Shop Courses > Federal Income Tax Changes 2026

Federal Income Tax Changes 2026 #292526

Course Overview

Credit

Amount

CPA

6.5

CFP^®

CDFA^®

EA / OTRP

CIMA^®/CPWA^®/RMA^®

4.5

CIMA^®/CPWA^®/RMA^® T&R

Course Author: Paul J. Winn CLU ChFC Field of Study (CPA): Taxes Field of Study (CFP): Tax Planning Field of Study (CDFA): Tax Field of Study (EA/OTRP): Federal Tax Law Update Field of Study (IWI/CIMA): Tax

Course Description

Publication/Revision Date: This course was updated on 1/8/2026.

Each year, various limits affecting income tax preparation and planning change. Some changes commonly occur each year as a result of inflation indexing, while others occur because of new legislation or the sunsetting of existing law. This course will examine the tax changes affecting 2026 as a result of passage of the SECURE Act 2.0, the provisions of the One Big Beautiful Bill Act (OBBBA) impacting 2025 and 2026 income, and the inflation-changed limits effective for 2026 that are more significant from the perspective of an income tax preparer. Some context will be supplied, as appropriate, to assist readers in understanding the changes.

Table of Contents

Chapter 1 – Changes in Various Limits1

Introduction	1
Chapter Learning Objectives	1
Individual Tax Rates	2
Standard Mileage Rates	2
Business Use of a Taxpayer's Personal Vehicle	2
Personal Vehicle Use for Charitable Purposes	3
Use of a Taxpayer's Personal Vehicle to Obtain Medical Care	3
Moving Expenses in Military and Intelligence Community Relocations	3
Standard Deduction Made Permanent	4
Standard Deduction for Blind and Senior Taxpayers	4
Standard Deduction Eligibility	4
Deduction for State & Local Taxes (SALT Deduction)	5
Reduction of Limitation Based on Income	5
Senior Exemption Authorized	6
Child Tax Credit	6
Tax on Tips	6
MAGI Limitation of Tip Deduction	6
Tax on Overtime	7
Deduction Limited by Modified Adjusted Gross Income	7
Car Loan Interest Deduction	7
Car Loan Interest Deduction Subject to Income and Other Limitations	8
Clean Energy Incentives – Non-Commercial	8
Clean Vehicle Incentives - Commercial	9
OBBBA Accelerates End of Alternative Vehicle Refueling Property Credit	9
Bonus Depreciation	9
Domestic Research and Experimental Expenses	10
Domestic Research & Experimental Expenses Incurred 2022 - 2025	10
Small Business Research & Experimental Transition Rules	10
Sustainable Aviation Fuel Credit	10
Limitation of Business Interest	11
Alternative Minimum Tax (AMT)	11
Tax Preference Items Added Back to Produce Alternative Minimum Taxable Income	11
Alternative Minimum Tax Exemption Amount Increased	12
Education Savings Bond Program	12
Qualified Education Expenses	13
Eligible Educational Institutions	13
Qualified Education Expenses Reduced by Certain Tax-free Benefits Received	13
Figuring the Tax-Free Amount	13
Education Savings Bond Program Eligibility Subject to Income Limits/Filing Status	14
Determining Taxpayer's Modified Adjusted Gross Income	15
Qualified Long-Term Care Insurance Premiums and Benefits	15
Favorable Benefits Tax Treatment Reserved for Chronically-Ill	15
Tax-Qualified Long Term Care Premiums Deductible within Limits	16
Tax-Qualified Long Term Care Insurance Benefits Tax-Free within Limits	16
Social Security Taxable Earnings Limit	17
Maximum Capital Gain/Dividend Tax Rate Increased for High-Income Taxpayers	17
Estate and Gift Tax Exemption	17
Section 199A Threshold Amount	17
Summary	18
Chapter Review	23

