Updated for the 2025 OBBBA

Blake Christian, HCVT Tax Partner | Malachi Trujillo, HCVT Advanced Staff Accountant

January 7, 2026

The One Big Beautiful Bill Act ("OBBBA" or "The Act") (signed July 4, 2025) reshaped several baseline assumptions for 2026 planning—especially around State and Local Tax (SALT), new above-the-line deductions, and updated inflation adjustments.

Below are 12 planning moves that deliver the largest after-tax dollar impact for individuals and businesses in 2026.

1) Revisit SALT Strategy and Model out PTE Elections

The OBBBA raised the itemized SALT deduction cap to $40,000 and, subject to certain income-based limits and phasedowns, The Act also provided for future inflation adjustments, with the cap scheduled to revert under existing statutory rules. If you reside in a state with high real estate and/or income taxes, making a PTE election can allow you to absorb more of the $40,000 annual SALT cap through other taxes while paying the remainder through the PTE strategy.

Individuals:

• If you itemize, ask your tax advisor to model whether you benefit from paying/accelerating deductible SALT within the allowed cap (and whether you’re capped by income limitations).
• If you’re near the itemize/standard-deduction “line,” ask your advisor to test both scenarios—because the post-OBBBA standard deduction is also higher for 2026.

Businesses/owners:

• Evaluate (or re-evaluate) state Pass Through Entity (PTE) tax elections for S corporations and partnerships. In many states, a PTE election can convert individual SALT that’s otherwise capped into a fully deductible entity-level tax (state-by-state rules vary). Provided your flow-through entity is an active trade or business, you are generally eligible to benefit from a PTE election.
• Ask your tax advisor or finance team to model the following: (i) entity-level tax deduction, (ii) owner credits, (iii) resident/nonresident treatment, (iv) estimated tax timing, and (v) interaction with apportionment and composite filings.

2) Treat Withholding and Estimates as a Planning Project

Because many OBBBA changes began in 2025 and carry into 2026, many taxpayers will have mismatches between (a) what their payroll department withheld and (b) what the law now allows. IRS guidance highlights that taxpayers may need to update withholding due to new/enhanced deductions and SALT changes.

Individuals:

• Reset Form W-4 strategy to reflect new OBBBA deductions, SALT treatment, and investment income changes.

Businesses:

• Owners: Align safe harbor estimated tax planning with pass-through income volatility.
• Employers: Confirm that payroll systems are tracking any new reporting categories you rely on for deductions (where applicable).

3) Harvest Capital Losses and Manage Gains Around Brackets and Surtaxes

Even with “unchanged” concepts, the dollar thresholds move, and good capital gain/loss planning is still one of the highest ROI moves you can make.

Individuals:

• Systematically harvest losses to offset capital gains (and up to the annual ordinary-income limit ($3,000) where applicable).
• Consider gain recognition up to lower capital gain target brackets, especially when you can “fill” a lower marginal band.
• For large short-term or long-term capital gains, consider deferring the reporting of such gains via the Opportunity Zone (OZ) program.  In 2026, capital gains reported on a K-1 can further benefit from the more expansive OZ 2.0 rules and defer such gains for up to five years if the gains are invested into an OZ Fund in 2027. Individually reported 2026 gains recognized on or before July 8, 2026, are still only eligible for OZ 1.0 treatment and would still be reportable on December 31, 2026. Therefore, taxpayers should consider transferring appreciated assets to a partnership, S Corp or a “regarded” (e.g. non-Grantor ) trust prior to sale so that the gain is reportable on a K-1 and can obtain the more beneficial OZ 2.0 treatment.

Businesses / owners:

• If you’re planning an exit, recap, or major distribution year, coordinate capital gains with compensation, distributions, and charitable planning (see #7 below).

4) Formulate a Tax Efficient Retirement Portfolio

The OBBBA provides an opportunity to re-evaluate your taxable accounts, and your taxable and non-taxable retirement accounts to allow long-term distribution tax efficiency.

Individuals:

• Create an “asset allocation” plan with your advisor: tax-efficient index/ETF exposure in taxable accounts; ordinary-income-producing assets placed thoughtfully.
• Review employer-sponsored plans and maximize employer-matching contributions which are common with 401(k) plans.
• Consider Roth vs. regular 401(k) and IRA contribution strategies. Also consider this strategy for your children with earned income.  (See #5 below.)
• As your advisor for help mapping future RMDs, Social Security, 401K, pension/ profit sharing and investment income into a multi-year bracket forecast to maximize after-tax proceeds.
• Factoring in ordinary income, capital gain and tax-free income annually will ensure more spending power in retirement.

Businesses/owners:

• Owners often hold concentrated positions and illiquid interests: coordinate planned liquidity events with retirement distributions and any entity-level tax payments. (See OZ Fund discussion 3 above.)

5) Use Roth Conversions (or partial conversions) as a Multi-Year Bracket-Management Tool

Individuals:

• If your 2026–2028 income will dip due to sale timing, retirement transition, bonus variability), partial Roth conversions can reduce future RMD pressure and smooth Medicare/phaseout cliffs.
• Also consider a Roth conversion if the markets have a downturn in 2026 as this will minimize your taxable income inclusion.

Businesses / owners:

• For pass-through owners, model conversions against projected K-1 income and anticipated business changes due to new contracts, cost expansions, and depreciation timing changes).

