OBBBA Tax Changes 2026: New Deductions That Could Save You Thousands

The One Big Beautiful Bill Act (OBBBA) passed and most people don't know what changed.

That's a problem, because several of the changes are significant — and if you file your 2026 taxes without knowing them, you'll likely leave money on the table. The higher SALT cap alone is worth thousands of dollars for homeowners in high-tax states. The new senior deduction adds $6,000 for qualifying filers. The car loan interest deduction is new and almost nobody knows about it.

This guide breaks down every major OBBBA tax change, who qualifies, and what you need to do before April 15.

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What Is the One Big Beautiful Bill Act?

The One Big Beautiful Bill Act was a sweeping piece of legislation that included several significant changes to the federal tax code. While the bill covered policy areas beyond taxes, the provisions that affect individual filers are what matter here.

These are not hypothetical future changes — they apply to your 2026 tax return.

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The 4 Major OBBBA Tax Changes

1. Higher SALT Cap ($40,000)

What changed: The State and Local Tax (SALT) deduction cap increased from $10,000 to $40,000.

Who it helps: Homeowners in high-property-tax states — primarily California, New York, New Jersey, Illinois, Massachusetts, and Connecticut — who previously hit the old $10,000 cap and lost thousands of dollars of deductions.

The math:

• Old cap: $10,000
• New cap: $40,000
• If your combined state income tax + property taxes = $30,000, you previously got $10,000 in deductions. Now you get $30,000.
• At a 22% federal tax bracket, that's an extra $4,400 in your pocket.

What you need to do: Itemize deductions (Schedule A). If you were taking the standard deduction because the old $10,000 SALT cap made itemizing pointless, run the numbers again. The new cap may make itemizing more valuable than the standard deduction for the first time.

Important nuance: The higher SALT cap phases out for higher incomes. Check the IRS guidance or let your tax software calculate whether the full $40,000 applies to you.

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2. New Senior Deduction ($6,000)

What changed: A new above-the-line deduction of $6,000 is available for filers age 65 and older.

Who it helps: Seniors across all income levels — this is an above-the-line deduction, meaning you get it regardless of whether you itemize or take the standard deduction.

The math:

• A retired couple both age 65+ gets $12,000 in additional deductions ($6,000 each)
• At a 22% bracket: $2,640 in additional tax savings
• At a 12% bracket: $1,440 in additional tax savings

What you need to do: Verify your age qualifies (65+ as of December 31, 2026). Most tax software will apply this automatically when you enter your birth date, but confirm it's appearing on your return. Look for it as a new line item on Schedule 1 (Additional Income and Adjustments).

Income limits: There are income thresholds where this deduction phases out. Middle-income and lower-income seniors will receive the full amount; higher-income seniors may receive a reduced deduction.

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3. Car Loan Interest Deduction (Up to $10,000)

What changed: A new deduction for interest paid on car loans for US-assembled vehicles — up to $10,000 per year.

Who it helps: Anyone who financed a car in the last few years and is currently paying interest — provided the vehicle was assembled in the United States.

The math:

• Car loan: $35,000 at 7% interest = approximately $2,100 in interest paid in year one
• At a 22% bracket: $462 in tax savings from interest you're already paying

What you need to do:

1. Check that your vehicle was assembled in the US — look up your VIN on the NHTSA website, or check your purchase documentation. The "Country of Final Assembly" must be the United States.
2. Gather your Form 1098 or lender statement showing interest paid in 2026
3. This is a new Schedule A line item — verify your tax software is including it

Vehicle eligibility notes: The assembly requirement is strict. Many "American brand" vehicles are assembled in Mexico or Canada and do not qualify. Conversely, some foreign-brand vehicles are assembled in the US and do qualify. Check the VIN, not the brand name.

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4. 100% Bonus Depreciation for Businesses

What changed: 100% first-year bonus depreciation is restored for qualified business property purchased in 2026.

Who it helps: AI Tools for Small Business Owners 2026 — Automate Everything Guide" class="internal-link">Business owners, freelancers, and self-employed individuals who purchased equipment, machinery, computers, or other qualifying assets.

What it means: If you bought a $5,000 computer for your business, under old rules you'd depreciate it over 5 years (~$1,000/year deduction). Under 100% bonus depreciation, you deduct the full $5,000 in the year of purchase.

The math (example):

• Business equipment purchased: $20,000
• Old deduction (year 1): $4,000
• New deduction (year 1): $20,000
• Tax savings difference at 22% bracket: $3,520 more this year

What you need to do: This applies to qualified business property — tangible personal property with a recovery period of 20 years or less. For most small business owners and freelancers, this includes computers, office equipment, tools, and vehicles used for business. Use Form 4562 (Depreciation and Amortization) and elect 100% bonus depreciation.

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How OBBBA Changes Interact With Your Filing Strategy

Standard Deduction vs. Itemizing (New Calculus)

The OBBBA SALT cap increase fundamentally changes whether itemizing makes sense for many filers.

