By Financial Planning Specialist Alex Kim, CFP®, MBA, CPA
What You Can Expect in This Article
11 tax law or filing changes:
The year 2025 proved to be pivotal for federal tax law. Much of the activity was driven by the One Big Beautiful Bill Act (OBBBA), legislation Congress passed last summer. Additional changes arose from presidential executive actions, IRS administrative guidance, and the scheduled expiration of existing tax provisions.
Below, we highlight several of the most significant developments and explore how they may shape tax planning going forward. Please note that this overview is not exhaustive and addresses federal tax changes only—state tax implications are not included.
Standard Deduction
The higher standard deduction established by the 2017 Tax Cuts and Jobs Act (TCJA) was scheduled to revert to a lower pre‑TCJA level in 2026, effectively halving the amount. Instead, the higher deduction was made permanent and even slightly increased it. As a result, for 2026 it rises to $32,200 for joint filers and $16,100 for single filers.1
Affordable Care Act (ACA) “Enhanced” Premium Tax Credit (PTC)
The “enhanced” Premium Tax Credit (PTC), which had been temporarily in place since 2021, expired after 2025 as originally scheduled. This provision was one of the main disputed points during the fourth‑quarter 2025 government shutdown, and Congress ultimately failed to agree on restoring the subsidy.
With its expiration, fewer individuals qualify for the regular PTC, and those who still qualify may receive a lower subsidy. As a result, the cost of ACA health insurance has increased sharply for many and may become unaffordable for some.
Auto Loan Interest Deduction
Taxpayers can now deduct up to $10,000 of interest on auto loans used to purchase a new personal vehicle (for tax years 2025 through 2028), provided the vehicle underwent final assembly in the United States. This deduction is available whether or not the taxpayer itemizes.2
Charitable Contribution Deduction for Non‑Itemizers
A new charitable contribution deduction was also introduced, starting in 2026, for taxpayers who elect the standard deduction. These filers can deduct up to $1,000 (single) or up to $2,000 (married) for cash donations to public charities. Contributions to donor‑advised funds or private foundations do not qualify. 2
A donor‑advised fund is a charitable giving account run by a public charity that allows a donor to contribute, receive an immediate tax deduction, and recommend grants to nonprofits over time.
This change primarily benefits lower‑ and middle‑income taxpayers.
Charitable Contribution Deduction Floor for Itemizers
Starting in 2026, charitable contribution deductions for itemizers are subject to a “floor” of 0.5% of Adjusted Gross Income (AGI). Only donation amounts exceeding this threshold are eligible for deduction. 2
For taxpayers with total donations close to this level, this rule may prevent them from itemizing charitable contributions altogether. This limitation primarily impacts high earners.
Taxpayers seeking to navigate around this hurdle can consider “bunching” multiple years of contributions into one year using a donor‑advised fund or making a Qualified Charitable Distribution (QCD) if age 70½ or older.
A Qualified Charitable Distribution (QCD) is a direct transfer of money from an IRA to a qualified charity that is excluded from the IRA owner’s taxable income. In short, it allows eligible IRA owners to give to charity tax‑free rather than taking the distribution as income.
Child Tax Credit (CTC)
As originally planned, the Child Tax Credit (CTC) was set to be cut in half after 2025 (to $1,000 per child), with fewer families qualifying due to the scheduled return of lower income phaseout thresholds. Instead, new legislation expanded the CTC for parents of qualifying children under age 17.
Effective in 2025, the CTC increases from $2,000 per child to $2,200 per child and makes the refundable portion of $1,700 permanent. Phaseout thresholds for 2025 and 2026 are $200,000 for single filers and $400,000 for joint filers. New legislation also permanently retained the $500 credit for other dependents who do not qualify for the main CTC. 1
Clean Energy Tax Credits
Under OBBBA, clean energy tax credits that had been in effect since 2022 were either repealed or had their expiration dates accelerated. As a result, credits for electric vehicles and clean-energy home improvements expired in 2025. The credit for home EV charging equipment installation expires after June 2026.
Direct File Cancellation
IRS Direct File, a free tax preparation service that allowed taxpayers to file directly with the IRS, has been shut down pursuant to a U.S. Treasury administrative order. However, IRS Free File—a partnership between private tax preparation companies and the IRS—remains available for eligible taxpayers.
Senior “Bonus Deduction”
Effective from 2025 through 2028, a new $6,000 “bonus deduction” is available for senior taxpayers age 65 and older. For married couples where both spouses are 65 or older, this deduction is $12,000. It applies whether you itemize or take the standard deduction.
Furthermore, it is layered on top of the existing additional standard deduction for taxpayers age 65 and older ($2,000 if single and $1,600 per spouse for joint filers). This new write‑off begins to phase out at Modified Adjusted Gross Income (MAGI) above $150,000 for joint filers or $75,000 for single filers.2
State and Local Tax (SALT) Deduction
Under OBBBA, the deduction limit for state and local taxes rises from $10,000 to $40,000 for most taxpayers for tax years 2025 through 2029. After 2029, the higher cap sunsets and reverts to $10,000.
With this higher cap, there is a stronger case for taxpayers in high‑tax states (such as NY, NJ, and CA), or those with significant mortgage interest, to consider itemizing deductions.
However, the deduction begins to phase out at MAGI above $200,000 for joint filers or $100,000 for single filers.2
Paper Check Phase‑Out
Pursuant to a presidential executive order, paper‑based federal tax refunds and payments to the IRS will begin phasing out. Beginning in 2026, the IRS will issue tax refunds only by direct deposit or other digital methods. Taxpayers who do not provide bank account information may experience delayed refunds.
For now, taxpayers may continue to pay taxes using paper checks, but the IRS strongly encourages the use of electronic payment options.
Takeaway
As you can see, there have been many changes to federal tax law, each affecting taxpayers in different ways. It is important to keep these changes in perspective and make financial decisions based on overall goals and needs—not solely on tax savings.
To learn more about how these changes may affect your personal situation, consult your tax adviser or financial planner. If you are an MMBB member, remember that you can speak with an MMBB CFP® (Certified Financial Planner®) professional at no additional cost as part of your membership benefit.
References:
2. Prepare for Major Tax Changes Coming in 2026: What You Need To Know - AOL
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