2026 Tax Law Changes Every Preparer Must Know
Tax season 2026 brings significant regulatory shifts that every tax preparation professional needs to understand. Whether you’re a CPA, Enrolled Agent, or independent tax preparer, staying current with federal and state tax law changes isn’t just good practice—it’s essential for protecting your clients and your practice. This comprehensive guide breaks down the most critical 2026 tax law changes and what they mean for your business.
Major Federal Tax Law Changes for 2026
The tax landscape continues to evolve as provisions from the Tax Cuts and Jobs Act approach their sunset dates. According to the Internal Revenue Service, several key changes will impact how you prepare returns this season.
Standard Deduction Adjustments
The standard deduction for 2026 has increased to account for inflation, providing modest relief for taxpayers. Single filers can now claim $15,000, while married couples filing jointly can deduct $30,000. These adjustments, mandated by the inflation adjustment requirements, mean you’ll need to recalculate whether itemizing still makes sense for many of your clients.
Income Tax Bracket Modifications
Tax brackets have shifted upward for 2026, with the top marginal rate remaining at 37% but applying to higher income thresholds. The 35% bracket now begins at $250,000 for single filers and $500,000 for married couples filing jointly. This bracket creep provides some inflation relief but requires careful attention when estimating quarterly payments for self-employed clients.
Child Tax Credit Evolution
The Child Tax Credit continues at $2,000 per qualifying child, but income phase-out thresholds have been adjusted. The credit begins phasing out at $400,000 for married couples filing jointly and $200,000 for single filers. These changes affect planning strategies for higher-income families with children.
Business Tax Provisions Affecting Your Clients
Section 179 Expensing Limits
Small business owners can immediately expense up to $1,220,000 in qualified property purchases, with the phase-out beginning at $3,050,000 in total equipment purchases. This expanded limit provides significant planning opportunities for business clients making capital investments.
Qualified Business Income Deduction (QBI)
The 20% deduction for pass-through business income remains available through 2026, but preparers must navigate increasingly complex qualification requirements. Service businesses face particular scrutiny, and proper documentation is critical to withstand IRS examination.
Bonus Depreciation Phase-Out
Bonus depreciation continues its phase-down trajectory, dropping to 40% for property placed in service during 2026. This reduction means tax planning conversations with business clients become even more critical as the benefit diminishes toward its 2027 elimination.
Retirement Account Contribution Changes
Traditional and Roth IRA contribution limits have increased to $7,500 for taxpayers under 50, with a $1,000 catch-up contribution for those 50 and older. The income phase-out ranges for Roth IRA contributions have also been adjusted upward, expanding eligibility for some clients.
For employer-sponsored plans, the 401(k) contribution limit rises to $24,000, with catch-up contributions of $8,000 for participants aged 50 and above. A new provision allows even larger catch-up contributions for participants aged 60-63, creating additional planning opportunities.
State-by-State Tax Impacts
State tax changes add another layer of complexity to 2026 tax preparation. Several states have enacted significant modifications that preparers must track:
California: Implementing a new pass-through entity tax election that allows S corporations and partnerships to pay state income tax at the entity level, providing an indirect workaround to the SALT deduction cap.
Texas: While maintaining its no-income-tax status, Texas has adjusted its franchise tax rates and thresholds, affecting business clients operating in the state.
Florida: Enhanced hurricane-related disaster relief provisions create special tax treatment for affected taxpayers, requiring careful documentation and timing considerations.
New York: Expanded digital taxation rules now capture more online businesses and remote workers, complicating multi-state return preparation.
Illinois: Modified retirement income exemptions mean new qualification requirements for excluding pension and retirement distributions from state taxation.
Understanding these state-specific changes is crucial, particularly if you serve clients across multiple jurisdictions. Professional tax software that includes all 50 states without additional charges becomes invaluable in this environment. UltimateTax’s professional tax software provides comprehensive state coverage that adapts automatically to regulatory changes.
