Tax changes, big and small, are coming in 2026. New tax rules were signed into law as part of the 2025 Reconciliation Legislation, also known as the Big, Beautiful Bill (BBB).
This sweeping legislation will impact taxpayers, especially the middle class, who may see shifts in everything from income-tax brackets to popular deductions and credits.
According to experts, here’s what may be changing, what’s staying the same and moves middle-class taxpayers can make to make sure they stay middle class.
While the BBB made changes at the federal level, Aaron Giles, founder and managing principal at Agile Consulting Group, pointed out that middle-class taxpayers could also see changes more locally.
“Many states are running budget deficits and are searching for creative ways to bridge the gap. From a sales tax perspective, there are two things we are seeing states lean into,” Giles wrote in an email. “First is expanding the base of products and services that are subject to sales tax. Second is increasing sales tax rates.”
At the federal level, here’s what middle-class earners can expect under the new law:
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Child Tax Credit: “The child tax credit for 2025 has been increased to a maximum of $2200, up from $2000 in 2024,” Jason Stanfield, PhD, certified public accountant (CPA), American Accounting Association member and associate professor at Paul W. Parkison, Department of Accounting at Ball State University, explained in an email statement. “This is a permanent increase which will persist into 2026 and beyond.”
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Charitable contributions: Another big change made permanent is that taxpayers who take the standard deduction can make charitable contributions to qualified organizations and deduct up to $1,000, or $2,000 married filing jointly. Previously, this was only available to those who itemize. “A related negative change for itemizing taxpayers is a new ‘floor’ for deducting charitable contributions, equal to .5% of the taxpayer’s adjusted gross income (AGI),” Standield explained. “This floor means that charitable contributions up to this .5% of AGI are not deductible.”
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Increase in state and local tax deductions: “Taxpayers who itemize their deductions, as opposed to taking the standard deduction, will see a 300% increase in the amount of state and local taxes deductible with a new $40,000 limitation through 2029, up from $10,000 in 2024,” Stanfield wrote. This will lead to some middle-class taxpayers, particularly those in areas with high income and/or property taxes, to lower their taxable income by itemizing rather than taking the standard deduction. “This increase in deductibility is temporary and set to expire after 2029,” he added.
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New, temporary deductions: The BBB introduced several new deductions set to expire after 2029. This includes an overtime pay deduction, a deduction on tips in occupations where tips are normally received, a deduction on purchasing a new vehicle that was manufactured or assembled in the U.S. and the $6,000 senior deduction, Standfield noted.
