly estimated tax payments remain required. The OBBBA doesn’t change quarterly payment obligations, but new deductions may reduce the amounts you need to remit each quarter. Many self-employed professionals underestimate their quarterly payments, resulting in penalties and interest. Review your 2026 estimated income and adjust your quarterly payment amounts accordingly.

What New Deductions and Credits Are Available in 2026?

Beyond the major changes, OBBBA introduces and expands several targeted deductions that can significantly reduce your tax burden. Understanding these provisions helps you maximize your 2026 tax savings.

Vehicle Loan Interest and Transportation Deductions

For the first time, vehicle loan interest is now deductible under OBBBA, providing relief for workers and business owners. While mortgage interest and student loan interest have long been deductible within limits, vehicle loan interest was previously non-deductible. This new provision benefits individuals with car loans who don’t itemize deductions. If you financed a vehicle for personal use and paid $3,000 in interest during 2026, you can now deduct this amount, saving approximately $600 in federal income taxes (at a 20% tax rate).

Enhanced Charitable Deductions (Starting 2026)

A new charitable deduction for non-itemizers takes effect in 2026, allowing taxpayers who claim the standard deduction to also deduct charitable contributions up to certain limits. This change was not effective for the 2025 tax year but applies to 2026 and forward, providing additional incentive for charitable giving among middle-income taxpayers who traditionally couldn’t benefit from charitable deductions.

How Can Seniors Benefit from the 2026 Trump Tax Overhaul Updates?

The OBBBA includes transformative provisions for senior taxpayers, fundamentally changing how Social Security benefits are taxed. These changes represent significant relief for retirees living on fixed incomes and provide substantial savings for high-net-worth seniors.

The Senior Deduction: $6,000 Individual/$12,000 Joint

Beginning in 2025 and continuing through 2028, seniors age 65 and older can claim an additional $6,000 deduction on their tax returns (or $12,000 for married couples filing jointly). This deduction is separate from and layered on top of the standard deduction and the existing age-based standard deduction increase. For a single senior, the total standard deduction is now $23,750 ($15,750 base + $6,000 senior deduction + $2,000 age-based additional deduction), while married seniors filing jointly can claim $50,100 ($31,500 base + $12,000 senior deduction + $3,200 for both spouses age 65+).

This deduction directly reduces taxable income, which is particularly valuable for seniors whose primary income source is Social Security. Since Social Security remains federally taxable (the OBBBA didn’t eliminate taxation, but reduced it through this deduction), this provision effectively shields most Social Security benefits from taxation for middle-income seniors.

Impact on Social Security Taxation

According to White House estimates, 88% of seniors will now avoid any federal tax on their Social Security benefits, compared to just 64% under the previous tax code. This represents a significant expansion of tax-free retirement income for seniors. The expanded deduction and increased standard deduction thresholds mean only seniors with substantial additional income sources (pensions, investment income, rental property income) will owe taxes on their benefits.

 

Uncle Kam in Action: Business Owner Maximizes OBBBA Benefits

Client Profile: Sarah, a self-employed management consultant and mother of two children, with annual revenue of approximately $150,000 and net business income averaging $85,000 annually.

Financial Situation: Sarah operates her consulting practice as a sole proprietor, earning $85,000 in net income after business expenses. She pays approximately $12,000 annually in self-employment taxes and is responsible for quarterly estimated payments. Her two children qualify for the child tax credit.

The Challenge: Sarah was uncertain how the 2026 trump tax overhaul updates would affect her tax liability. She had heard about increased child tax credits and new deductions but didn’t understand how to implement them or whether they would meaningfully reduce her substantial self-employment tax burden. Additionally, she was considering purchasing new office equipment and wanted to understand how OBBBA’s depreciation provisions could help.

The Uncle Kam Solution: Our tax strategy team analyzed Sarah’s situation and identified three major areas of optimization under OBBBA. First, we leveraged the permanent 100% bonus depreciation to deduct $25,000 in office equipment purchases in 2026 (computers, furniture, and software), rather than depreciating over multiple years. Second, we ensured she claimed the full $2,200 child tax credit for each of her two children, resulting in a $4,400 total credit. Third, we restructured her business to take advantage of the qualified business income (QBI) deduction, which was renewed and made permanent under OBBBA.

The Results: Sarah reduced her 2026 tax liability from an estimated $18,500 to $13,200—a savings of $5,300 in the first year alone. The $25,000 equipment deduction reduced her self-employment tax by approximately $3,825 (15.3% self-employment tax rate). The two child tax credits of $2,200 each provided $4,400 in tax credits (additional benefit since her tax liability exceeded this amount). Combined, these OBBBA provisions delivered immediate tax relief while positioning her for long-term savings through retained earnings. Our services fee of $2,500 provided a first-year ROI of 212%—more than five times the investment.

