The One Big Beautiful Bill Act: What You Need to Know for Tax Season 2026
February 18, 2026
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Tax season 2026 is here, and it looks different. The One Big Beautiful Bill Act, signed into law on July 4, 2025, brings sweeping changes to the tax code that affect how you prepare returns, what your clients can deduct, and how your office handles reporting.
Whether you're a seasoned tax pro or growing your practice, understanding these changes isn't optional; it's essential. Let's break it down together.
Big Picture: What Changed?
Most of the new provisions apply to tax year 2025 returns you're filing right now in 2026. Some expire in 2028, others in 2029, and a few are here to stay. For all practical purposes, these changes will shape the next several filing seasons.
Here's what you need to know.
Higher Standard Deductions for 2026
Your clients filing 2025 returns will see updated standard deduction amounts:
• $32,200 for married couples filing jointly
• $16,100 for single filers and married individuals filing separately
• $24,150 for heads of household
This is a meaningful bump, and for many of your clients, it means a larger refund or lower tax liability. Make sure they know.
Five New Individual Deductions Your Clients Need to Hear About
These are the deductions that will drive client conversations this season. Each one operates through 2028 with income-based phaseouts.
1. Tips Deduction
If your clients work in tipped occupations, such as restaurants, salons, rideshare, and more, they may be eligible for up to a $25,000 deduction on qualified tips. This applies to both employees and self-employed individuals with a Social Security number.
The deduction phases out above $150,000 MAGI ($300,000 for joint filers). Qualifying tips include voluntary cash tips, charged tips, and shared tips reported on Form W-2, Form 1099, or Form 4137.
Who doesn't qualify? Self-employed individuals in a Specified Service Trade or Business (SSTB) under Section 199A, or employees of SSTB employers.
2. Overtime Deduction
Workers earning overtime can now deduct the premium portion of their overtime pay, the "half" in "time-and-a-half." The maximum deduction is $12,500 ($25,000 for joint filers), phasing out above $150,000 MAGI ($300,000 for joint filers).
This is huge for your clients in hourly roles: construction, healthcare, manufacturing, and beyond. Many of them won't even know this exists unless you tell them.
3. Car Loan Interest Deduction
Here's one that caught a lot of people's attention. Interest on qualifying auto loans is now deductible up to $10,000 per year. But there are specific requirements:
• The loan must have originated after December 31, 2024
• The vehicle must be for personal (non-business) use
• Final assembly must be in the United States
• The VIN must be included on the return
• Lease payments do not qualify
The deduction phases out above $100,000 MAGI ($200,000 for joint filers). Pro tip: Start collecting VINs from your clients now; missing this information will delay refunds.
4. Deduction for Seniors
Clients age 65 and older get an additional $6,000 deduction ($12,000 if both spouses qualify). This is on top of the existing higher standard deduction for seniors and is available to both itemizers and non-itemizers.
It phases out above $75,000 MAGI ($150,000 for joint filers). If you serve retirees or older adults in your community, this is a conversation starter.
5. SALT Deduction Increase
The state and local tax (SALT) deduction cap jumped from $10,000 to $40,000 for most filers ($20,000 for married filing separately) for tax years 2025 through 2029. A phaseout begins at $500,000 MAGI.
For clients in high-tax states, this is a welcome change. Keep in mind: beginning in 2030, the cap reverts to $10,000.
What's Changed for Business Owners?
Employer-Provided Childcare Credit
The maximum credit increased from $150,000 to $500,000 for tax year 2026, with eligible small businesses able to claim up to $600,000. This now covers third-party arrangements and jointly operated childcare facilities, providing a real incentive for employers to invest in their teams.
Employee Retention Credit (ERC) Limitation
If you have clients who claimed the ERC for Q3 and Q4 2021, be aware that new limitations apply to claims filed after January 31, 2024. The IRS has released FAQs on filing and appeal rights.
Estate Tax Exclusion
The exclusion jumped to $15,000,000 for 2026 decedents (up from $13,990,000 in 2025). This affects estate-planning conversations with your higher-net-worth clients.
New Reporting Requirements: Don't Get Caught Off Guard
The IRS provided penalty relief for tax year 2025, but 2026 filings face full enforcement. Here's what's new:
Tips and Overtime Reporting: Employers must report cash tips on IRS/SSA information returns, including the occupation of the tip recipient and qualified overtime compensation.
Car Loan Interest Reporting: Lenders must now file information returns with the IRS and provide statements to taxpayers showing total interest received.
Remittance Transfer Excise Tax: Starting January 1, 2026, there's a 1% excise tax on remittance transactions paid with cash, money order, or cashier's check. Providers must make semimonthly deposits and file quarterly Form 720 returns.
Other Changes Worth Knowing
Trump Accounts: A new savings vehicle for children. Parents or guardians can establish accounts with a one-time $1,000 federal contribution and up to $5,000 in individual contributions per year. These can't be funded before July 4, 2026, and generally, no withdrawals are allowed before the child turns 18.
HSA Expansions: Starting January 1, 2026, bronze and catastrophic health plans are treated as HSA-compatible, and direct primary care enrollees may contribute to HSAs.
Clean Vehicle and Energy Credits — Expired: The New Clean Vehicle Credit (30D), Used Clean Vehicle Credit (25E), and Qualified Commercial Clean Vehicle Credit (45W) all expired September 30, 2025. The Energy Efficient Home Improvement Credit (25C) and Residential Clean Energy Credit (25D) expired December 31, 2025. Your clients may ask about these — be ready to explain they're no longer available.
Adoption Credit Enhancement: The maximum credit for 2026 increased to $17,670, with up to $5,120 refundable.
Mid-Season Action Plan: What to Do Right Now
We're in the thick of it. E-filing opened on January 26; the April 15 deadline is approaching fast, and your office is busy. But with this many changes to the tax code, taking a moment to reset can save you headaches and earn your clients more money. Here's what we recommend:
Double-check your intake process. Are you capturing VINs for the new car loan interest deduction? Confirming occupation codes for tipped workers? Documenting overtime breakdowns? If any of these slipped through early-season returns, now is the time to course-correct before the April 15 rush. Missing information means delayed refunds and frustrated clients.
Have the conversation with every client who walks in. Many taxpayers still have no idea about the new deductions for tips, overtime, car loan interest, or the senior deduction. Don't assume they've heard. A two-minute explanation can mean hundreds (or thousands) more in their pocket, and that's the kind of value that keeps clients coming back year after year.
Review early returns for missed opportunities. If you filed returns before fully understanding the new provisions, it's worth a second look. An amended return is better than leaving money on the table, and your clients will thank you for going the extra mile.
Stay on top of IRS guidance as it drops. The IRS is still releasing notices, revenue procedures, and FAQs to address specific scenarios under the One Big Beautiful Bill Act. Keep an eye out, mid-season, new guidance could impact returns you haven't filed yet.
Lean on your partner, that's us. Tax season is a marathon, not a sprint, and you don't have to run it alone. Whether it's a quick question through our chat (94% satisfaction rate), a call to our support team (84% answered in 3 minutes or less), or browsing our Help Center with 200+ articles and videos, Refundo is right here with you through April 15 and beyond.
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We're In This Together
At Refundo, we don't just give you software, we give you a strategic partner who understands your business, your community, and the challenges you face every season. These tax law changes are complex, but you don't have to navigate them alone.
Have questions? Reach out anytime.
• Phone: (908) 445-5544
• Chat: Available on your dashboard and at refundo.com
Amplify your success this tax season. 💜
Source: IRS — One, Big, Beautiful Bill provisions.
Written in collaboration with Surgent Tax Experts.
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