What to Know Before Filing Your 2025 Taxes in 2026

The One Big Beautiful Bill (OB3 Act) introduced significant changes affecting high-income individuals, business owners, estate planning, deductions, and reporting rules. Some provisions are temporary while others are permanent. Several create short planning windows that could materially impact how much you pay or save.

For high earners, timing is no longer a minor detail. It’s the main piece of your strategy.

Below is a clear breakdown of what matters most heading into the filing season and where proactive planning makes the biggest difference.

You will want to read this blog if you are:

• A high-income W-2 earner (particularly $300K+ household income)

• A profitable business owner (S-Corp, LLC, partnership, or sole proprietor)

• Living in a high-tax state and impacted by the SALT cap

• Focused on minimizing penalties, documentation gaps, or missed deductions

• Earning $500K+ and ready for a proactive strategy instead of reactive filing

If that sounds like you, the next few months of creating your planning leverage should not be ignored.

Key Changes Impacting Your 2026 Filing Season

(Your 2025 Return)

1. The 2026 “Tax Cliff” Is Delayed

The top individual rate remains at 37% through 2029 under a temporary extension.

While this avoids an immediate rate increase, it does not eliminate long-term uncertainty. High earners should still evaluate multi-year income timing strategies.

2. Higher Standard Deduction

For reference:

2025 Standard Deduction

• $31,500 (Married Filing Jointly)

• $15,750 (Single)

2026 Indexed Standard Deduction

• $32,200 (Married Filing Jointly)

• $16,100 (Single)

For many high earners, itemizing will still matter, especially with the SALT cap window discussed below.

The SALT Cap Window: A Limited Opportunity

One of the most impactful changes for high-tax state residents:

The SALT (State and Local Tax) deduction cap increases to $40,000 for tax years 2025–2029, with a phase-out beginning around:

• $500,000 MAGI (Married Filing Jointly)

It is currently scheduled to revert to $10,000 in 2030.

This is a defined planning window.

Rather than evaluating each year in isolation, strategic taxpayers will map multi-year state tax payments, income timing, and pass-through entity elections to maximize this temporary increase.

For high earners in states like California, New York, or New Jersey, this can materially shift outcomes.

Families & Workers: Temporary Deductions to Watch

Several provisions run through 2029 and include income phase-outs. Small shifts in income can change eligibility.

Expanded Child Tax Credit

Temporarily increased to $2,200 per qualifying child through 2029.

Phase-out begins at:

• $400,000 MAGI (MFJ)

• $200,000 (Single/HOH)

For households near these thresholds, year-end planning can preserve credits that would otherwise phase out.

Tip Income Deduction (Temporary)

Qualified tip income may be deductible up to $25,000 per year through 2029, subject to income limits and eligibility rules.

Phase-out begins at:

• $150,000 MAGI (Single)

• $300,000 MAGI (MFJ)

Clean payroll reporting and documentation are critical.

Notably, for 2025 only, certain employees in traditionally tipped roles, even within professional service industries, may qualify under temporary IRS flexibility.

Proper reporting determines eligibility.

Senior Deduction

Taxpayers age 65+ may qualify for an additional:

• $6,000 per person

• Up to $12,000 on a joint return

Phased out fully by approximately:

• $150,000 (Single)

• $300,000 (MFJ)

The phase-out reduces $100 for each $1,000 over the threshold.

Car Loan Interest Deduction

Interest on qualifying personal-use vehicle loans may be deductible up to $10,000 through 2029, subject to income limits and eligibility requirements.

Phase-out begins at:

• $100,000 MAGI (Single)

• $200,000 MAGI (MFJ)

Keep:

• Loan statements

• Interest summaries

• Purchase documentation

Business Owners: Where the Largest Leverage Exists

For profitable business owners, the OB3 Act offers significant opportunities, especially in depreciation, QBI, and R&D.

1. QBI Deduction Made Permanent

The 20% Qualified Business Income deduction for pass-through businesses is now permanent.

However, it still depends on:

• Income level

• Whether you are a Specified Service Trade or Business (SSTB)

• W-2 wages paid

• Qualified property

Entity structure and reasonable compensation strategies can significantly change your results.

This is not a calculation to outsource blindly.

2. 100% Bonus Depreciation Restored

100% bonus depreciation is restored for qualifying assets placed in service after January 19, 2025, and is not scheduled to phase out.

Timing matters.

It is not when you order or pay.
It is when the asset is ready and available for use.

Example:

A $50,000 business vehicle:

• Under prior 40% bonus rules: $20,000 deducted in year one

• Under restored 100% bonus: Full $50,000 deductible in year one

Documentation must support:

• Invoices

• Delivery/installation records

• Placed-in-service date

Cash flow planning becomes critical here.

3. Section 179 Expanded

Expensing limits increase as phase-out thresholds rise.

Section 179 often provides more control than bonus depreciation and may be advantageous when:

• You want flexibility

• You have sufficient income to absorb the deduction.

Coordination with bookkeeping and cash flow strategy is essential.

4. R&D Expensing Restored

Domestic R&D costs may once again be fully deductible instead of amortized over multiple years.

If your business develops:

• Software

• Products

• Internal systems

• Proprietary processes

You may qualify.

Example:

A company spending $120,000 to develop internal tools may deduct the full amount in the current year, improving near-term cash flow rather than spreading the deduction over multiple years.

Documentation and project tracking are non-negotiable.

What Begins in 2026

Several provisions begin affecting planning in 2026 and beyond:

1099 Reporting Changes

• Restored 1099-K threshold: $20,000 and 200 transactions (for certain platforms)

• Higher general 1099 thresholds in some contexts (commonly referenced as $2,000 vs. $600)

Compliance processes may need updating.

Estate & Gift Exemption Increase

Estate and gift exemptions increase to approximately $ 15M per person starting in 2026.

For high-net-worth families, this creates substantial planning leverage.

Estate strategy should be revisited rather than assumed.

HSA & Telehealth Expansion

Expanded HSA eligibility and telehealth flexibility to begin in 2026.

Healthcare planning and tax planning are increasingly connected.

Charitable Giving Changes

Beginning in 2026:

• 0.5% AGI floor on itemized charitable deductions

• Small above-the-line charitable deduction for non-itemizers (commonly referenced as $1,000 single / $2,000 married)

Charitable timing strategy may need adjustment.

“Trump Accounts” for Children

New tax-advantaged accounts for children under 18 were introduced.

Children born between:

• December 31, 2024

• January 1, 2029

May qualify for a one-time $1,000 federal pilot contribution (subject to federal eligibility rules).

Regular contributions are expected to begin after July 4, 2026.

After age 18, the account functions similarly to a traditional IRA, raising long-term planning considerations depending on how it is used and converted.

Spark’s Tax Season Playbook

For high earners and business owners, this is not a checklist year; it is a strategy year.

Here is where we focus:

• Maximize the temporary SALT window if applicable.

• Coordinate QBI, bonus depreciation, and Section 179 decisions.

• Align bookkeeping with placed-in-service timing.

• Revisit estate plans if exemption thresholds apply.

• Evaluate income timing against credit phase-outs

• Strengthen documentation before filing season.

The biggest savings rarely show up from a single deduction.

They show up as part of a coordinated strategy.

Looking for Proactive Tax Planning?

If you are:

• A high-earning W-2 professional

• A profitable business owner

• Earning $500,000+

• Seeking a proactive strategy instead of a reactive filing

You may qualify to work with Spark Tax Services.

We specialize in high-income earners and business owners who want clarity, confidence, and a structured plan, not just tax preparation.

Apply to become a Spark Tax Services client below!