Chapter 2 – Tax Credit Changes24

Introduction	24
Chapter Learning Objectives	24
Retirement Savings Contribution Credit	24
Saver's Credit Applicable to Range of Retirement Contributions	24
Saver's Credit Eligibility Based on Income and Filing Status	25
OBBBA Repeals Savers Match & Increases Contribution Considered for Credit	26
Earned Income Credit	26
EIC Rules Applicable to Everyone	27
Adjusted Gross Income Limits	27
Valid Social Security Number Required	27
Tax Filing Status	27
Citizenship or Residency	27
Foreign Earned Income	28
Investment Income	28
Earned Income	28
EIC Rules That Apply if Taxpayer Has a Qualifying Child	28
Relationship, Age, Residence and Joint Return Tests	28
Qualifying Child of More than One Person Rule	28
Taxpayer as the Qualifying Child of Another Taxpayer Rule	29
EIC Rules That Apply if Taxpayer Does Not Have a Qualifying Child	29
The Age Rule	29
The Dependent of Another Person Rule	29
The Qualifying Child of Another Taxpayer Rule	30
The Main Home Rule	30
Figuring the Amount of the Earned Income Credit	30
Adoption Credit/Exclusion	30
Eligible Child	31
Qualified Adoption Expenses	31
The Benefit	31
Timing of the Credit/Exclusion	31
Benefit Phased-Out at Higher Taxpayer MAGI	32
Adoption Credit Now Partially Refundable	33
Summary	33
Chapter Review	35

Chapter 3 – PPACA-Related Tax Changes36

Introduction	36
Chapter Learning Objectives	36
Summary of Existing PPACA-Related Tax Requirements	36
Health Flexible Spending Arrangement Contributions	36
Refundable Premium Tax Credit to Assist in Purchase of Qualified Health Plan	37
Eligibility for Credit	37
Federal Poverty Level	37
Qualified Health Plan	38
Amount of the Credit	39
Benchmark Plan	39
Taxpayer's Expected Contribution	39
Calculating the Credit	39
Adjusted Monthly Premium	40
Special Rules Applicable to the Tax Credit	41
Reconciling Advance Premium Tax Credits	41
Small Business Premium Tax Credit	41
Eligibility Requirements	42
Limitations Affect Health Insurance Premium Credit	42
Full-Time Equivalent Employee (FTE) Limitation	42
Average Annual Wage Limitation	43
Average Premium Limitation	43
State Premium Subsidy and Tax Credit Limitation	43
Calculating the Credit	44
Large Employer Shared Responsibility: The Employer Mandate	51
Employers Not Offering Coverage	52
Employers Offering Coverage	52
Summary	53
Chapter Review	54

Chapter 4 – Changes in Archer MSAs, HSAs & IRAs55

Introduction	55
Chapter Learning Objectives	55
Medical Savings Accounts	55
High Deductible Health Plan Requirement	55
Archer MSA Contributions	56
Penalty for Excess Contributions	57
Special Rules for Employer-Installed MSAs	57
Archer MSA Distributions	57
Archer MSA Rollovers	57
Account Transfer Incident to Divorce	57
Account Transfer at Death	57
Archer MSA Taxation	58
Contribution Tax Treatment	58
Distribution Tax Treatment	58
Archer MSA Distribution Tax Penalty	59
Health Savings Accounts	59
HSA Eligibility	60
HSA High Deductible Health Plan Requirement	60
HSA Contributions	60
HSA Contributions from Multiple Sources	60
Additional Contributions for Age 55 and Older Account Holders	60
First-Year Contributions for New Account Holders	61
Maximum HSA Contributions may be Reduced	61
Penalty for Excess Contributions	61
Employer HSA Participation	61
HSA Distributions	61
HSA Rollovers	62
Account Transfer Incident to Divorce	62
Account Transfer at Death	62
HSA Taxation	62
Contribution Tax Treatment	62
Distribution Tax Treatment	63
Tax-Free HSA Distributions	63
Taxable HSA Distributions	63
HSA Distribution Tax Penalty	63
Early Distributions	63
Roth IRA Eligibility	64
Modified Adjusted Gross Income	64
Limits on Contributions	64
Traditional IRA Contributions by Active Participants	66
Tax Treatment of Contributions by Active Participants	66
Reduced Deductibility of Traditional IRA Contributions for Active Participants	66
Summary	68
Chapter Review	71

