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Tax Planning

Stretch Your Dollars: Tax Planning Under the One, Big, Beautiful Bill

The One, Big, Beautiful Bill introduced sweeping tax law changes for 2026—this article helps individuals strategically plan around standard deductions, brackets, and new credits to maximize savings.

By Nomadic Tax Institute research team · 5-8 min read · Created

Understanding Key Changes for 2026

The One, Big, Beautiful Bill (signed into law July 4, 2025) brought major adjustments to U.S. individual income taxes beginning with the 2026 tax year. Some changes to focus on:

  • Inflation adjustments — standard deduction, brackets, AMT exemptions, gift/estate exclusions all rose. (irs.gov)
  • New deductions — including “no tax on tips,” no tax on overtime, and reductions in car loan interest. (irs.gov)
  • Enhanced credits — adoption credit limit increased, employer-provided childcare credit expanded. (irs.gov)

Planning Strategies for Individuals

To make the most of these changes:

  1. Update your withholding — Since deductions and brackets changed, using the IRS Withholding Estimator is essential so you neither underpay nor overpay. (irs.gov)

  2. Max out deductions when available

    • If you receive tipped income, review occupations on the “list of upward of 70 occupations” where tip deductions now apply. (irs.gov)
    • For those with car loan interest: determine eligibility for relief under the new “no tax on car loan interest” provision. (irs.gov)

  3. Strategic use of credits

    • Adoption credit: planning timing of an adoption can help ensure claiming under the new higher limit. (irs.gov)
    • Childcare credit: employer-provided childcare credit now has higher maximums for small businesses — consider negotiations or reimbursement arrangements. (irs.gov)

  4. Long-term tax planning

    • With certain deductions now permanent or expanded (e.g. Qualified Business Income for gig workers), review business structure (sole proprietor, LLC taxed as pass-thru, etc.).
    • Evaluate retirement savings: increased standard deduction and limits may affect marginal tax rates — strategic Roth vs Traditional contributions.

Example Case

Jane and Sam, married filing jointly, income $220,000

  • Under 2025, their marginal bracket was taxed at 32% for income over $191,100. In 2026, the threshold for 32% begins at $201,775. Thanks to inflation indexing, they enjoy a higher “buffer” before hitting the next bracket. (irs.gov)
  • Jane earns tipping income as a waitress — qualifies under “no tax on tips” if her occupation is listed. She can deduct up to existing limits on tipped income. (irs.gov)

Actionable Insights

  • Use updated tax software or consult a tax professional to adjust forecasts for 2026 using new deduction and credit parameters.
  • Review side income sources (tips, overtime) to take advantage of expanded exclusions or deductions.
  • If adopting or expecting adoption, ensure you understand timing so you can claim under the higher credit in 2026.
  • Small business owners should explore the increased childcare credit and ensure compliance to claim it.
  • Always keep detailed records of tip income and overtime pay to support future deductions.

Sources

Existing article citations

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one-big-beautiful-bill-provisions-individuals-and-workers (www.irs.gov)

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irs-releases-tax-inflation-adjustments-for-tax-year-2026-includ… (www.irs.gov)