Maximizing Tax Deductions: Keeping More of Your Money

As the 2026 tax year approaches, many taxpayers are facing a new landscape shaped by the One Big Beautiful Bill (OBBB). With retroactive tax relief up to $91 billion and expanded opportunities, you can keep more of your hard-earned income. This comprehensive guide will walk you through key changes, strategic planning tips, and practical insights to maximize your deductions and credits.

Navigating these rules effectively demands understanding eligibility thresholds, phaseouts, timing strategies, and how different provisions interact. From standard deductions to business incentives, each section below will empower you with actionable planning strategies to harness these new benefits.

Understanding Standard and Itemized Deductions

The OBBB raises the standard deduction to $32,200 for married couples filing jointly, while single filers enjoy $16,100 and heads of household claim $24,150. For many, taking the standard deduction remains the simplest way to reduce taxable income. However, itemizing can outperform standard deductions under the right circumstances.

Itemized deductions now face no overall limitation, and the SALT cap is raised to $40,400, subject to phaseout. Families with high property taxes, state income taxes, or charitable contributions should compare both approaches annually. Below are scenarios where itemizing may deliver greater savings:

• Homeowners in high-tax states with significant property tax bills.
• Individuals making large charitable gifts or bunching donations into a single tax year.
• Taxpayers with deductible mortgage interest over the new $750,000 limit.

By estimating total itemized deductions and comparing them to the elevated standard amount, you can make an informed choice well before filing deadlines.

Charitable Giving and K-12 Scholarship Credits

One of the most compelling opportunities under the new law is enhanced support for charitable donors. Even standard deduction takers can claim up to $1,000 (single) or $2,000 (joint) in above-the-line charitable deductions for cash gifts. Itemizers must now exceed an AGI floor of 0.5% to deduct gifts, but those in the top bracket will still benefit from a 35% deduction limit.

Additionally, the new K-12 scholarship credit provides a dollar-for-dollar reduction for donations to state-certified scholarship funds. By planning gifts through donor-advised funds or accelerating donations into 2025, you can optimize your tax position before floors and limits take effect.

Family and Child-Related Benefits

Families receive robust support under the OBBB. The Child Tax Credit increases to $2,200 per child, with up to $1,700 refundable based on earned income. Eligibility extends to households with AGI below $200,000 ($400,000 joint), making this credit accessible to millions. Additionally, Trump Savings Accounts provide new retirement-like vehicles for children, and Dependent Care FSAs offer up to $7,500 in pre-tax benefits for childcare or elder care.

Key credits and deductions include:

• Child Tax Credit enhancements for children under 17.
• New refundable Adoption Credit to offset adoption expenses.
• Dependent Care FSA exclusions up to $7,500 annually.

By maximizing these family-oriented provisions, households can significantly reduce their overall tax liability while supporting educational and care expenses.

Senior and Worker-Specific Deductions

Seniors aged 65 and above can claim an additional $6,000 single or $12,000 joint deduction, phased out at $75,000/$150,000 AGI. With 24 million eligible claimants, this senior deduction can yield average tax savings of $1,000 or more. Meanwhile, workers earning tips or overtime can leverage new deductions that average around $1,400 per filer.

Other targeted deductions include:

• Auto loan interest deduction up to $10,000 per year.
• Overtime income deduction phased out at $100,000 AGI.
• Special tip income deduction for service industry workers.

These provisions recognize diverse income sources and provide tailored relief to millions of Americans.

Business and Investment Incentives

Small business owners and entrepreneurs benefit from preserved and expanded incentives. The 20% Qualified Business Income deduction remains intact, while bonus depreciation returns at 100% for qualifying property placed in service after January 2025. Section 179 expensing thresholds increase to $2.5 million, and targeted credits like the Work Opportunity Tax Credit continue to encourage hiring from priority groups.

Employers can also take advantage of:

• Employer Childcare Credit up to $150,000.
• Employee meal deductions restored at 50%.
• WOTC credits up to $2,400 per eligible hire.

Integrating personal and business deductions can further amplify tax savings, especially for pass-through entities and sole proprietorships.

Strategic Year-End Tax Planning

Timing is critical to maximizing benefits under the OBBB. With many provisions becoming effective January 1, accelerate deductible actions into late 2025 to avoid new floors or phaseouts. Consider bunching charitable gifts, prepaying state and local taxes up to the raised SALT cap, and acquiring qualifying assets before year-end to claim 100% bonus depreciation.

Monitor your Adjusted Gross Income carefully to remain under phaseout thresholds, such as $500,000 for SALT deductions or $100,000 for auto interest. By coordinating timing, income deferral, and strategic purchases, you can minimize tax liability effectively and boost refunds through retroactive credits.

Embracing the Opportunity Ahead

The One Big Beautiful Bill offers a rare window to reshape your tax profile, unlock significant savings, and support long-term financial goals. Whether you are a family seeking greater relief, a senior optimizing retirement income, or a business owner expanding operations, the tailored provisions can deliver meaningful tax cuts.

By staying informed, planning proactively, and leveraging expert guidance, you can confidently navigate the 2026 tax landscape. Take advantage of these changes now, and position yourself for financial resilience and growth in the years to come.