2026 Tax Law Changes Explained by CPA

 Hey, everyone. This blog post is mostly for my U.S. readers as we approach another tax filing season. But even if you're reading from somewhere else, you still might find it interesting.

As you may know, there are some important tax changes coming up for the 2025 tax filing season. In this post, I’m going to break down what you need to know.

We’ll look at what’s changed, what’s staying the same, and how this may impact your tax return—whether you’re an employee, a retiree, or a small business owner.

We’ll go over what matters most, including the 1099-K reporting changes, no taxes on tips and overtime income, the new standard deduction amounts, the child tax credit increase, and the increase to the state and local tax deduction, also known as SALT, among other things.

President Trump and Scott Bessent say that you’ll get the biggest refunds you’ve ever seen. We’ll figure out if that will actually be the case for you and hopefully avoid any surprises at tax time.

The One Big Beautiful Bill That Changes Your Taxes

Before getting into the specific tax changes, it helps to understand an important tax law change.

Back in 2017, Congress passed the Tax Cuts and Jobs Act, often called the TCJA. That law made major changes to the tax code, including lower tax rates, a doubling of the standard deduction, changes to itemized deductions, and the elimination of personal exemptions.

What many people didn’t realize is that most of those changes were temporary. They were scheduled to sunset at the end of 2025. If Congress had done nothing, tax rules would have reverted to what they were before 2018—higher taxes, lower standard deductions, and different rules across the board.

The bill signed into law on July 4, 2025, was designed to stop that from happening.

In simple terms, this law did two main things. First, it made many of the current tax rules permanent so they wouldn’t expire. Second, it added several new provisions that affect certain groups, including workers who earn tips or overtime, families with children, seniors, and some business owners.

Some of these changes apply to your 2025 taxes, which you’ll file in early 2026. Others fully take effect starting January 1, 2026. That’s why this period can feel confusing—we’re in a transition where some changes apply now and others come shortly after.

The good news is that for most people, this is not a total rewrite of the tax system. Your tax return will still look familiar, but there are enough changes that it’s worth paying attention this year.

What’s Not Changing

Let’s start with some good news. Not everything is changing.

The higher standard deduction is staying and actually increasing slightly. For 2025, it rises to:

• $15,750 for single filers

• $23,625 for head of household

• $31,500 for married filing jointly

These amounts will continue adjusting for inflation every year. For most people who don’t itemize deductions, that’s a real benefit.

The current lower tax rate brackets are also staying in place. They are not reverting to the higher rates we had before 2018, which was a major concern if the TCJA expired. This brings some welcome consistency.

Personal exemption amounts remain at zero. While that may sound negative, this has been the case since 2018, so nothing is really changing—it’s just now confirmed as permanent.

If you’ve been filing your taxes over the past few years and things have felt predictable, they’ll likely continue to feel that way for 2025 and 2026. That stability is helpful when planning ahead.

New Changes for 2025 and Retroactive Updates

These changes apply to tax year 2025 and will affect the return you file in early 2026.

Child Tax Credit Increase: The child tax credit increases from $2,000 to $2,200 per child. That extra $200 may not seem like much, but for families with multiple children, it adds up. This increase is permanent, not a one-year bump.

New Senior Deduction: If you’re 65 or older, there’s a new $6,000 bonus deduction available on your 2025 return. This applies whether you itemize or take the standard deduction.

There is an income phase-out. It begins if your modified adjusted gross income exceeds $75,000 for individuals or $150,000 for married couples filing jointly. This deduction will be available for several years and can be a meaningful benefit for retirees living on fixed income.

No Tax on Certain Tips and Overtime (Up to a Limit): If you earn tip income, you may be able to deduct up to $25,000. If you earn overtime, you may be able to deduct up to $12,500.

These deductions phase out at higher income levels, starting at $150,000 for individuals and $300,000 for married couples.

Not all jobs qualify for the tip deduction. Your role must customarily and regularly receive tips and be designated by the Treasury Department. You’ll also need proper documentation. These deductions are not automatic, so good record-keeping is essential.

SALT Deduction Increase: The state and local tax deduction limit increases from $10,000 to $40,000 starting in 2025. This change will cause more people to itemize deductions, which often leads to a larger tax refund.

This benefit does phase out for incomes over $500,000 and is especially helpful for taxpayers in high-tax states.

New Savings Option for Children: Trump Accounts: The new tax law creates a federal savings account for children, commonly referred to as a Trump Account.

Children born between January 1, 2025, and December 31, 2028 may qualify for a $1,000 federal contribution, assuming they have a valid Social Security number. These accounts are designed for long-term savings, invested in low-cost index funds, and grow tax-deferred.

1099-K Rules Go Back to Normal

The 1099-K reporting threshold returns to the old rules. A 1099-K is only issued if you have both more than 200 transactions and over $20,000 in payments.

Casual users selling personal items or splitting expenses should not receive one. That said, income is still taxable even if you don’t receive a form. The form doesn’t create the tax—it only reports it.

Business Changes Worth Knowing

For business owners, self-employed individuals, and side hustlers, several helpful provisions return in 2025:

• Bonus depreciation is back to 100%

• R&D expenses can be deducted upfront again

• Section 179 limits are increased

These changes allow businesses to deduct more costs sooner and can significantly reduce taxable income.

What You Can Still Do

Even though the year has ended, tax planning isn’t over.

You may still be able to contribute to an IRA for the prior tax year, explore a backdoor Roth IRA if your income is too high, or contribute to an HSA if you had a qualifying health plan.

Retirement planning doesn’t stop on December 31. The earlier you plan, the more flexibility you have.

Should You Do Your Own Taxes This Year?

If your situation is very simple—one W-2, no kids, no business—you’re probably fine using tax software.

But if you have multiple income sources, investments, self-employment, or questions about these new changes, this may be the year to get professional help. A good tax professional can often save you more than they cost by helping you avoid mistakes and missed opportunities.

If you want to make sure you’re capturing all available deductions, you can download my free tax deductions cheat sheet linked below.

Thanks for reading, and I’ll see you in the next post.