OBBBA Changes 2026: What NJ Taxpayers Need to Know

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Executive Summary for the Taxpayer
The OBBBA changes 2026 planning by making several Tax Cuts and Jobs Act provisions permanent while creating temporary deductions for tips, overtime, seniors, and qualifying vehicle-loan interest that generally expire after 2028. Brick Taxes can help taxpayers separate permanent planning opportunities from provisions requiring annual monitoring; call 732-540-1040.

The One Big Beautiful Bill Act, P.L. 119-21, was signed on July 4, 2025. Its most important planning distinction is whether a provision is permanent, temporary through 2028, or subject to a separate sunset period under the statute. P.L. 119-21

Permanent Provisions Versus Temporary Relief

For 2026, the following OBBBA changes are generally permanent:

  • The 20% qualified business income deduction under IRC §199A. IRC §199A
  • A $400 minimum QBI deduction for an active owner with at least $1,000 of QBI, subject to the statutory requirements. IRC §199A(i)
  • 100% bonus depreciation for qualifying property acquired after the applicable effective date. IRC §168(k)
  • Immediate domestic research and experimental expenditure deductions under new IRC §174A. IRC §174A
  • A $15 million federal estate and gift tax exemption per person beginning in 2026, indexed under the statute. IRC §2010
  • The restored Form 1099-K threshold of more than $20,000 and more than 200 transactions per payment platform. IRC §6050W

The following provisions are temporary or require a scheduled expiration review:

  • Qualified tips deduction through 2028. IRC §224
  • Qualified overtime compensation deduction through 2028. IRC §225
  • Enhanced senior deduction through 2028. IRC §151(d)(5)
  • Qualified passenger-vehicle loan interest deduction through 2028. P.L. 119-21
  • The enhanced SALT cap, which is scheduled to change after its current statutory period rather than being treated as a permanent replacement for the prior limitation. IRC §164(b)(6)

Homeowners: SALT and Mortgage Insurance

For tax year 2026, the SALT deduction cap is $40,400 for single, head-of-household, married-filing-jointly, and qualifying-surviving-spouse taxpayers; the married-filing-separately cap is $20,200. The cap phases down for taxpayers above the applicable modified-AGI threshold, but the limitation cannot fall below the $10,000 floor for non-MFS taxpayers. IRC §164(b)(6)

The SALT deduction covers qualifying state and local income or sales taxes and property taxes. It does not include mortgage interest, and taxpayers must still compare itemized deductions with the 2026 standard deduction before deciding whether itemizing produces a benefit. IRC §§63, 164

Mortgage insurance premiums are again treated as qualified residence interest under the OBBBA rules, subject to the applicable acquisition-debt requirements and income limitations. IRC §163(h)(3)(F)

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Small Business, 1099, and S Corporation Planning

The QBI deduction is now permanent, but it is not automatic. Owners must still determine whether income comes from a qualified trade or business, whether specified-service limitations apply, and whether wage and qualified-property limitations affect the calculation. IRC §199A

For 2026, an active owner with at least $1,000 of qualified business income may qualify for a minimum $400 QBI deduction, subject to the material-participation and other statutory requirements. IRC §199A(i)

The Form 1099-NEC and Form 1099-MISC reporting threshold increases to $2,000 for covered payments. The higher reporting threshold does not make income below $2,000 nontaxable; business income remains reportable based on the underlying transaction. P.L. 119-21

For Form 1099-K, the 2026 threshold is more than $20,000 in aggregate payments and more than 200 transactions, generally tested by payment platform. Income received through a payment app or marketplace remains taxable even when no Form 1099-K is issued. IRS Form 1099-K FAQs

An S corporation election should be evaluated against compliance costs, not only payroll-tax projections. Those costs can include:

  • Preparing Form 1120-S annually. IRC §6037
  • Preparing and delivering Schedule K-1s to shareholders. [IRC §6037]
  • Payroll processing and payroll tax filings. IRC §§3402, 941
  • State unemployment tax, including SUTA where applicable.
  • Monthly or quarterly bookkeeping and account reconciliation.
  • Reasonable-compensation analysis and documentation. IRC §162

S Corporation Illustration

Assume a laborer’s business produces $125,000 of gross income and has $25,000 of ordinary business expenses before owner compensation. If the owner receives a $50,000 reasonable salary, the preliminary business profit is approximately $50,000 before employer payroll taxes and other adjustments.

The salary is not a tax-free distribution, and the remaining profit is not automatically a 20% deduction. The final QBI amount depends on payroll costs, employer taxes, retirement contributions, other deductions, taxable income, and the applicable §199A limitations. [IRC §§162, 199A]

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Real Estate Agents and Landlords

For real estate agents operating as sole proprietors, partnerships, or S corporations, permanent §199A treatment improves long-term planning certainty but does not eliminate the need to track commissions, ordinary expenses, wages, and retirement contributions. Real estate brokerage income must still be analyzed under the qualified-business rules and any specified-service limitations. IRC §199A

Landlords may use cost segregation to identify qualifying components with shorter recovery periods. Permanent 100% bonus depreciation may then permit immediate expensing of eligible property, but land and the building’s structural components do not all qualify for the same treatment. IRC §§168, 168(k)

Rental real estate may qualify for QBI only when the activity satisfies the applicable trade-or-business requirements or an available rental-real-estate safe harbor. Documentation of services, records, leases, time, and expenses remains important. IRC §199A; Rev. Proc. 2019-38