6) Review Accounting Methods and “Timing Levers” (cash/accrual, inventory, capitalization, repairs)

This is one of the biggest business tax planning opportunities for many enterprises because it drives the period in which income and deductions are recognized.

Businesses:

• Re-evaluate eligibility for cash vs. accrual, inventory methods, and capitalization policies.
• Identify “timing levers”: prepaid expenses, bonus/§179 positioning, repair vs. improvement studies, cost segregation for real estate, and year-end accrual planning.
• If you’re scaling fast, revisit whether your current method is still optimal (or still permissible).

Individuals with pass-throughs:

• Ensure that your business’s timing decisions match the owners’ personal marginal-rate forecasts and SALT/PTE posture.

7) Maximize Charitable Planning with the Right “Vehicle” for Your Income Type

Individuals:

• For appreciated assets: donating securities held for more than one year can remove embedded gain while generating a deduction (subject to AGI limits).
• For large income years: consider donor-advised funds or (where appropriate) split-interest planning.

Businesses / owners:

• Coordinate charitable planning with entity structure: some gifts are more efficient when executed at the owner level; others can integrate with business objectives and exit planning.

8) Evaluate the Legal and Tax Structure of all Entities in Which You Are Active —and Document Why that Structure Still Makes Sense

Your entity structures should evolve as your income, ownership roles, and business activities change. A 2026 review ensures that each entity still provides the right mix of liability protection, tax efficiency, and state‑level advantages under OBBBA‑era rules.

Individuals:

• Review holding companies, family LLCs, and trusts to confirm that they still align with your SALT posture, NIIT exposure, and estate planning goals.

• Assess active vs. passive participation for each entity, since this affects loss utilization, QBI eligibility, and PTE election benefits

Businesses:

• Re-evaluate whether your current entity choice (sole proprietorship / partnership / S Corp / C Corp) still fits your facts:
• W-2 compensation vs. distributions (S Corp reasonableness)
• State footprint and apportionment
• Financing needs, liability containment, and exit strategy
• Whether entity structure supports (or blocks) PTE election optimization
• Retain, or restructure, to allow the more liberalized IRC Section 1202 for C Corp structures

9) Exploit OBBBA-Specific Deductions Where You Qualify (and where documentation will survive an audit)

The IRS has summarized several OBBBA deductions effective for tax years 2025 through 2028 (with income-based phaseouts), including deductions tied to qualified tips, qualified overtime, personal vehicle loan interest, and an additional senior deduction.

Individuals:

• If relevant, treat these as “documentation-driven deductions,” not assumptions. Confirm the reporting forms and eligibility limits.

Businesses:

• Ensure that your payroll and reporting support your employees’ ability to claim what they’re entitled to (where the business is responsible for reporting).

10) Watch Out for Phaseouts and Cliffs

Many of the biggest costs in 2026 aren’t rates—they are phaseouts and benefit cliffs.

Individuals:

• As your advisor for help tracking and planning around modified AGI thresholds that affect deductions/credits and itemizing benefits (including SALT).
• If you’re 65+, specifically consider the senior deduction and its phaseout range.

Businesses/owners:

• Build owner-level dashboards for K-1 income variability, wages, distributions, and charitable/retirement moves so you can adjust before Q4.

11) Utilize Cost Segregation Studies

A cost segregation study can accelerate depreciation by reclassifying portions of real estate into shorter‑lived property. For 2026 planning, you can complete a study in 2026 for property placed in service in 2025 -- and intentionally “spike” 2025 deductions. This is acceptable and often advantageous because the additional depreciation can create or increase a Net Operating Loss (NOL), which can then be carried forward to offset future income.

Individuals:

• Consider a 2026 cost segregation study for 2025 acquisitions to accelerate depreciation and generate a 2025 NOL, which can offset future rental or business income.
• Have your advisor evaluate passive vs. active participation to determine whether accelerated losses can offset other income or should be preserved as future passive loss carryforwards.

Businesses / Owners:

• Use cost segregation to front‑load depreciation on 2025 property, even when the study is performed in 2026. This intentionally increases 2025 deductions and creates an NOL that can reduce future taxable income.
• Coordinate cost segregation with entity‑level tax strategy (including PTE elections, bonus depreciation, and accounting method planning) to maximize the benefit of accelerated deductions.

 12) Evaluate your Medical and Life Insurance Coverage, Including HSA Strategy

Health and risk‑management choices directly affect both cash flow and tax efficiency. A 2026 review ensures that your medical, life, and HSA arrangements still match your income level, family needs, and entity structure—especially as premiums, deductibles, and contribution limits shift.

Individuals:

• Review medical plan options (HDHP vs. traditional) to confirm you’re in the most cost‑effective structure and eligible for HSA contributions where beneficial.
• Reassess life insurance coverage to ensure death benefits, riders, and ownership structure still align with family needs, income changes, and long‑term planning goals. Securing a permanent (i.e. whole life policy) policy for minor children can also establish a growth asset and shift assets to the next generation.

Businesses / Owners

• Evaluate employer‑provided health and life benefits to ensure they are compliant, cost‑efficient, and aligned with owner and employee needs.
• Confirm that HSA and cafeteria plan structures are optimized for tax savings and properly integrated with payroll and entity‑level compensation strategies.