Long-Term Impact: Going forward, Sarah’s business will benefit from the permanent nature of these provisions. The qualified business income deduction continues indefinitely, and the 100% bonus depreciation applies to all future equipment purchases. By leveraging these benefits annually, Sarah projects tax savings exceeding $20,000 over the next three years, allowing her to reinvest in her business and retirement savings.

Visit our client results page for more success stories from business owners and freelancers who maximized OBBBA benefits.

Next Steps

Don’t leave tax savings on the table. Take these immediate actions to maximize your 2026 trump tax overhaul updates:

• Review your filing status: Confirm you’re using the optimal filing status (married filing jointly vs. separate) based on your combined income and deductions.
• Catalog eligible deductions: Gather documentation for vehicle loan interest, charitable donations, medical expenses, and business investments to support your deductions.
• Plan equipment purchases: If your business needs new equipment, accelerate purchases to 2026 to benefit from 100% bonus depreciation.
• Schedule a tax planning consultation: Meet with a tax professional to model your specific situation and identify additional personalized tax strategies based on your income and business structure.

Frequently Asked Questions

When Did the OBBBA (One Big Beautiful Bill Act) Take Effect?

The One Big Beautiful Bill Act was signed into law on July 4, 2025. Most provisions are effective retroactively to the beginning of 2025, meaning they apply to your 2025 tax return filed in 2026. Some provisions, like the charitable deduction for non-itemizers and certain business provisions, take effect in 2026. This retroactive application is significant because taxpayers filing 2025 returns in early 2026 benefit from these changes immediately.

How Much Can I Save with 100% Bonus Depreciation?

Bonus depreciation savings depend on your business structure and tax bracket. If you’re in the 25% federal tax bracket and purchase $50,000 in qualifying equipment, you save $12,500 in federal taxes immediately (25% of $50,000). Pass-through entities like S Corps and sole proprietorships retain these deductions at the owner level, allowing the benefit to flow through to your personal return. For a business in a 37% combined federal and state tax bracket, that same $50,000 equipment purchase saves $18,500 in the first year.

Who Qualifies for the New Child Tax Credit Increase?

Any taxpayer with qualifying children under age 17 at the end of 2026 can claim the $2,200 child tax credit, provided they meet income requirements. The credit phases out for single filers with income over $200,000 and married couples filing jointly with income over $400,000. Each child must have a valid Social Security number, and for married filing jointly, at least one spouse must also have a valid Social Security number. There is no limit to the number of qualifying children you can claim.

Can I Deduct Vehicle Loan Interest if I Already Itemize Deductions?

The new vehicle loan interest deduction is most valuable for taxpayers who claim the standard deduction, as it provides an additional deduction without itemizing. If you itemize deductions, you may already be claiming mortgage interest, charitable donations, and other itemized deductions. Vehicle loan interest still doesn’t qualify as an itemized deduction. However, if you own a business and financed a vehicle for business use, the vehicle loan interest is deductible as a business expense on your Schedule C, separate from personal deductions. This provides significant value for self-employed individuals.

Are the Senior Deduction and Other OBBBA Provisions Permanent?

Some OBBBA provisions are permanent, while others are temporary. The senior deduction ($6,000 individual/$12,000 joint) is authorized only through the 2028 tax year, meaning it’s currently set to expire after December 31, 2028. However, Congress may extend these provisions if they prove popular with voters. Business provisions like 100% bonus depreciation and the qualified business income deduction are permanent under current law. Always consult with a tax professional to understand the status of specific provisions that affect your situation.

How Do I Claim the Additional Child Tax Credit (ACTC)?

The refundable portion of the child tax credit (the ACTC) is claimed on Form 1040 when you file your tax return. If your tax liability is less than your total child tax credit, the excess refundable portion is paid to you as a refund, up to the $1,700 per-child limit for 2026. You must provide the child’s Social Security number and relationship to claim the credit. IRS.gov provides detailed guidance and worksheets for calculating and claiming the credit.

Related Resources

• Tax Strategy Services – Personalized planning to maximize your OBBBA benefits.
• Business Owner Tax Planning – Strategies for maximizing depreciation and business deductions.
• Self-Employed Professional Support – Dedicated resources for 1099 contractors and freelancers.
• High-Net-Worth Tax Planning – Advanced strategies for wealthy individuals and multi-entity owners.
• 2026 Tax Preparation and Filing – Professional preparation of your returns reflecting all OBBBA changes.

This information is current as of 2/9/2026. Tax laws change frequently. Verify updates with the IRS or a tax professional if reading this later.

Last updated: February, 2026