Permanent extension of certain TCJA provisions:
Creation of permanent charitable deduction: For taxable years after 2025, non-itemizers can claim a deduction of up to $1,000 for single filers/$2,000 for married filing jointly for certain charitable contributions.
Enhanced standard deduction for seniors: Temporarily adds a $6,000 deduction for each qualified individual senior through 2028. The senior deduction begins to phase out when the taxpayer’s MAGI exceeds $75,000 for single/$150,000 for joint filers. A qualified individual is a taxpayer who is 65 or older.
Increased estate tax exemption: Permanently extends the estate and lifetime gift tax exemption. The exemption amount is raised to $15 million single/$30 million joint filers starting in 2026 and indexed for inflation.
Introduction of floor on charitable contributions: A new 0.5% floor on charitable contributions for taxpayers who elect to itemize for taxable years after December 31, 2025. The amount of an individual’s charitable contributions for a taxable year is reduced by 0.5% of the taxpayer’s contribution base for the taxable year.
Enhanced qualified business income (QBI) pass-through deduction (Section 199A): Makes permanent the 20% deduction.
Introduction of child savings accounts: The new tax bill introduces a new tax-advantaged child savings account option named “Trump accounts,” that can be opened for any child under the age of 18, starting in 2026. It also creates a pilot program that enables the federal government to contribute $1,000 per eligible child born between 2025 and 2028. For newborns, accounts may be opened by either parents or guardians. The child must be a U.S. citizen to be eligible for an account.
Notable provisions include:
529 use expansion: Expands the use of 529 plans to include post-secondary credentialing expenses such as certifications, licenses, and other professional qualifications. Additionally, the amount of tuition and related expenses at an elementary or secondary public, private, or religious school that is treated as a qualified higher education expense is now increased from $10,000 to $20,000, starting in 2026.
ABLE accounts changes: Permanently extends increased contribution limits and provides an additional year of inflation adjustment for the limit base amount. The saver’s credit is increased by an additional $100 starting in 2027. The new law also permanently allows designated beneficiaries who make qualified contributions to achieving a better life experience (ABLE) accounts to qualify for the saver’s credit and permanently allows tax-free rollovers from 529 qualified tuition programs into qualified ABLE programs.
No tax on tips: Creates a new deduction for qualified tips received during the year available through 2028. This is available to itemizers and non-itemizers. However, this excludes highly compensated individuals and those defined under Section 199A. The deduction is capped at $25,000 and phased out at MAGI levels above $150,000 for single filers and $300,000 for those married filing jointly.
No tax on overtime: Creates a deduction for qualified overtime compensation received during the year. The deduction applies to overtime that exceeds the employee’s regular rate and is available through 2028. The deduction amount is capped at $12,500 for single filers and $25,000 for those married filing jointly and phased out at MAGI levels above $150,000 and $300,000 respectively.
Disclosures and footnotes:
1 Additional one-time inflation adjustment in 2026 for 10% and 12% tax brackets.
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