Tax Planning
Planning for Inflation-Adjusted Tax Items Under the One, Big, Beautiful Bill 2026
With legislative indexing changes in effect for 2026, it’s critical to understand adjusted thresholds and deductions under the One, Big, Beautiful Bill.
By NomadicTax Research Team • 6 min read • July 26, 2026
## What Is Changing: Key Inflation Adjustments
For tax year **2026**, several thresholds and deductions have increased under indexing tied to the One, Big, Beautiful Bill (OBBB). These changes will apply in 2027 when you file your 2026 return. ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai)) Some of the major changes:
- **Standard Deductions**: Now $32,200 for married filing jointly, $16,100 for singles. ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai))
- **Foreign Earned Income Exclusion**: Increased to **$132,900**, up from $130,000. ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai))
- **Employer-Provided Childcare Tax Credit**: Maximum credit jumps to $500,000 (or $600,000 if small business). ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai))
- **EITC** for 3+ children: max credit is **$8,231**. ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai))
- **Fringe benefit caps**: Qualified transportation/parking benefit limit is now $340/month. Health FSA salary reduction limit is $3,400. ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai))
## How These Adjustments Impact Planning
### For Individuals
- **Itemize vs standard deduction**: Larger standard deductions may reduce the number of taxpayers who itemize. Review actual expenses (mortgage, state/local taxes, charitable gifts) to compare.
- **Foreign income**: If you live abroad, you can exclude more foreign earned income, reducing U.S. taxable income. But keep in mind the “bona fide residence” or “physical presence” tests.
- **Childcare benefits**: If your employer offers childcare tax credits, or you provide childcare, enhanced credit caps open possibilities for more support.
### For Businesses & Entities
- Fringe benefit limits: transportation and parking credits under OBBB increase—use these benefits strategically for employee compensation packages or entity expense planning.
- Health FSA limits up: more pre-tax dollars available. Better savings for high-deductible health plan employees.
## Example Scenarios
- A couple filing jointly with 3 children and foreign income of $200,000: raising foreign earned income exclusion means more income is excluded, lowering taxable income.
- A single parent with qualified transportation costs might now exclude $340/month instead of $325, saving tax if employer provides benefit or covers transit pass.
## Tips to Leverage These Changes
- Update your payroll withholding—use the new standard deduction and credits to avoid under-or over-withholding.
- Review use of benefits like FSAs, childcare assistance—optimize compensation mix.
- Prioritize charitable contributions if itemizing still makes sense.
- Plan big income or investment sales with year boundaries in mind to stay within favorable thresholds.
By keeping inflation-adjusted changes in mind, you can make smarter decisions in 2026 to optimize deductions, reduce taxable income, and avoid surprises.