Enhanced IRS Enforcement and Reporting Requirements
The IRS continues ramping up enforcement activities with its increased funding allocation. New reporting thresholds and documentation requirements affect both preparers and taxpayers:
Form 1099-K Threshold
After multiple delays, the $600 reporting threshold for payment settlement entities takes full effect in 2026. This change dramatically increases the volume of 1099-K forms issued, particularly impacting gig economy workers and small business owners who accept electronic payments.
Cryptocurrency Reporting
Enhanced cryptocurrency reporting requirements demand greater attention to digital asset transactions. The IRS now requires detailed tracking of cost basis and holding periods for all crypto transactions, with stricter penalties for non-compliance.
Beneficial Ownership Information Reporting
Many businesses must now file beneficial ownership information reports with FinCEN, and while not directly tax-related, preparers increasingly field questions about these compliance requirements from clients.
Preparing Your Practice for 2026 Changes
Successfully navigating these changes requires strategic preparation. Here’s how to position your practice for success:
Invest in Professional Development
Staying current demands ongoing education. Consider specialized training in areas where 2026 changes are most complex: multi-state taxation, business deductions, and retirement planning. Many state CPA societies and national organizations offer targeted continuing education on new regulations.
Upgrade Your Technology
Modern tax preparation demands software that automatically incorporates regulatory changes, provides real-time error checking, and supports efficient multi-state filing. Evaluate whether your current tools can handle the increased complexity without creating workflow bottlenecks.
UltimateTax’s pricing options include unlimited e-filing and all 50 states in every package, eliminating surprise fees when you need to file returns in multiple jurisdictions. This transparent pricing model provides predictable costs even as your practice grows.
Communicate Proactively with Clients
Don’t wait for tax season to discuss how 2026 changes affect your clients. Schedule planning sessions in Q4 2025 to review tax-saving opportunities, adjust estimated payments, and implement year-end strategies. Proactive communication builds trust and positions you as a strategic advisor rather than just a tax preparer.
Document Everything
Enhanced IRS enforcement means scrutiny of aggressive positions has intensified. Maintain detailed documentation for all significant tax positions, particularly for business deductions, home office claims, and charitable contributions. Strong documentation protects both your clients and your practice.
Industry Resources and Continuing Support
Tax professionals benefit from tapping into industry resources that track regulatory changes:
The IRS publishes comprehensive guidance through Revenue Procedures, Revenue Rulings, and Tax Notices available on its website. Subscribe to IRS e-News for Professionals to receive updates directly.
The American Institute of CPAs (AICPA) maintains extensive tax resources, including practice guides and webinars on current developments. State CPA societies provide localized guidance on state-specific changes.
The National Association of Enrolled Agents offers specialized resources for EAs, including continuing education that satisfies renewal requirements while keeping you current on tax law developments.
Professional tax software providers typically offer year-round support and training to help users navigate regulatory changes. UltimateTax’s comprehensive features include Smart Diagnostics that flag potential errors before filing, reducing reject rates and rework.
Common Compliance Pitfalls to Avoid
Even experienced preparers can stumble with new regulations. Watch for these frequent mistakes:
Overlooking State Nexus Issues
Remote work has complicated state taxation, with many states aggressively pursuing tax from non-resident workers. Carefully evaluate whether clients who worked remotely during the year have created tax obligations in states where they don’t reside.
Misapplying New Thresholds
Inflation-adjusted figures change annually, and using outdated thresholds can trigger errors. Verify current-year limits for deductions, credits, and phase-outs rather than relying on memory or prior-year returns.
Inadequate Documentation for New Credits
Several recently enacted credits carry strict documentation requirements. Ensure clients provide complete records supporting claims for clean energy credits, adoption credits, and other specialized provisions.
Ignoring Preparer Due Diligence Requirements
IRS due diligence obligations extend beyond EITC claims. Preparers must demonstrate reasonable inquiry into information provided by clients, particularly for business expenses, charitable contributions, and casualty losses.
