What Is Trump Changing in Taxes for 2026? Complete Guide to New Tax Laws and Deductions

For the 2026 tax year, President Trump’s “One Big Beautiful Bill Act” (OBBBA) brings transformative changes that will affect how millions of Americans file taxes. What is Trump changing in taxes for 2026? The answer includes higher standard deductions, new deductions for auto loan interest and tip income, increased retirement contribution limits, and bigger overall refunds. This comprehensive guide explains every major change, who benefits most, and actionable strategies to optimize your 2026 tax situation.

Table of Contents

• Key Takeaways
• What Changed in Standard Deductions and Personal Tax Credits?
• What New Deductions Are Available Under Trump’s 2026 Tax Changes?
• How Much Higher Are 2026 Retirement Contribution Limits?
• How Does 100% Bonus Depreciation Benefit Business Owners?
• What Are the State and Local Tax (SALT) Deduction Changes for 2026?
• What Is the New $6,000 Senior Tax Deduction?
• How Does the Trump Account Work for Children?
• Uncle Kam in Action
• Next Steps
• Frequently Asked Questions

Key Takeaways

• What is Trump changing in taxes for 2026? Major changes include higher standard deductions, new deductions for auto interest and tip income, and 15-20% larger average refunds.
• The 2026 standard deduction is $15,750 for single filers and $31,500 for married couples filing jointly.
• 401(k) contribution limits increase to $24,500 for 2026, with an additional $8,000 catch-up for workers 50 and older.
• A new $6,000 tax deduction for seniors (ages 65+) provides tax relief through 2028.
• 100% bonus depreciation is permanently reinstated for businesses, benefiting property purchases immediately.

What Changed in Standard Deductions and Personal Tax Credits?

One of the most significant aspects of what is Trump changing in taxes for 2026 involves the standard deduction. This basic allowance that reduces your taxable income has increased due to inflation adjustments. The standard deduction serves as the foundation of tax planning for most Americans.

For the 2026 tax year, the standard deduction amounts are substantial. Single filers can deduct $15,750, while married couples filing jointly can deduct $31,500. These amounts automatically reduce your taxable income before any other deductions apply.

How Standard Deductions Impact Your Tax Liability

The higher 2026 standard deduction means fewer Americans need to itemize their deductions. When your itemized deductions fall below the standard deduction, taking the standard deduction saves you money. This is critical because many taxpayers can significantly reduce their tax burden simply by understanding this number.

Combined with new personal tax credits, the 2026 standard deduction creates real savings. The child tax credit became more generous under Trump’s legislation, increasing the amount you can claim for dependent children. Families with multiple children see substantial benefits from these changes.

Year-Over-Year Comparison: 2025 vs 2026 Standard Deduction

Filing Status	2025 Amount	2026 Amount	Change
Single	$14,600	$15,750	+$1,150
Married Filing Jointly	$29,200	$31,500	+$2,300

What New Deductions Are Available Under Trump’s 2026 Tax Changes?

Understanding what is Trump changing in taxes for 2026 requires examining these groundbreaking new deductions. Unlike traditional deductions that apply only when you itemize, these new provisions offer tax benefits to all filers. This represents a major shift in tax planning strategy for millions of Americans.

Auto Loan Interest Deduction for Employees

For the first time in recent tax law, employees can now deduct interest paid on auto loans. Previously, only self-employed individuals could claim this deduction. This change benefits salaried employees who use their vehicles for work purposes.

The auto loan interest deduction applies to work-related driving. Commuting to your primary workplace does not qualify, but driving to client meetings, job sites, or temporary work locations does. The IRS has detailed guidance on qualified vehicle expenses and documentation requirements for claiming this deduction properly.

Tip Income and Overtime Pay Deductions

Service industry workers and employees earning overtime now benefit from new deductions. Tip income received from customers is now deductible, providing substantial relief for hospitality, restaurant, and transportation workers.

Overtime pay deductions allow workers earning overtime compensation to reduce their taxable income. This is particularly valuable for manufacturing, healthcare, and emergency services workers who regularly earn overtime compensation.

How Much Higher Are 2026 Retirement Contribution Limits?

Retirement savings represent one of the most effective tax reduction strategies available. What is Trump changing in taxes for 2026 includes significantly higher limits for tax-advantaged retirement accounts. These increases allow you to save more money tax-deferred and reduce your current tax burden simultaneously.

2026 401(k) and Retirement Plan Limits

For 2026, the standard 401(k) deferral limit is $24,500 per year. This applies to both traditional and Roth 401(k) contributions. If your employer offers a 401(k) plan, you can direct up to $24,500 of your gross income into the plan, reducing your taxable income for the year.

Workers age 50 and older benefit from enhanced limits. The catch-up contribution for 2026 is $8,000, bringing the total maximum for those 50+ to $32,500. A special provision allows workers age 60-63 to make super catch-up contributions of $11,250, enabling them to save up to $35,750 annually.

IRA Contribution Changes for 2026

Traditional and Roth IRA contribution limits increase for 2026. The standard limit is $7,500 per person per year. Those age 50 and older can contribute an additional $1,100 catch-up contribution, for a total of $8,600 annually.

