Filing Season Is Here: New IRS Rules, Deductions, and Delays to Know in 2026

Key Takeaways:

• The One Big Beautiful Bill Act introduces new deductions, credits, and permanent extensions starting in the 2026 filing season.
• Many of the most valuable benefits are temporary and phase out based on income.
• A reduced IRS workforce increases the importance of filing accurately and electronically.
• Strategic tax planning is essential, especially for seniors, tipped workers, and business owners.

Tax season is officially underway, and the 2026 filing season marks the first full year taxpayers are navigating returns under the One Big Beautiful Bill Act (OBBBA). Signed into law in July 2025, this sweeping legislation represents the most significant shift in federal tax policy since the Tax Cuts and Jobs Act of 2017.

For individual taxpayers, seniors, families, and business owners, OBBBA introduces new deductions, expanded credits, and permanent extensions of several familiar tax rules. At the same time, major operational changes at the Internal Revenue Service (IRS) are adding friction to the filing process, increasing the cost of errors and delays.

This filing season is not just about compliance. It is about understanding how new rules apply to your income, identifying time-limited planning opportunities, and filing accurately in an environment where corrections may take longer than in prior years.

The overview below highlights the OBBBA provisions most likely to affect taxpayers now and in the coming years, along with practical considerations as you prepare your return.

What Is the One Big Beautiful Bill Act?

OBBBA extends, modifies, and replaces many provisions that were originally enacted under the 2017 Tax Cuts and Jobs Act and scheduled to expire after 2025. Rather than a blanket extension, Congress took a targeted approach:

• Some provisions were made permanent
• Others were allowed to expire
• Several new deductions and credits were introduced

Many of the most taxpayer-friendly benefits under OBBBA are temporary and currently scheduled to sunset after 2028. This creates a narrow planning window for qualifying taxpayers.

Major Changes Affecting Individual Taxpayers

New Schedule 1-A and Four New Above-the-Line Deductions

For the first time, taxpayers will see Schedule 1-A attached to Form 1040. This new schedule introduces four targeted deductions that apply even if a taxpayer does not itemize.

1. Qualified Tip Income Deduction

• Up to $25,000
  • Phases out beginning at $150,000 AGI (single) / $300,000 (joint)
  • Fully phases out at $400,000 (single) / $550,000 (joint)
  • Reduced by $100 for each $1,000 over the threshold and not available for married filing separately
• Must be properly reported on wage statements

2. Qualified Overtime Compensation Deduction

• Up to $12,500 per individual ($25,000 joint)
  • Income phase-outs begin at $150,000 (single) / $300,000 (joint)
  • Fully phases out at $275,000 (single) / $425,000 (joint)
  • Reduced by $100 for each $1,000 over the threshold and not available for married filing separately
• Overtime remains subject to payroll taxes

3. Qualified Passenger Vehicle Loan Interest

• Up to $10,000
  • Phase-outs begin at $100,000 AGI (single) / $200,000 (joint)
  • Fully phases out at $150,000 (single) / $250,000 (joint)
  • Reduced by $200 for each $1,000 over the threshold

4. New Senior Deduction (Age 65+)

• $6,000 per qualifying individual (not directly tied to Social Security Benefits)
• Available only for tax years 2025–2028
• Phases out beginning at $75,000 modified AGI (single) / $150,000 (joint)
• Fully phases out at $175,000 (single) / $250,000 (joint)
• Reduced by 6% of income over those thresholds

These deductions apply even if a taxpayer does not itemize and are designed to benefit workers and households facing higher living costs. Each deduction has eligibility rules and income phase-outs, so proper documentation and reporting are crucial.

Special Planning Considerations for Tipped and Hourly Workers

The new deductions for tips and overtime are among the most significant structural changes under OBBBA. Importantly:

• Apply only to income properly reported on wage statements, phase out as income rises
• Payroll and self-employment taxes still apply

For service-industry and hourly workers, proper wage reporting and withholding coordination are essential to avoid underpayment issues.

Expanded Credits for Families

OBBBA also enhances family-focused benefits, including:

• Child Tax Credit increased to $2,200 per qualifying child
• Larger refundable portion of the credit
• Future enhancements to the Child and Dependent Care Credit

These changes provide more direct support to working families while reinforcing the importance of income-threshold planning.

Permanent Higher Standard Deduction

The increased standard deduction amounts introduced in 2018 are now permanent, preserving the simplified filing structure many taxpayers rely on and reducing the need to itemize for most households.

Temporary SALT Deduction Increase

For tax years 2025–2029, the state and local tax (SALT) deduction cap increases to:

• $20,000 for single filers
• $40,000 for married filing jointly

The higher cap phases out for upper-income taxpayers and is scheduled to revert in future years. This provision is particularly relevant for taxpayers in high-tax states such as California and New York.

Charitable Giving Rule Changes

Starting in future filing years:

• Non-itemizers may again deduct limited cash charitable contributions
• Itemized charitable deductions are allowed only to the extent they exceed 0.5% of AGI

This new “charitable deduction hurdle” changes how higher-income households may want to structure multi-year giving strategies, donor-advised funds, and timing of contributions.

Read more charitable strategies with the OBBBA rules here.

IRS Operational Changes to Know This Filing Season

In addition to tax law changes, administrative shifts at the Internal Revenue Service will impact taxpayers:

• IRS staffing reduced by approximately 26%
• Longer processing times for amended returns and correspondence
• Manual reviews expected to increase
• Paper refund checks are being phased out
• Direct deposit and electronic filing are strongly encouraged

Accuracy on the first submission is more important than ever.

Key Changes for Business Owners and Investors

Qualified Business Income (QBI) Deduction Made Permanent

The 20% QBI deduction for pass-through entities is now permanent. Income phase-out ranges have also been expanded, allowing more business owners to benefit.

Immediate Expensing and Investment Incentives

Several provisions strengthen incentives for capital investment, including:

• Restoration of 100% bonus depreciation for qualifying property
• Higher Section 179 expensing limits
• Improved cash-flow planning for capital-intensive businesses

Research & Development Expensing Restored

Domestic R&D costs may once again be fully deducted rather than capitalized. Some businesses may be able to recover previously deferred deductions through amended returns or accounting method changes.

Expanded U.S. Manufacturing Incentives

New accelerated expensing rules and enhanced investment credits reduce the after-tax cost of domestic expansion and production facilities.

What This Means for Taxpayers

OBBBA introduces meaningful tax savings opportunities, but many are temporary, income-sensitive, and documentation-heavy. Combined with IRS processing constraints, this filing season rewards those who plan early with accurate reporting and a coordinated tax and financial strategy.

This is where working with a wealth advisor who collaborates with your tax professional can add measurable value.

How Mission Wealth Can Help

At Mission Wealth, we help clients integrate tax planning into a broader financial strategy, coordinating with CPAs and other professionals to help minimize surprises and identify planning opportunities.

Learn more and schedule your complimentary consultation today.

About the Author

Richard Mubanga, MBA is a Tax Associate at Mission Wealth, where he supports clients and advisory teams with tax analysis, compliance, and forward-looking tax planning strategies. Richard works closely with senior advisors to help clients understand how changes in tax law impact their broader financial picture. He brings a detail-oriented, analytical approach to complex tax topics, translating new legislation into practical insights that help individuals, families, and business owners make more informed decisions throughout the year.