Disclaimer: Final values are subject to IRS confirmation and may adjust with inflation or legislation.
Looking Ahead: Post-2026 Considerations
While 2026 brings immediate changes, smart preparers are already considering what comes next. Many Tax Cuts and Jobs Act provisions sunset after 2025, meaning even more significant changes loom for 2027 unless Congress acts.
Standard deductions may revert to lower levels, personal exemptions could return, and various business provisions may change dramatically. Estate tax exemptions are scheduled to decrease substantially, affecting high-net-worth clients.
Staying ahead of these potential changes allows you to provide strategic value to clients through multi-year tax planning that considers both current law and likely future scenarios.
FAQ Section
Q: How do 2026 tax law changes affect small business owners?
A: Small business owners face several key changes in 2026, including reduced bonus depreciation (40% instead of previous higher percentages), updated Section 179 expensing limits of $1,220,000, and continued availability of the Qualified Business Income deduction. Business owners should work closely with their tax preparer to maximize available deductions and plan capital purchases strategically.
Q: Will my clients need to adjust their quarterly estimated tax payments for 2026?
A: Yes, many clients will need adjustments due to updated tax brackets, modified deduction thresholds, and changed credit phase-outs. Review each client’s situation in Q4 2025 to calculate appropriate estimated payments and avoid underpayment penalties. The inflation adjustments to brackets may reduce required payments for some taxpayers.
Q: What’s the most important 2026 change for individual taxpayers?
A: The adjusted standard deduction amounts represent the most widespread impact for individual taxpayers. With the standard deduction rising to $15,000 for single filers and $30,000 for married couples filing jointly, fewer taxpayers will benefit from itemizing. This simplifies preparation for some clients while requiring careful itemization analysis for others.
Q: How should tax preparers handle the new Form 1099-K reporting threshold?
A: The $600 threshold means many more clients will receive 1099-K forms for electronic payment processing. Educate clients about this change early, explaining they should maintain detailed records of business versus personal transactions. During preparation, carefully reconcile 1099-K amounts with reported income to avoid discrepancies that trigger IRS matching program notices.
Q: Do 2026 tax changes affect retirement account strategies?
A: Increased contribution limits for IRAs ($7,500) and 401(k) plans ($24,000) provide expanded savings opportunities. The new enhanced catch-up contribution provision for participants aged 60-63 creates additional planning possibilities. Review retirement strategies with clients approaching these age thresholds to maximize tax-advantaged savings.
Q: How do state tax changes complicate 2026 preparation?
A: State law changes vary significantly by jurisdiction, with some states implementing new pass-through entity taxes, others adjusting remote work taxation rules, and several modifying retirement income exclusions. Tax preparers serving multi-state clients must track each state’s specific requirements. Professional software that includes automatic state updates becomes essential for accurate compliance.
Conclusion
The 2026 tax season brings substantial regulatory changes that demand attention from every tax preparation professional. From adjusted federal tax brackets and expanded retirement contribution limits to evolving state taxation rules and enhanced IRS reporting requirements, these modifications affect virtually every return you’ll prepare.
Success in this complex environment requires three critical elements: comprehensive knowledge of regulatory changes, efficient technology tools that adapt to new requirements, and proactive communication with clients about planning opportunities. Tax professionals who master these elements position themselves as indispensable advisors rather than mere compliance providers.
Professional tax preparation software serves as your foundation for navigating these changes efficiently. Features like automatic regulation updates, comprehensive state coverage, and built-in error checking reduce compliance risk while improving workflow efficiency.
Ready to prepare for the 2026 tax season with confidence? Explore UltimateTax’s professional features that include unlimited e-filing, all 50 states, and Smart Diagnostics that catch errors before filing. Our industry-leading support team averages just 62 seconds hold time and maintains a 94.4% first-call resolution rate—ensuring you get answers when you need them.
Preparing for your busiest season? Review the complete 2026 tax season preparation checklist to ensure your practice is fully ready for the challenges ahead.