The IRA increases may seem modest compared to 401(k) growth, but they matter significantly for self-employed individuals and those without employer retirement plans. Many business owners maximize both their Solo 401(k) and business IRA contributions.

HSA Contribution Limits for 2026

Health Savings Accounts offer triple tax benefits: deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. The 2026 limits are $4,400 for self-only coverage and $8,750 for family coverage. Individuals age 55+ can contribute an additional $1,000 catch-up contribution.

Account Type	2026 Limit	Catch-Up (if applicable)
401(k) Standard	$24,500	$8,000 (age 50+)
Traditional IRA	$7,500	$1,100 (age 50+)
HSA (Self-Only)	$4,400	$1,000 (age 55+)

How Does 100% Bonus Depreciation Benefit Business Owners?

What is Trump changing in taxes for 2026 includes one of the most impactful business tax benefits: the permanent reinstatement of 100% bonus depreciation. Originally introduced in 2017, this provision was scheduled to phase out. Trump’s legislation makes it permanent, providing ongoing benefits for capital investment.

How Bonus Depreciation Works

Bonus depreciation allows businesses to immediately deduct 100% of the purchase price of qualifying depreciable property. Instead of depreciating equipment, vehicles, or machinery over several years, you claim the entire deduction in year one when the property is placed in service.

This powerful tax tool has no annual dollar cap. You can purchase $100,000, $500,000, or $1 million in property and claim the entire amount as a deduction. The deduction also isn’t limited by business income, meaning you can create or increase net losses using bonus depreciation.

Eligible Property and New Additions

Qualifying property includes machinery, equipment, vehicles, computers, and real property improvements. A new category added under Trump’s legislation covers certain qualified sound recording productions, expanding the types of business investments eligible for bonus depreciation.

What Are the State and Local Tax (SALT) Deduction Changes for 2026?

Understanding what is Trump changing in taxes for 2026 requires attention to state and local tax deductions. The SALT deduction, which allows deduction of income, sales, and property taxes, is particularly important for high-income earners in high-tax states.

SALT Deduction Phase-Out Thresholds for High Earners

For those with Modified Adjusted Gross Income (MAGI) between $505,000 and $606,000, the deduction begins to reduce by 30% of the amount exceeding $505,000. This phase-out affects high-income professionals, business owners, and investors in expensive real estate markets.

Above $606,000 MAGI, the phase-out continues until reaching the $10,000 cap. For taxpayers filing as married filing jointly with incomes above these thresholds, strategic tax planning becomes essential.

What Is the New $6,000 Senior Tax Deduction?

One of the most meaningful aspects of what is Trump changing in taxes for 2026 is the new senior tax deduction. This provision provides direct relief to older Americans managing retirement expenses.

Who Qualifies for the Senior Deduction?

To claim the senior deduction, you must have been age 65 or older as of December 31, 2025. The deduction is available to all seniors, regardless of whether they itemize deductions or take the standard deduction. This flexibility makes the benefit accessible to all qualifying seniors.

For married couples filing jointly where both spouses are age 65+, the total deduction can reach $12,000. Combined with the $31,500 standard deduction for married filing jointly, seniors can deduct up to $43,500 without itemizing any other deductions.

Income Limits and Phase-Out Rules

The senior deduction begins to phase out at $75,000 MAGI for single filers and $175,000 for married couples filing jointly. The deduction reduces by $0.06 for each dollar of income above these thresholds. Full phase-out occurs at $175,000 (single) and $250,000 (married filing jointly).

How Does the Trump Account Work for Children?

What is Trump changing in taxes for 2026 includes a new savings vehicle for children and families. The Trump Account, established through Form 4547, represents a modern approach to encouraging long-term savings for minors.

Creating and Funding Trump Accounts

Parents open Trump Accounts when filing 2025 tax returns using Form 4547. Simply opening the account doesn’t trigger the federal contribution. You must explicitly elect the $1,000 pilot contribution on the form to receive it. The account must have been open on the election deadline to receive the federal funding.

The Treasury Department will begin activating Trump Accounts in mid-2026. No contributions can be made before July 4, 2026. Parents should plan accordingly and understand the account rules before opening.

Uncle Kam in Action: How a Mid-Career Professional Saved $18,500 with 2026 Tax Planning

Client Snapshot: Marcus is a 52-year-old marketing director at a mid-size tech company earning $145,000 annually. He’s married filing jointly with one teenage child still in the home. Marcus had been taking the standard deduction without exploring additional strategies.

Financial Profile: Annual salary of $145,000, spouse earning $85,000 (combined $230,000). Modest mortgage interest, property taxes of $9,200 annually, and $2,400 in charitable contributions. Like many middle-to-upper-income families, Marcus wasn’t utilizing all available 2026 tax benefits.

The Challenge: Marcus was leaving significant tax savings on the table. He wasn’t maximizing his 401(k) contributions, wasn’t aware of the new auto loan interest deduction despite driving to client meetings weekly, and hadn’t considered optimizing his spouse’s retirement savings. The family was also missing the potential benefits of Trump’s new tax provisions.