Run the numbers for itemizing if:

• You own a home in a high-property-tax state
• Your state income taxes are substantial
• You have significant mortgage interest
• You made large charitable contributions

The standard deduction for 2026 is $15,000 (single) / $30,000 (married filing jointly). If your SALT + mortgage interest + other deductions now exceed those thresholds — which is more likely with the $40,000 SALT cap — itemizing may be worth it.

For most tax software users: Run both scenarios (standard and itemized) and let the software pick the higher deduction. TurboTax and H&R Block do this automatically. If you're using FreeTaxUSA, the optimization still runs but you'll need to enter your itemized amounts manually to compare.

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What OBBBA Does Not Change

Worth being clear on what didn't change, since there's misinformation circulating:

• Roth IRA contribution limits — unchanged
• 401(k) contribution limits — unchanged
• Capital gains tax rates — unchanged (0%, 15%, 20% brackets still apply)
• Child Tax Credit — some adjustments, but the core structure remains
• Standard deduction amount — unchanged from pre-OBBBA levels

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OBBBA Tax Filing Checklist

Before you file, verify you've covered each applicable change:

For itemizing filers:

• Recalculate SALT deduction with the new $40,000 cap
• Compare standard deduction vs. itemized under new rules
• Include car loan interest (Form 1098/lender statement) if your vehicle is US-assembled

For seniors (65+):

• Confirm the $6,000 per-filer senior deduction appears on your return
• Verify income level vs. phase-out thresholds

For business owners / self-employed:

• Elect 100% bonus depreciation on qualifying 2026 equipment purchases
• Verify vehicle VIN qualifies for car loan interest deduction (if applicable)

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Which Tax Software Handles OBBBA Best?

The changes in the OBBBA require 2026 tax software updates. As of filing season, the major providers have all released updates.

TurboTax — Best for taxpayers who want the changes applied automatically without needing to understand the details. Strong at guiding itemization decisions, and the interview format catches most OBBBA-relevant situations. Premium tier handles small business bonus depreciation well.

H&R Block — Strong for filers who want a human review option (their Accuracy Guarantee with a tax pro review add-on is worth it for complex OBBBA situations). Their software is fully updated for all changes.

FreeTaxUSA — Best free option. Handles all OBBBA changes at no cost for federal filing. State filing is $15. If your taxes are relatively straightforward — W-2 income, maybe a home deduction — this works well without paying for TurboTax.

For a detailed comparison of all the top options, see our guide on best tax software 2026.

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Frequently Asked Questions

Q: Do I have to file differently to claim OBBBA deductions?

No — the same forms apply. Tax software handles this automatically when updated. What you do need is the right documentation: property tax records (SALT), Form 1098 or lender statements (car loan interest), proof of business equipment purchases (bonus depreciation). The software does the calculations; you provide the records.

Q: Does the higher SALT cap apply to my 2025 taxes?

No. The higher SALT cap applies to tax year 2026 (the return you file in 2026). If you're filing a 2025 return, the old $10,000 cap still applies.

Q: I'm a renter — does any of this help me?

The SALT cap increase primarily benefits homeowners who pay property taxes. The senior deduction helps qualifying renters who are 65+. The car loan interest deduction applies to renters who own a qualifying US-assembled vehicle. The standard deduction amounts weren't changed, so pure renters below 65 see limited direct impact from OBBBA.

Q: What's the phase-out income for the senior deduction?

The phase-out thresholds haven't been finalized at the time of this writing. Check the IRS 2026 tax guidance or let your tax software calculate the applicable amount based on your AGI.

Q: My car is a Honda — does it qualify for the car loan interest deduction?

Some Hondas do and some don't — it depends on where the specific vehicle was assembled, not the brand. Look up your 17-digit VIN on the NHTSA website (nhtsa.gov/vin-decoder) and check "Final Assembly Point." If it says a US state, you qualify. If it says Japan, Canada, or Mexico, you don't.

Q: Can I deduct car loan interest if I also use the vehicle for business?

The OBBBA car loan interest deduction covers personal vehicles. Business-use vehicles have separate depreciation rules. If you use your vehicle for both business and personal use, the calculation gets more complex — this is a situation where the tax pro review add-on in H&R Block or TurboTax Live is worth the extra cost.

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The Bottom Line

The OBBBA changes are the most significant update to individual tax filing rules in several years. The SALT cap increase is worth thousands for homeowners in high-tax states. The senior deduction is meaningful money for anyone 65+. The car loan interest deduction is new and easy to miss.

File with software that's fully updated for these changes — TurboTax, H&R Block, or FreeTaxUSA have all released 2026 updates. And run the itemized vs. standard deduction comparison before you file — the new SALT cap may change the right answer for you.

April 15 is the deadline. There's still time to get this right.

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Also see: Best Tax Software 2026: TurboTax vs H&R Block vs FreeTaxUSA | Best Crypto Tax Software 2026