Retirees and 2026 Individual Figures

Taxpayers age 65 or older may claim an additional $6,000 senior deduction, or up to $12,000 on a joint return when both spouses qualify, subject to income phase-outs. The deduction is available to itemizers and non-itemizers through 2028 and is claimed through Schedule 1-A. IRC §151(d)(5); IRS Schedule 1-A guidance

The federal estate and gift tax exemption is $15 million per person beginning in 2026, with indexing after the statutory base year. Estate planning documents, portability elections, prior gifts, and state estate or inheritance taxes must still be reviewed separately. IRC §2010

Other 2026 figures include:

  • Standard deduction of $16,100 for single and married-filing-separately taxpayers. IRS 2026 inflation adjustments
  • Standard deduction of $32,200 for married filing jointly. IRS 2026 inflation adjustments
  • Child Tax Credit of $2,200 per qualifying child, subject to eligibility and phase-out rules. IRC §24
  • A deduction for qualifying interest on certain new passenger-vehicle loans, subject to statutory limits and phase-outs. P.L. 119-21

Tips and Overtime Are Deductions, Not Exclusions

The “No Tax on Tips” provision does not remove tips from wage reporting. Qualified tips remain income, and eligible taxpayers claim a deduction of up to $25,000 on Schedule 1-A, subject to occupation, documentation, and income limitations. IRC §224

The overtime provision works similarly. Qualified overtime compensation may produce a deduction of up to $12,500 for single taxpayers or $25,000 for married taxpayers filing jointly, subject to the statutory definition and phase-outs. IRC §225

These provisions are therefore not tax-free income and do not eliminate payroll-tax treatment. Taxpayers should preserve paystubs, employer reporting, tip records, and overtime calculations. IRC §§224–225

Year-End Action List

Before year-end, taxpayers should:

  1. Recalculate 2026 estimated tax payments and make the fourth-quarter payment by January 15, 2027, if required. IRC §6654
  2. Recheck Form W-4 withholding after changes in tips, overtime, bonuses, side income, marriage, dependents, or deductions. IRS Form W-4
  3. Decide whether equipment purchases, cost-segregation studies, or domestic R&D expenditures should occur in 2026 or a later year. IRC §§168(k), 174A
  4. Review S corporation timing only after comparing payroll savings with Form 1120-S, K-1, payroll, SUTA, and bookkeeping costs. IRC §1362
  5. Review retirement-account contributions and distributions in light of permanent versus temporary deductions. IRC §§401, 408

Taxpayer Rights and IRS Resolution

A taxpayer has the right to retain authorized representation, including representation by a federally licensed Enrolled Agent, during an IRS examination, collection matter, appeal, or other qualifying administrative proceeding. Taxpayer Bill of Rights

Taxpayers facing economic hardship may qualify for collection alternatives or hardship-based relief when supported by complete financial information. The Taxpayer Advocate Service may assist when an IRS problem is causing significant hardship or when normal channels have failed. IRS Collection Financial Standards; Taxpayer Advocate Service

Safety exceptions and disclosure concerns are fact-specific and should be raised promptly with the IRS or a representative. Brick Taxes provides federal tax preparation and IRS representation; call 732-540-1040.

If an IRS Balance Is Part of the Picture

Many of these OBBBA provisions only matter if you can file and pay on time. If you are carrying an unpaid balance, review the notices you have received, your filing status, your payment history, your assets, your income, and your expenses, and look at the collection options — a payment plan, Currently Not Collectible status, or an Offer in Compromise — before the matter moves to an assigned Revenue Officer. IRM 5.1

If you are asked to complete Form 433-A or Form 433-F, the figures must match your records. Have bank statements, household-expense records, a list of assets and liabilities, an explanation for irregular income, and documentation supporting any hardship claim ready before you submit the form. IRM 5.15

For assistance with OBBBA planning or IRS representation, Brick Taxes can help you understand which rules apply to you, review your notices and records, and organize the documents needed for the next filing or resolution step. Call 732-540-1040 or schedule a consultation.

Frequently Asked Questions

Is the SALT cap permanent now?
No. The 2026 cap is $40,400 for most non-MFS taxpayers, but the enhanced cap has a statutory period and is not a permanent replacement for the prior limitation. IRC §164(b)(6)

Is the 20% QBI deduction permanent?
Yes. OBBBA made the §199A deduction permanent, although income thresholds, wage limits, specified-service rules, and taxable-income limitations still apply. IRC §199A

Do I have to report 1099 income under $2,000?
Yes. The $2,000 Form 1099-NEC and Form 1099-MISC threshold determines information reporting by the payer, not whether the recipient’s business income is taxable. P.L. 119-21

Is overtime really tax free?
No. Qualified overtime remains income, but an eligible taxpayer may claim a separate Schedule 1-A deduction subject to statutory limits and phase-outs. IRC §225

What is the 2026 senior deduction?
It is an additional deduction of up to $6,000 per qualifying taxpayer age 65 or older, or up to $12,000 for a qualifying joint return with two eligible spouses, subject to phase-outs. IRC §151(d)(5)

What is the 1099-K threshold for 2026?
A payment platform generally reports Form 1099-K when payments for goods or services exceed $20,000 and transactions exceed 200 for the calendar year. Both tests must be met. IRS Form 1099-K FAQs

Official Authorities Referenced