Chapter 5 – Secure Act 2.072

Introduction	72
Chapter Learning Objectives	72
SECURE Act 2.0 Provisions That Became Effective in 2023	72
Tax Credits for Small Employer Plan Startup Costs Expanded	73
Tax Credits for Small Employers – Military Spouse Employment & Accelerated Plan Eligibility	73
Required Minimum Distribution (RMD) Age Change	73
Reducing Tax Penalties for RMD Insufficiencies	73
SEPs for Domestic Employees	73
Removing RMD Restrictions on Life Annuities	74
Penalty on Partial Annuitization	74
Compliance Resolution System (EPCRS) Expanded	74
Eliminating Premature Distribution Tax Penalty at Age 50 for Private Sector Firefighters	74
Repaying Qualified Birth or Adoption Distributions	75
Simplifying Hardship Distributions	75
Clarifying IRA Tax Penalty Statute of Limitations	75
Authorizing Retroactive Individual 401(k) Elective Deferrals for Sole Proprietors	75
Limiting Penalties for IRA Prohibited Transactions	75
Exempting Tax Penalties for Premature Distributions by Terminally Ill	76
Repealing the Direct Payment Requirement for Health and Long Term Care Insurance Premiums	76
Modifying the Premature Distribution Tax Penalty for Public Safety Officers	76
Providing Permanent Rules for Qualified Federally-Declared Disasters	76
Eliminating Additional Tax Penalties on IRA Excess Contribution Corrective Distributions	77
Modifying RMD Rules Applicable to Special Needs Trusts	77
Roth Contributions to SEPs & SIMPLEs Authorized	77
Roth Requirement for Catch-up Contributions	77
Employer may make Matching and Nonelective Roth Contributions	77
SECURE Act 2.0 Provisions That Became Effective Beginning in 2024	77
Indexing of IRA Catch-up Limits	78
Emergency Expense Withdrawals	78
Additional SIMPLE Nonelective Contributions	78
SIMPLE Contribution Limits Increased	78
Starter 401(k) & 403(b) Plans Authorized	78
Transfer of Limited §529 funds to Roth IRAs	78
401(k) Replacement of SIMPLE IRAs	79
Former Plan Participant Involuntary Distribution Limit	79
Domestic Abuse Distributions	79
Clarifying the Substantially Equal Periodic Payments Rule	80
Lifetime Distribution Requirement for Designated Roth Accounts Eliminated	80
Surviving Spouse Distribution Options	80
403(b) Hardship Distribution Rules	80
Summary	81
Chapter Review	83

Chapter 6 – One Big Beautiful Bill Act84

Introduction	84
Chapter Learning Objectives	84
OBBBA Provisions Impacting 2025 Income	84
Standard Deduction	84
SALT Deduction	84
Personal Exemptions	84
Child Tax Credit	85
Tax Treatment of Tips	85
Tax Treatment of Overtime Compensation	85
Tax Treatment of Passenger Vehicle Loan Interest	85
Tax Treatment of New and Previously-Owned Cleaned Vehicles	85
OBBBA Provisions Impacting 2026 Income	85
Alternative Minimum Tax	85
Tax Treatment of Mortgage Insurance Premiums	85
Casualty Loss Deduction	85
Miscellaneous Deductions Subject to 2%	86
Itemized Deductions	86
Tax Treatment of Transportation Fringe Benefits	86
Moving Expenses	86
Tax Treatment of Wagering Losses	86
ABLE Contributions	86
Savers Credit	86
Qualified Tuition Program Rollovers to ABLE Accounts	86
Imminent Danger Pay	86
Tax Free Student Loan Discharge	87
Trump Accounts	87
Child and Dependent Care Credit	87
Dependent Care Assistance Program FSA Contribution	87
Employer Student Loan Payment Exclusion	87
Section 529 Plan Distributions	87
Charitable Contribution Deductible Floor	87
Non-Itemizer Charitable Deduction	87
Remittance Transfer Tax	87
Energy Efficient Home Improvement Credit	87
Residential Clean Energy Credit	87
AOTC and Lifetime Learning Credit	88
Summary	88
Chapter Review	88

