2026 Tax Brackets and What You Need to Know: A Guide to The One, Big, Beautiful Bill Act

Married Filing Separately

The income thresholds for married filing separately are generally half of those for married filing jointly, except at the higher brackets. The rates remain the same at 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

For the 37% bracket, married filing separately taxpayers reach this highest rate at income over $384,350, which is not exactly half of the $768,700 threshold for joint filers.

Head of Household

The head of household filing status offers more favorable tax brackets than single filing status for those who qualify. To qualify, you must be unmarried and pay more than half the cost of maintaining a home for yourself and a qualifying person.

For 2026, head of household filers reach the 37% bracket at income over $640,600, the same threshold as single filers.

Trump Accounts

Section 70204 establishes “Trump Accounts” under the Working Families Tax Cuts provision. These accounts allow families to set aside pre-tax income for qualifying expenses related to childcare, education, and family support services.

Eligible families can contribute up to specified limits annually, with funds growing tax-free when used for qualified expenses. This provision aims to provide financial flexibility for working families managing the costs of raising children.

Enhanced Adoption Credit

Section 70402 significantly enhances the adoption credit, making it more accessible and valuable for families pursuing adoption. The enhancements include:

• Increased maximum credit amount
• Higher income phase-out thresholds
• Expanded eligibility criteria
• Improved refundability provisions

These changes reduce the financial barriers to adoption and provide greater support to adoptive families.

Passenger Vehicle Loan Interest Relief

Section 70203 provides transition relief for businesses regarding passenger vehicle loan interest for 2025. This temporary provision allows businesses to deduct interest on loans for passenger vehicles used for business purposes, even if they would otherwise be subject to interest deduction limitations.

Qualified Production Property

Section 70307 introduces new tax incentives for Qualified Production Property, benefiting manufacturers and producers. These incentives include accelerated depreciation, special tax credits, and simplified accounting methods for qualifying property used in production activities within the United States.

Third Party Network Transactions

Section 70432 revises reporting requirements for third-party network transactions, affecting platforms that process payments. The changes include adjusted thresholds for Form 1099-K reporting and modified timing requirements, reducing administrative burden for small businesses and gig economy workers.

Employee Retention Credit Limitations

Section 70605 implements new limitations on the Employee Retention Credit (ERC), restricting eligibility and establishing stricter documentation requirements. Businesses that previously claimed this credit should review these changes carefully to ensure compliance.

Rural Opportunity Zones

Section 70421 establishes Rural Opportunity Zones, creating tax incentives for investments in designated rural areas. These incentives include:

• Capital gains tax deferrals for investments in qualified opportunity funds
• Step-up in basis for long-term investments
• Tax credits for job creation in designated zones
• Accelerated depreciation for qualifying business property

These provisions aim to stimulate economic development and job creation in rural communities facing economic challenges.

Agricultural and Rural Lending Benefits

Section 70435 introduces tax benefits for agricultural and rural lending, providing incentives for financial institutions to increase lending in rural areas. The benefits include:

• Special deductions for interest income from qualified rural loans
• Tax credits for originating loans to small agricultural businesses
• Favorable tax treatment for loan loss reserves related to rural lending
• Simplified reporting requirements for qualifying loans

These provisions aim to increase access to capital in rural communities and support agricultural businesses.

Indian Tribal Governments and Adoption Credit

Section 70403 extends adoption credit benefits to Indian tribal governments, allowing them to certify tribal adoptions for purposes of the federal adoption credit. This provision ensures that adoptions through tribal governments receive the same tax benefits as other adoptions.

Scholarship Organization Donations

Section 70411 creates a new tax credit for donations to qualified scholarship organizations. This credit allows taxpayers to receive a federal tax credit for contributions to organizations that provide educational scholarships, with special provisions for scholarships to low-income students.

Dyed Fuel Claims

Section 70525 modifies the rules for dyed fuel claims, affecting businesses that use dyed diesel fuel for off-road purposes. The changes include revised claim procedures, documentation requirements, and compliance standards.

Excise Tax on Remittance Transfers

Section 70604 implements a new excise tax on certain remittance transfers, primarily affecting money transfer services that facilitate international money transfers. The provision includes specific exemptions and special rules for qualifying transactions.

Marginal Tax Rate

Your marginal tax rate is the rate you pay on your last dollar of income—the highest bracket your income reaches. For example, if you’re a single filer with $60,000 in taxable income in 2026, your marginal tax rate would be 22%, as your income falls within the 22% bracket ($50,401 to $105,700).

However, this doesn’t mean you pay 22% on all your income. You only pay 22% on the portion of your income that falls within that bracket—in this case, the amount over $50,400.

Effective Tax Rate

Your effective tax rate is the actual percentage of your total taxable income that you pay in taxes. It’s calculated by dividing your total tax liability by your total taxable income.

For example, a single filer with $60,000 in taxable income in 2026 would pay:

• 10% on the first $12,400 = $1,240
• 12% on income from $12,401 to $50,400 = $4,560
• 22% on income from $50,401 to $60,000 = $2,112

Total tax: $7,912 on $60,000 income = 13.2% effective tax rate