Other Items Affecting 2025, 2026 or Future Years’ Individual Tax Returns
- ABLE accounts: The Act permanently provides for additional contributions to Achieving a Better Life Experience (ABLE) accounts for employed individuals with disabilities. The Act also permanently allows beneficiaries who make qualified contributions to their ABLE account to qualify for the Saver’s Credit.
- Adoption: Starting in 2025, the adoption credit is enhanced to include a refundable portion of up to $5,000 per child (indexed for inflation).
- Alternative fuel vehicle refueling property credits: The credit for alternative fuel vehicle refueling property (such as an EV charger) terminates for property placed in service after June 30, 2026.
- Alternative Minimum Tax: Taxpayers with high incomes are likely to owe more tax due to changes to the alternative minimum tax (AMT).
- American Opportunity and Lifetime Learning credits: Starting in 2026, there are new reporting requirements for claiming these education credits, including reporting the student’s name and SSN and the EIN for institutions to which qualified tuition and related expenses were paid for which the credit is claimed.
- Bicycle commuting expenses: The Act permanently eliminates the qualified bicycle commuting reimbursement exclusion starting in 2026.
- Casualty loss deduction: The rule that limits the casualty loss deduction to losses from disasters has been made permanent. However, starting in 2026, losses from certain state-declared disasters, as well as from federally-declared disasters, will be deductible.
- Charitable contributions: There are several changes for individual taxpayers effective in 2026 and 2027:
- Taxpayers who take the standard deduction can claim an additional deduction for cash gifts to qualified public charities of up to $1,000 for single filers and $2,000 for married couples filing jointly. Gifts to donor-advised funds or private foundations do not qualify.
- Individuals who itemize can only deduct charitable contributions that exceed 0.5% of their adjusted gross income.
- Starting in 2027, individual taxpayers can claim a new income tax credit of up to $1,700 per year for cash contributions to qualifying scholarship-granting organizations (SGOs) in participating states. More information will come regarding which organizations will qualify.
- Child and dependent care credit: Starting in 2026, the maximum child and dependent care credit rate will increase to 50% of eligible expenses, up to $3,000 for one qualifying individual or $6,000 for two or more. The full 50% rate will apply to families with Adjusted Gross Income up to $15,000 and gradually phase down to 35% for AGI up to $75,000 ($150,000 for joint filers). The credit rate is further phased down to 20% for AGI up to $105,000 ($210,000 for joint filers).
- Child tax credit: The child tax credit has been made permanent and increased to $2,200 per qualifying child for 2025. This amount will be adjusted for inflation after 2025. The credit allowed will be reduced once Modified Adjusted Gross Income exceeds $200,000 ($400,000 for joint filers).
- Clean vehicle credits: The credits for new and previously owned clean vehicles ends for vehicles acquired after September 30, 2025.
- Educator expenses: Starting in 2026, the Act adds a new educator expense deduction that will allow K-12 teachers, counselors, coaches, and aides who work at least 900 hours per year to deduct unreimbursed classroom expenses, such as books, supplies, and equipment. This new deduction won’t be classified as a miscellaneous itemized deduction.
- Energy efficient home improvement and residential clean energy credits: The energy efficient home improvement credit (e.g. exterior doors, windows, insulation) is terminated for property placed in service after December 31, 2025. The residential clean energy credit (e.g. solar panels, geothermal heat pumps, battery storage technology) is terminated for any expenditures made after December 31, 2025.
- Gain on the sale of certain farmland property: For sales or exchanges occurring after July 4, 2025, sellers of qualified farmland property may elect to pay capital gains tax on the sale in four equal annual installments, with the first payment due with the return for the year in which the sale occurs.
- Gambling losses: Starting in 2026, only 90% of gambling losses can be deducted against winnings, even if the losses equal or exceed the winnings.
- Income tax rates: The Act makes permanent the lower individual income tax rates and wider tax brackets. The top individual rate will remain at 37% and the marriage penalty relief for most brackets continues. This means that married couples filing jointly will typically not face higher taxes compared to what they would have paid as singles.
- Itemized deductions: The Act permanently eliminates miscellaneous itemized deductions for individual taxpayers. Thus, formerly deductible items such as unreimbursed employee business expenses, investment expenses, and tax preparation expenses are permanently disallowed. In addition, starting in 2026, high-income taxpayers will see a smaller limitation on itemized deductions.
- Mortgage interest: The deduction for mortgage interest on home acquisition debt is now permanently capped at $750,000 ($375,000 if married filing separately). Taxpayers considering buying a home, refinancing, or taking out a new mortgage should be aware that interest on debt above $750,000 will not be deductible. Interest on home equity loans remains nondeductible unless the funds are used to buy, build or substantially improve the home that secures the loan.
- Moving expenses: Moving expenses are now permanently nondeductible for most taxpayers, and any employer reimbursement for moving costs is fully taxable as income. Only active-duty military members moving under orders and, starting in 2026, certain intelligence community employees remain eligible to deduct or exclude qualified moving expenses.
- Standard deduction: The standard deduction has been increased for 2025 and beyond. For 2025, the amounts are $31,500 for joint filers and surviving spouses, $23,625 for heads of household, and $15,750 for singles and marrieds filing separately. These amounts will be adjusted for inflation after 2025.
- Student loans: The Act makes permanent the employee exclusion for qualifying employer payments of student loans. Also, the Act provides an inflation adjustment to the statutory maximum exclusion amount ($5,250) for tax years beginning after 2026.
- Tax-deferred investment accounts for children: Beginning in 2026, taxpayers can open a new tax-deferred investment account for children, called a “Trump account,” for each eligible child born in 2025 – 2028. Taxpayers can contribute up to $5,000 per year in after-tax dollars for each child. Funds must be invested in a diversified U.S. equity index fund. For children born between January 1, 2025, and December 31, 2028, the federal government will automatically contribute $1,000 to each account. The accounts are treated generally like Individual Retirement Accounts (IRAs) but not Roth IRAs.
- Qualified small business stock (QSBS): The Act provides that the “applicable percentage” (50% for stock held for at least 3 years, 75% for stock held for at least 4 years, and 100% for stock held for 5 years or more) of gain on the sale of QSBS may be excluded from gross income for QSBS acquired after July 4, 2025. The per-issuer limitation on eligible gain and the aggregate gross asset limitation amounts have also changed.
- Qualified health plan: Starting in tax years after 2027, individuals will only be able to claim the premium tax credit (PTC) for months when the health insurance Exchange has verified that individuals are eligible to enroll in a qualified health plan (QHP) and to receive advance PTC payments.
- SALT limitation: The state and local tax (SALT) deduction cap is temporarily increased to $40,000, subject to income limits, for 2025 ($40,400 in 2026, with 1% annual increases through 2029), before reverting to $10,000 in 2030.
- 529 accounts (K-12): Starting July 4, 2025, families can use tax-free distributions for a much broader range of K-12 education expenses, including not just tuition, but also curriculum, books, online materials, tutoring, standardized test fees, dual enrollment, and educational therapies for students with disabilities. Starting in 2026, the annual limit for K-12 distributions doubles from $10,000 to $20,000 per beneficiary.
- 529 accounts (Postsecondary): Starting July 4, 2025, 529 plan distributions can now be used tax-free for a wider range of education expenses, including not only college costs but also “qualified postsecondary credentialing expenses.” This means 529 funds may be used for tuition, fees, books, supplies, and equipment required for enrollment in recognized certificate, licensing, or apprenticeship programs even if they are not traditional degree programs.
