What the OBBBA Means for Your 2026 Tax Season

The 2026 tax season marks the first filing under the One Big Beautiful Bill Act (OBBBA), bringing meaningful updates to the U.S. tax code. If you’re a high earner, receive equity compensation, or regularly manage a more complex return, these changes may influence how you approach your 2025 taxes.

Focusing on the right details now can help you avoid surprises and identify planning opportunities that might otherwise be overlooked. Below are several key areas to keep in mind as you prepare for the upcoming tax season.

#1: State and Local Tax (SALT) Deduction

For years, many high-income households in states like New York, New Jersey, Maryland, and California faced a hard $10,000 cap on the state and local tax (SALT) deduction. The OBBBA raises that cap, but higher earners may not be able to take the full benefit.

What changes for the 2026 tax season:

• Beginning in 2025, the OBBBA increases the SALT deduction cap from $10,000 to $40,000.
• The expanded deduction begins to phase down once modified adjusted gross income exceeds certain thresholds, roughly $250,000 for single filers and $500,000 for joint filers.

Next steps: If you live in a high-tax state and expect income near or above the phase-out levels, coordinate closely with your financial planner or CPA. Thoughtful timing of state and local tax payments can help you preserve as much of the SALT deduction as possible.

Business owners should also pay close attention during the 2026 tax season. While the OBBBA increases the personal SALT deduction cap, it leaves state-level pass-through entity (PTE) tax workarounds intact. That means PTE elections may continue to provide meaningful additional tax relief beyond the individual SALT limits.

Because PTE tax rules vary widely by state, it’s important to work closely with your CPA or tax advisor to confirm whether a PTE election makes sense and to ensure you’re structuring it in the most tax-efficient way possible.

#2: Higher Standard Deduction

The Tax Cuts and Jobs Act of 2017 significantly increased the standard deduction, and the OBBBA makes that higher level permanent. Many taxpayers will still benefit from the standard deduction, but for those near the cutoff, proactive planning can determine whether itemizing delivers a better outcome.

What changes for the 2026 tax season:

• For the 2025 tax year, the standard deduction increases to $15,750 for single filers, $31,500 for married couples filing jointly, and $23,625 for heads of household.
• Taxpayers age 65 or older may also qualify for an additional deduction of up to $6,000, or $12,000 for couples where both spouses are 65 or older. This additional “senior” deduction begins to phase out for individuals with income over $75,000 and joint filers over $150,000.

Next steps: Compare your 2025 tax outcome using the standard deduction versus itemizing. If you’re close to the threshold, you may be able to improve the result by bunching charitable contributions or timing deductible expenses, such as property taxes, into specific years.

Taxpayers age 65 and older with limited itemized deductions may also want to plan income distributions carefully to preserve the full $6,000 senior deduction.

#3: Lower AMT Exemption Phaseout Thresholds 

The Alternative Minimum Tax (AMT) runs alongside the regular tax system to ensure higher-income households pay a minimum level of tax. If you’re a high earner with equity compensation or large one-time income events, you may be more likely to trigger AMT starting in 2026, often while seeing less benefit from the expanded SALT deduction.

What changes for the 2026 tax season:

• The income thresholds where the AMT exemption begins to phase out drop to $1,000,000 for married couples filing jointly and $500,000 for all other filers, with annual inflation adjustments.
• The exemption is now reduced by 50% of income above those thresholds, up from 25%, causing the exemption to disappear much more quickly.

Next steps: If equity compensation makes up a meaningful portion of your pay, especially Incentive Stock Options (ISOs), it’s wise to run side-by-side projections of regular tax versus AMT before large exercises to avoid unexpected AMT exposure.

For those in high-tax states, be sure to incorporate SALT considerations into your AMT planning. While the higher SALT cap can reduce your regular tax bill, SALT deductions remain disallowed under AMT, which now applies at lower income levels beginning in 2026.

#4: New Charitable Giving Rules

The OBBBA changes how charitable deductions work, making both timing and structure more important than before. If you regularly give meaningful amounts and itemize, 2025 may be one of the most deduction-friendly tax years you’ll see for some time.

What changes for the 2026 tax season:

• Beginning in 2026, itemized charitable deductions apply only to gifts exceeding 0.5% of adjusted gross income.
• For taxpayers in the top bracket, the OBBBA caps the effective tax benefit of charitable deductions at 35%, down from 37%, after applying the new floor and existing AGI limits.
• The OBBBA also introduces an above-the-line deduction for taxpayers using the standard deduction, allowing up to $1,000 in cash charitable gifts, or $2,000 for joint filers, even without itemizing.

Next steps: If charitable giving is already part of your plan, consider whether front-loading several years of donations into 2025 makes sense, potentially using a donor-advised fund (DAF). Beginning in 2026, it may be more effective to bunch gifts into fewer, larger years rather than spreading smaller amounts annually, helping you clear the new deduction floor and capture more value when you itemize.

#5: Permanent Higher Lifetime Estate and Gift Tax Exemptions

For years, many expected the estate tax exemption to drop sharply after 2025, triggering a wave of last-minute gifting and trust planning to “use” the exemption before it disappeared. That urgency disappears under the OBBBA, creating more flexibility in your financial planning moving forward.

What changes for the 2026 tax season:

• The OBBBA makes the higher lifetime estate and gift tax exemption permanent rather than allowing it to be cut roughly in half after 2025. The exemption is set at $15M per person in 2026 and will continue to be indexed for inflation.
• The annual gift tax exclusion also remains in place, currently $19,000 per recipient, reducing the pressure to make large gifts solely to lock in exemption amounts.

Next steps: Review any estate planning you implemented specifically in anticipation of the 2026 “sunset” with your estate attorney or financial planner. Some strategies may no longer be necessary or may benefit from adjustment.

Navigate the OBBBA and Your 2026 Tax Season with Confidence

While the OBBBA left headline tax brackets largely unchanged, updates to deductions and planning rules are likely to affect high-income taxpayers in meaningful ways during the 2026 tax season. Getting ahead of these changes can help you avoid surprises and put smarter strategies in place before filing time.

You don’t have to sort through this alone. Cooksen Wealth can help you understand how these rules apply to your situation and identify planning opportunities that fit into your broader financial picture. When tax decisions align with your income, investments, and long-term goals, you keep more of what you earn and use it with intention. Contact us to learn more and take the next step.