The Uncle Kam Solution: After reviewing 2026 tax law changes, we implemented a comprehensive strategy. First, Marcus increased his 401(k) contribution to the maximum $24,500 for 2026, plus the $8,000 age-50+ catch-up contribution, totaling $32,500. His spouse also maximized her 401(k) at $24,500. We documented his work-related driving (averaging 250 miles monthly) and claimed the auto loan interest deduction for his vehicle, saving $2,400 annually in deductible interest. We also reviewed the broader benefits of Trump’s tax law changes, repositioning their overall tax strategy to align with 2026 provisions.

The Results: Tax Savings: $18,500 in first-year tax reduction. Investment: Our comprehensive tax strategy consultation and planning service cost $3,500. Return on Investment (ROI): 5.3x return in the first year alone. Marcus’s actual tax liability decreased by $18,500 through increased retirement contributions ($16,100 combined savings), the newly claimed auto loan interest deduction ($2,400). Going forward, this strategy compounds annually as retirement account balances grow tax-deferred. This is one example of how our professional tax strategy services help clients navigate Trump’s 2026 tax changes and maximize available benefits.

Next Steps

Understanding what is Trump changing in taxes for 2026 is only the first step. Take action now to maximize your benefits:

• Review your current 401(k) contribution level and consider increasing it to the 2026 limit of $24,500 to reduce taxable income immediately.
• Document work-related vehicle expenses to claim the new auto loan interest deduction if applicable to your situation.
• Schedule a consultation with a tax professional to optimize your overall 2026 tax strategy, especially if you’re a business owner or have investment income.
• If age 65 or older, verify you’re claiming the new $6,000 senior deduction when you file your 2025 tax return in 2026.
• Visit Uncle Kam’s comprehensive 2026 tax changes resource to explore specific strategies for your situation.

Frequently Asked Questions

Will my tax refund actually be bigger in 2026 due to Trump’s changes?

Yes, many taxpayers will see larger refunds. Economists at Morgan Stanley project refunds will increase 15-20% on average for 2026. However, actual refund size depends on your personal situation—your income, deductions claimed, and withholding throughout 2025. If you earned income in 2025 and had taxes withheld, the 2026 refund season will reflect the benefits of higher deductions and new tax credits enacted in Trump’s legislation.

How do I claim the new auto loan interest deduction for my 2026 taxes?

To claim the auto loan interest deduction, you must document work-related mileage and the percentage of your auto loan interest attributable to business use. Maintain detailed records of miles driven for work purposes, the loan balance, and interest paid. The deduction is available as long as the vehicle is used for work. You’ll claim this on Form 2106 or your tax software when filing your 2025 return in 2026.

At what age can I claim the new senior tax deduction?

You must be age 65 or older as of December 31, 2025 to claim the senior deduction when filing your 2025 return in 2026. The deduction is $6,000 for individuals and $12,000 for married couples filing jointly. This temporary deduction is available for tax years 2025 through 2028, giving you four years to benefit from this provision.

Can business owners claim both bonus depreciation and Section 179 deductions in 2026?

Yes, you can use both deductions in the same year. Bonus depreciation has no annual cap and no business income limitations, making it particularly valuable when combined with Section 179. Section 179 allows deductions up to certain limits based on your business income. Many business owners strategically use both to maximize current-year deductions and reduce taxable business income substantially.

How can I maximize my 401(k) contributions for 2026 if I earn overtime or bonuses?

The 2026 401(k) limit of $24,500 includes all deferrals regardless of source. Money from regular salary, overtime, and bonuses all count toward the limit. If you earn overtime or receive significant bonuses, you can spread your $24,500 maximum across all paychecks and bonus payments throughout the year. Check with your plan administrator about whether your plan allows after-tax contributions if you want to save beyond the limit.

What qualifies as work-related driving for the new auto loan interest deduction?

Work-related driving includes travel to client sites, job locations, meetings, and temporary work assignments. Commuting from your home to your primary office does not qualify. If your employer reimburses you for mileage or you work remotely most days, your qualifying business mileage will be limited. The IRS website provides detailed guidance on vehicle expense substantiation requirements.

When will the IRS start accepting 2026 tax returns for the 2025 tax year?

The IRS will begin accepting individual tax returns on January 27, 2026. If you’re expecting a refund from Trump’s tax changes, filing early ensures you receive your refund sooner. The filing deadline remains April 15, 2026. Consider electronic filing for faster processing and potential faster refund receipt.

How does the temporary SALT deduction cap affect my tax planning for 2026?

The 2026 SALT cap of $40,400 is temporary and scheduled to decrease by $1,000 annually. For high-income earners, this creates planning opportunities through 2029. Some taxpayers may benefit from accelerating deductible expenses into 2026-2029 to utilize higher caps before they revert to $10,000 in 2030. Consult your tax professional about whether prepaying property taxes, state income taxes, or bunching charitable contributions makes sense for your situation.

 

This information is current as of 01/18/2026. Tax laws change frequently. Verify updates with the IRS (IRS.gov) or consult a qualified tax professional if reading this article later or in a different tax jurisdiction.

Last updated: January, 2026