Key Federal Tax Updates for 2026: What Individuals and Businesses Should Know
Federal tax rules continue to evolve, and 2026 brings several important provisions that could affect individuals, families and business owners. Understanding these changes before tax season arrives can make it easier to adjust withholding, organize records, evaluate business purchases and avoid surprises.
Howard Dagley, CPA helps individuals and businesses throughout Santa Clarita Valley, San Fernando Valley and Los Angeles navigate tax changes and plan with the bigger financial picture in mind.
Higher Standard Deductions for 2026
For tax year 2026, the federal standard deduction increases to $16,100 for single filers and married individuals filing separately, $32,200 for married couples filing jointly, and $24,150 for heads of household. These amounts generally apply to 2026 income tax returns filed in 2027.
Tax brackets have also been adjusted for inflation. While the seven federal marginal rates remain 10%, 12%, 22%, 24%, 32%, 35% and 37%, the income thresholds associated with those rates have changed for 2026.
New Deductions May Affect Your Tax Planning
Recent federal legislation introduced several deductions that taxpayers should understand. Depending on eligibility and income, these include deductions involving qualified tips, qualified overtime compensation, qualifying passenger-vehicle loan interest and an enhanced deduction for seniors.
For example, eligible taxpayers may deduct up to $25,000 in qualified tips, while the qualified overtime deduction can reach $12,500 for individuals or $25,000 for joint filers. These provisions include income limits and other eligibility requirements.
Eligible taxpayers may also deduct up to $10,000 of interest on certain qualifying vehicle loans. The vehicle, loan and final assembly location must meet specific requirements, so this is an area where the fine print matters.
An Additional Deduction for Eligible Seniors
Taxpayers age 65 and older may qualify for an additional deduction of up to $6,000 per eligible person, or potentially $12,000 for a married couple when both spouses qualify. The deduction is available for tax years 2025 through 2028 and begins phasing out when modified adjusted gross income exceeds specified thresholds.
Importantly, qualifying taxpayers can claim this deduction whether they itemize or take the standard deduction.
Business Owners Have Changes to Watch, Too
Federal tax updates aren’t limited to individual returns. Businesses should also review changes that could affect equipment purchases, deductions and longer-term planning.
One significant provision increased the Section 179 expensing limit to $2.5 million for qualifying property placed in service in tax years beginning after December 31, 2024, subject to a phaseout threshold and other requirements. Those amounts are indexed for inflation after 2025.
That can make the timing of certain business purchases an important part of year-end tax planning.
Business owners should also regularly review estimated tax payments, entity structure, bookkeeping, payroll-related issues and financial statements rather than waiting until a return is due.
Don’t Wait Until Tax Season to Start Planning
Tax planning works best when there is still time to act.
Changes in income, a new business, retirement, equipment purchases, major investments or changes to your business structure can all affect your tax picture. Reviewing your situation before year-end may give you more opportunities to make informed decisions rather than simply documenting what already happened.
The IRS has also updated its Tax Withholding Estimator to account for several recent changes, providing another reason for taxpayers to review withholding during the year.
Put Experience on Your Side
Howard Dagley, CPA provides professional tax and accounting assistance for individuals and businesses, including:
- Personal & Business Tax Preparation
- Quarterly Estimated Tax Planning
- Business Entity Selection, including LLC, S-Corp, C-Corp and 501(c)(3)
- Bookkeeping & Financial Statements
- Year-Round Tax Planning
Tax laws can be complicated, and not every deduction or provision applies to every taxpayer. Eligibility, income limitations and individual circumstances matter.
📞 Call Howard Dagley, CPA at: 1-661-255-8627
Serving SCV, SFV & Los Angeles
Know What Changed. Plan Ahead. Be Better Prepared for Tax Time.