Your Tax Geek’s Guide to What Just Happened and What It Means for Your Wallet

I’ve been doing this for nearly 40 years, starting in 1986 when Reagan was rewriting the tax code and I still had hair, and I can tell you that the last 30 days in U.S. income tax have been like watching a season finale of Game of Thrones . Supreme Court bombshells, IRS guidance dropping like confetti, a brand-new filing season loaded with OBBBA goodies, and tariff chaos that would make even the Medicis say “troppo!” (too much).

So, grab your espresso and let’s break it down.

The 2026 Filing Season Is OPEN (And It’s a Big One)

On January 26, 2026, the IRS officially opened the 2026 filing season for tax year 2025 returns, with a deadline of April 15, 2026. The IRS expects to receive approximately 164 million individual returns this year. But here’s the deal, this isn’t your typical filing season. This is the first filing season under the One Big Beautiful Bill Act (OBBBA) , which was signed into law on July 4, 2025, and it’s loaded with new provisions that affect virtually every taxpayer.

Early filing statistics through February 6 show the average refund amount is up 10.9% over last year at $2,290, and analysts expect this year’s average refund could end up roughly $1,000 higher than 2024 because of OBBBA changes. That’s real money, folks. Who says you can’t buy votes?

The IRS has been issuing guidance at a furious pace to help taxpayers and practitioners navigate the new landscape. In January alone, there were nearly 20 news releases, and February has continued the trend.

OBBBA Provisions Now in Play: The Greatest Hits

Let me walk you through the key OBBBA provisions that are NOW LIVE and affecting 2025 returns being filed right now:

Bigger Standard Deductions

The OBBBA retroactively increased the standard deduction for tax year 2025 to $15,750 for single filers and $31,500 for married filing jointly . For 2026, those numbers bump up again to $16,100 and $32,200. This is a meaningful increase that the Bipartisan Policy Center estimates will save single taxpayers between $75 and $278, and married couples between $150 and $555 depending on their tax bracket.

The Senior Deduction

Individuals aged 65 and older can now claim an additional $6,000 deduction on top of the standard deduction for tax years 2025 through 2028. It phases out for those with modified AGI above $75,000 ($150,000 joint). The IRS issued Tax Tip 2026-14 on February 19 specifically highlighting this new benefit for seniors. If you know anyone in this category, make sure they know about it.

No Tax on Tips (Up to $25,000)

The OBBBA created a brand-new deduction for qualified tip income (up to $25,000 annually) for workers in occupations that customarily receive tips. This isn’t an income exclusion (Medicare and Social Security taxes still apply), but it’s a significant income tax break for eligible workers. The IRS issued proposed regulations in September 2025 listing dozens of qualifying occupations across eight categories.

No Tax on Overtime (Up to $12,500/$25,000)

Similarly, the OBBBA established a new deduction for qualified overtime compensation (up to $12,500 per year ($25,000 for joint filers)). Only overtime required under the Fair Labor Standards Act (FLSA) qualifies. State-law daily overtime or contractual premium pay generally doesn’t make the cut. Both deductions phase out when MAGI exceeds $150,000 ($300,000 joint). Remember this is only for the overtime portion of pay, so if you receive time and a half, only the half is excluded from income.

Important for employers: The IRS issued Notice 2025-69 in November clarifying that the W-2 forms won’t be updated until 2026 reporting, but employers must provide employees with a statement showing qualifying overtime amounts for 2025. On January 23, the IRS released Fact Sheet 2026-01 with FAQs on the overtime deduction.

SALT Cap Raised to $40,000

The state and local tax deduction cap jumped from $10,000 to $40,000 for 2025 (increasing to $40,400 for 2026 with an inflation adjustment). The increased cap phases out for taxpayers with modified AGI above $500,000 ($505,000 for 2026), but it won’t drop below $10,000. For those of you in high-tax states, and you know who you are, this is a welcome development.

100% Bonus Depreciation Is BACK — Permanently!

This one makes my spreadsheet-loving heart sing. The OBBBA permanently restored 100% bonus depreciation for qualified property acquired after January 19, 2025. No more phasedown. No more worrying about whether Congress would extend it. It’s permanent.