Glossary89

Answers to Review Questions92

Chapter 1	92
Chapter 2	93
Chapter 3	95
Chapter 4	95
Chapter 5	97
Chapter 6	98

Index99

Appendix A101

Course Details

Author: Paul J. Winn CLU ChFC

Paul J. Winn CLU ChFC — Financial Writer, Editor & Trainer. Education: B.A., St. John’s University (1961–1964); Law School, University of Virginia (1964–1965); MBA program Binghamton University (1986–1989); CLU (1985); ChFC (1987). Experience: Thirty years in the life insurance and investment industry (1965–1995). Thirty-one years as a financial writer, editor and trainer (1995–2026). Paul held positions at Mutual Life Insurance Company of New York as product developer and compensation officer; at Security Mutual Life Insurance Company as general agent, marketing vice president, and agency vice president; at Principal Financial Group as agency manager; and as president of Maryland Financial Corporation, managing a financial adviser corporation providing tax, investment and financial planning. As a writer and editor, Paul is a published book author whose books include Tax Planning from the Heart, Business Succession Planning, and Dominating Obamacare. He served as writer and editor of a major mutual life insurance company’s agent training university, created more than 200 insurance, securities and tax training courses in online, print and scripted classroom formats, and is the founder and CEO of Winn Publications LLC, a tax and insurance continuing education course licensor.

Publication/Revision Date: 1/8/2026

Course Exam Questions (online): 45 (multiple-choice)

Program Delivery Method: Self-Study (NASBA QAS Self-Study)

Available Formats of Course Text: Downloadable PDF, Printed/Mailed

Course Level, Prerequisites, and Advance Preparation Requirements

License	Course Level	Prerequisites	Advance Preparation Requirements
CPA	Overview	None	None
CFP®	Overview	None	None
CDFA®	Overview	None	None
EA/OTRP	Overview	None	None
CIMA®/CPWA®/RMA®	Overview	None	None

* This program is appropriate for professionals at all organizational levels.

Sponsor ID Numbers

National Registry of CPE Sponsors I.D.: 107615

CFP Board Sponsor I.D.: 1008 — Course I.D.: 345040

Registered with the Institute for Divorce Financial Analysts

IRS Qualified Sponsor I.D.: FWKKO — Course I.D.: FWKK0-U-00730-26-S

IWI CE Sponsor I.D.: 222740 — Course I.D.: 26BCNHF001

State CPA Board Sponsor ID Numbers (where applicable)

Florida Division of Certified Public Accounting: 0004761

Hawaii Board of Public Accountancy: 14003

New York State Board for Public Accountancy: 002146

Ohio Accountancy Board: CPE .51 PSR

Pennsylvania State Board of Accountancy: PX178025

Texas State Board of Public Accountancy: 009349

Learning Objectives

As a result of studying the course material, you should be able to meet the objectives listed below:

List the 2026 changes in various amounts including the –
- Standard mileage rates,
- Standard deduction,
- Deduction for State and Local Taxes (SALT Deduction),
- Tip deduction,
- Tax on overtime,
- Car loan interest deduction,
- Clean Energy Incentives,
- Bonus Depreciation,
- Research and Development expenses,
- Sustainable Aviation Fuel Credit,
- Limitation of Business Interest, AMT exemption amount,
- Limits related to income from U.S. Savings Bonds for taxpayers paying higher education expenses, and
- Deductions for qualified long-term care insurance premiums;
Identify the 2026 tax credit changes affecting the –
- Saver's credit,
- Child Tax Credit
- Additional Child Tax Credit,
- Earned income credit, and
- Adoption credit;
Recognize the 2026 changes affecting –
- Health Savings Account (HSA) and Archer Medical Savings Accounts (MSA) requirements and contribution limits,
- Roth IRA eligibility, and
- Traditional IRA contribution deductibility for active participants in employer-sponsored qualified plans;
List the changes effective for 2026 with respect to the –
- Small employer premium tax credit, and
- Applicable large employer mandate;
Determine the changes to retirement plans resulting from the Secure Act 2.0 that affect income tax preparation; and
Describe the changes affecting 2025 and 2026 income resulting from the passage of the One Big Beautiful Bill (OBBBA).

Online Book, Online Exam

$54.00

Hardcopy Book, Online Exam

$69.00