NEWS & RESOURCES

As we move through the 2026 tax season, additional provisions of the One Big Beautiful Bill Act are beginning to take effect. While earlier discussions focused on broader structural changes, this month we’re looking more closely at the provisions that directly impact individual taxpayers, particularly deductions and health insurance premium credits.

One of the most talked-about changes is the increase to the state and local tax (SALT) deduction. For 2025, the deduction cap increased to $40,000. Beginning in 2026, that amount will rise by one percent annually. However, this expanded deduction is temporary, currently scheduled to apply only from 2025 through 2029, and it is subject to income-based phaseouts. For higher-income households, the full benefit may not be available.

Good news for educators, who will also see a meaningful adjustment beginning in 2026. Teachers have long been allowed an above-the-line deduction of up to $300 for out-of-pocket classroom expenses. Under the new law, any qualifying expenses above that $300 limit may now be claimed as an itemized deduction. This change may provide additional relief for educators who regularly invest their own funds into their classrooms.

Charitable giving rules are also shifting. Starting in 2026, taxpayers who itemize deductions will face a new floor: charitable contributions will only be deductible to the extent they exceed 0.5 percent of adjusted gross income. At the same time, non-itemizers gain an opportunity. Those who take the standard deduction may now claim an above-the-line charitable deduction of up to $1,000 for single filers or $2,000 for married couples filing jointly. This creates a planning opportunity for taxpayers who previously received no tax benefit for charitable giving.

Several deductions that were suspended under the Tax Cuts and Jobs Act have now been made permanently nondeductible. These include tax preparation fees, investment management fees, most moving expenses, unreimbursed employee business expenses, and personal casualty and theft losses not connected to a federally declared disaster. For taxpayers who had anticipated the possible return of these deductions, the law now provides clarity that they are not coming back.

Gambling losses will also be treated differently beginning in 2026. Losses will remain an itemized deduction, but they will be limited to the lesser of 90 percent of gambling losses or 100 percent of gambling income. This change effectively narrows the ability to fully offset gambling winnings with losses.

Finally, there are important updates to the Premium Tax Credit for health insurance purchased through the Marketplace. Beginning in 2026, the repayment of excess advance premium tax credits will no longer be capped. Previously, repayment amounts were limited based on income relative to the federal poverty level. Under the new rules, if a taxpayer’s income is higher than initially estimated and too much credit was received, the full excess amount must be repaid. In addition, enhanced income verification procedures are expected to begin in 2028.

Taken together, these changes highlight the importance of proactive tax planning. Deduction thresholds, phaseouts, and new repayment rules can significantly affect a taxpayer’s overall liability. As always, reviewing your situation early and adjusting strategies accordingly can help avoid surprises and ensure you are positioned to take advantage of the benefits that are available.

If you have questions about how these provisions may affect your 2026 return or future planning, our team at Cordell, Neher & Company is here to help.

This article is for general informational purposes only and should not be construed as tax or legal advice. Tax laws are subject to change, and their application may vary based on individual circumstances.