On January 14, the IRS issued Notice 2026-11 providing interim guidance on the additional first-year depreciation deduction under Section 168(k) as amended by the OBBBA. This covers the rules practitioners need for most tangible property with a MACRS recovery period of 20 years or less, plus qualified improvement property (QIP).

Brand New: Qualified Production Property (QPP)

And then there’s the new kid on the block. The OBBBA created an entirely new category for Qualified Production Property that’s eligible for 100% bonus depreciation on a temporary basis (through December 31, 2030).

QPP is nonresidential real property used as an integral part of a qualified production activity, think manufacturing, chemical production, agricultural production, or refining. This is HUGE for manufacturers because it means they can write off plant costs immediately instead of over 39 years.

Just days ago, on February 20 th , Treasury and the IRS dropped Notice 2026-16 , providing interim guidance on the special depreciation allowance for QPP. The notice covers definitions, how to calculate the allowance, election procedures, and depreciation recapture rules for property that ceases to qualify. Taxpayers can rely on this guidance until proposed regulations are issued.

Section 179 Got a Boost Too

The OBBBA also increased the Section 179 expensing limits. For 2025, taxpayers can immediately deduct 100% of up to $2.5 million in property purchases, with the phaseout beginning at $4 million and fully phasing out at $6.5 million. Remember that Section 179 deductions are limited to taxable income while Bonus Depreciation is not. Section 179 is much more relevant for states that do not allow or limit Bonus Depreciation.

QSBS Gets Even Better

The Section 1202 Qualified Small Business Stock exclusion, already one of the most powerful tools in our arsenal, got expanded under the OBBBA:

• Maximum exclusion increased from $10 million to $15 million per taxpayer (or 10x adjusted basis, whichever is greater) for stock issued after July 4, 2025.
• Gross asset threshold raised from $50 million to $75 million (adjusted for inflation after 2026).
• New shorter holding period exclusions : 75% exclusion for stock held 4 years and 50% exclusion for stock held 3 years (for stock acquired after July 4, 2025).

For my entrepreneur and business-owner clients thinking about exits, this is one of the most significant wealth preservation tools available. And when you combine QSBS stacking with trusts? The math gets beautiful. A single $10M (now $15M) exclusion can potentially multiply to $40M+ with proper planning.

The Supreme Court Dropped a BOMB on Tariffs

Now, I know tariffs aren’t technically “income tax,” but friends, what happened on February 20, 2026 is going to ripple through every area of tax and business planning. The Supreme Court, in a 6-3 ruling in Learning Resources, Inc. v. Trump , struck down the IEEPA-based tariffs that had been the backbone of the administration’s trade policy.

The Court held that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs. Chief Justice Roberts wrote that the President’s interpretation would give “power to unilaterally impose unbounded tariffs” — a “transformative expansion” of presidential authority that Congress never clearly delegated.

What Happened Next

Within hours, President Trump signed executive orders terminating all IEEPA tariffs and replacing them with a 10% global import surcharge under Section 122 of the Trade Act of 1974, a separate legal authority that permits tariffs of up to 15% for up to 150 days. The new surcharge took effect February 24, 2026. Trump then announced via Truth Social his intent to raise the rate to the maximum 15% , though no formal order had been signed as of February 21. The tariff debate is clearly not over and we are sure to see more legal actions and Supreme Court decisions as the administration continues to try to expand executive authority.

The Refund Question

The Wharton Budget Model projects that reversing the IEEPA tariffs could generate up to $175 billion in refund claims from importers. The Court’s decision did not explicitly order refunds, but the ruling that tariffs were collected illegally has opened the door. Importers generally have 180 days after goods are “liquidated” to protest and request refunds from U.S. Customs and Border Protection. This will get messy and Congress may need to intervene.

