INDIVIDUAL TAX PROVISIONS – 2026 AND BEYOND

Itemized Deduction Changes Beginning In 2026

The law permanently extended several itemized deductions that were set to expire and modified or reinstated others. Taxpayers should carefully evaluate whether to itemize or use the standard deduction in 2026 and beyond. Key changes include:

• • The law permanently sets the $750,000 mortgage acquisition indebtedness limit ($375,000 if married filing separately) for post-2017 mortgages.
  • The law reinstates the mortgage insurance premiums (PMI) deduction.
  • A 0.5% AGI floor applies to cash contributions. Taxpayers may deduct only amounts above that threshold. Special carryforward rules may allow future tax benefits.
  • The law permanently sets the 60% AGI limit for cash contributions to qualified charities.
  • Non-itemizers may deduct up to $1,000 (single) or $2,000 (married filing joint) in cash contributions.
  • Beginning in 2026 the law allows personal casualty loss deductions for state-declared disasters. Taxpayers may claim the loss even if they use the standard deduction. They may also elect to claim it in the prior year.
  • The law permanently suspends miscellaneous itemized deductions subject to 2% of AGI. Unreimbursed business expenses, investment advisory fees, union dues, tax preparation fees, safe deposit fees, and hobby expenses remain nondeductible.
  • The law limits gambling losses to the lesser of 90% of annual losses or total annual winnings. It expands the definition to include related expenses such as travel, lodging, and admission.
  • Congress repealed the Pease limitation. However, it imposed a new limitation on taxpayers in the 37% bracket. These taxpayers lose 2/37 of the lesser of total itemized deductions or the excess of AGI over the 37% threshold.
  • The law permanently suspends the moving expense deduction and the exclusion of employer-provided reimbursements for most taxpayers. Only active duty military and intelligence community members may deduct qualified assignment-related expenses.
  • The law removes certain educator expenses exceeding the $300 above-the-line deduction from miscellaneous itemized deductions. However, allowable expenses now include nonathletic supplies for health or physical education courses. The definition of educator now includes interscholastic sports administrators or coaches.

Child and Dependent Care Changes

The child and dependent care tax credit increases from 35% to 50%. The credit phases out in two tiers rather than one. This provides more credit for moderate income taxpayers but still limits benefits to those with higher incomes.

Employer-provided dependent care assistance increases to $7,500 per year ($3,750 if married filing separately).

Education Provisions Beginning in 2026

Beginning in 2026 the cap on 529 plan distributions for K-12 expenses increases to $20,000 per student.

To claim the AOTC or LLC, the student must have a valid Social Security number if the student is not the taxpayer or spouse. Non-SSN identifiers do not qualify. Taxpayers must also provide the educational institution’s EIN to claim the AOTC.

The law permanently excludes from income up to $5,250 per year in employer payments toward student loans. Beginning in 2027 the amount adjusts for inflation.

The law permanently excludes from gross income student loan discharges due to death or total and permanent disability. This exclusion includes private loans and federal forgiveness.

The law provides a nonrefundable credit for contributions to state-certified scholarship-granting organizations for K-12 students from specified low-income families. When eligibility criteria are met, the law excludes related scholarship funds from federal income.

Long-Term Savings Accounts

The legislation establishes new long-term savings accounts, also known as Trump Accounts, as modified traditional IRAs for individuals under age 18. Children born between January 1, 2025, and December 31, 2028, may receive a one-time $1,000 Treasury deposit. These tax-deferred accounts carry specific eligibility, contribution, and distribution requirements. Annual contributions of up to $5,000 begin July 4, 2026.

The law permanently increases contribution limits for ABLE accounts and adjusts them for inflation. Employed beneficiaries may contribute additional amounts. The saver’s credit permanently extends to ABLE contributions and increases from $2,000 to $2,100 beginning in 2027. The law also permanently allows rollovers from 529 plans into ABLE accounts without tax or penalty.

Health and Premium Tax Credit Changes

The law expands the definition of high-deductible health plans. Individuals enrolled in Bronze or Catastrophic ACA plans may now open health savings accounts.

Beginning in 2026 individuals who enroll in a health plan through a special enrollment period based solely on income do not qualify for the premium tax credit. Beginning in 2028 the law imposes new verification requirements.

Other Changes

The qualified business income deduction (QBID) remains permanent with modifications. The wage and qualified property phase-in increases to $75,000 for single filers and $150,000 for married filing joint. A $400 minimum deduction now applies when an individual has at least $1,000 of income from qualified businesses in which that individual materially participates. Beginning in 2027 the law adjusts these thresholds annually for inflation.

Employer-provided transportation fringe benefits eliminated the exclusion for qualified bicycle commuting reimbursements. 

It also revised the method for adjusting for inflation and made modifications to future limits for transit passes and parking benefits. 

The law permanently increases AMT exemption amounts and adjusts them for inflation. It increases the phase-out rate from 25% to 50%. This change subjects higher-income taxpayers to liability sooner.

The law permanently limits excess business losses for individuals. Carryforward rules remain unchanged.

The law permanently increases estate and gift tax exemptions. The estate tax exclusion begins at a $15 million base exclusion in 2026 and continues to index for inflation. The annual gift tax exclusion increases to $19,000 for 2025 and 2026. Portability rules remain unchanged.