Why You Should Care

If you or your clients are importers, manufacturers relying on imported materials, or businesses with supply chains affected by tariff pricing the landscape just shifted dramatically. Contract assumptions, pricing models, and inventory valuations tied to IEEPA tariffs may need to be revisited. And the potential for tariff refunds creates both cash flow opportunities and accounting complexities. We anticipate the new developments in the tariff landscape will create a great deal of uncertainty in the coming months which may have negative impacts on the economy. We are hopeful this issue will get resolved so we can see a clear path forward.

Other IRS Guidance You Need to Know About

The IRS has been busy in February. Here’s the rapid-fire rundown:

• February 3 : Proposed regulations for the clean fuel production credit under the OBBBA.
• February 9 : Expansion of Tax Pro Account with new business-level digital capabilities for tax professionals. This is a welcome upgrade for us practitioners.
• February 12 : Guidance on prohibited foreign entity rules for energy tax credit eligibility.
• February 20 : Interim guidance on the special depreciation allowance for QPP (Notice 2026-16).

And from late January:

• January 14 : Notice 2026-11 on 100% bonus depreciation
• January 16 : IRS guidance on new and expanded tax benefits under the OBBBA, including the Child Tax Credit, Adoption Credit, and education expenses.
• January 23 : Fact Sheet 2026-01 on the overtime deduction .
• January 26 : Filing season officially opened.

The QBI Deduction Is Now Permanent

One more item that deserves its own spotlight: the 20% Qualified Business Income deduction is now permanent under the OBBBA. It was originally set to expire after December 31, 2025 under the TCJA. Not only did the OBBBA make it permanent for tax years beginning after 2025, but it also increased the phase-in thresholds from $50,000/$100,000 to $75,000/$150,000 for individual/joint filers.

For 2026, the income range for the phase-out is $75,000 for single filers (beginning at taxable income of $201,750 and ending at $276,750) and $150,000 for joint filers (beginning at $403,500 and ending at $553,500).

Bottom line: if you’re a pass-through business owner, the Section 199A deduction isn’t going anywhere. Plan accordingly.

1099 Reporting Threshold Going Up in 2026

Starting with payments made in 2026, the OBBBA raises the 1099 reporting threshold from $600 to $2,000 . Beginning in 2027, the threshold will be adjusted for inflation. This means fewer 1099s to issue and file, less administrative headache for small businesses, and better alignment with modern economic realities.

The money is still taxable income — the reporting obligation just kicks in at a higher threshold.

Action Items: What You Need to Do NOW

There’s a lot happening in tax as usual, so let me give you the practical takeaways:

1. File smart, not fast. This filing season has more new provisions than any since the TCJA. Make sure your return captures every OBBBA benefit available — tips deduction, overtime deduction, senior deduction, increased SALT cap, enhanced standard deduction.
2. Review your depreciation strategy. With 100% bonus depreciation permanently restored and the new QPP category, capital investment planning just got a lot more interesting. The new Notice 2026-16 on QPP is essential reading for anyone in manufacturing or production.
3. Revisit QSBS planning. The expanded exclusion ($15M), higher asset threshold ($75M), and new shorter holding period exclusions open up planning opportunities that didn’t exist before July 2025. If you’re a founder, investor, or business owner with a C-corp structure, this needs to be on your radar.
4. Monitor the tariff fallout. The SCOTUS ruling and the pivot to Section 122 tariffs creates uncertainty and opportunity. If you’re an importer, talk to your trade counsel about refund claims. If you’re a business owner with supply chain exposure, model the impact of the new 10-15% surcharge.
5. Celebrate the permanent QBI deduction. Pass-through owners can now plan with confidence that Section 199A isn’t going away.
6. Prepare for 2026 changes. The increased 1099 threshold, expanded estate tax exemption, and mandatory W-2 overtime/tip reporting all take effect for 2026.

Friends, we’re living through one of the most dynamic periods in tax history. The OBBBA is the biggest tax legislation since the TCJA, the Supreme Court just rewrote the rules on trade policy, and the IRS is pumping out guidance faster than I can drink Italian “water wine ”. If you need help navigating any of this and let’s be honest, who doesn’t?, reach out to us at [email protected]. That’s what we’re here for.

Grazie Mille, Ciao!