(This article by Col. Curt Sheldon, USAF (Ret), originally appeared in the February 2026 issue of Military Officer, a magazine available to all MOAA Premium and Life members who can log in to access our digital version and archive. Basic members can save on a membership upgrade and access the magazine.)

It’s that time again.

For some, tax season means cash is coming their way. For others, it’s time to write a hefty check. And given how often the federal tax system changes, it’s important you prepare for the next season.

Here’s how the One Big Beautiful Bill Act (OBBBA), signed into law by President Donald Trump in July 2025, will significantly change how you pay and file your taxes.

Changes to Deductions

State and local tax limits: The Tax Cuts and Jobs Act of 2017 limited state and local tax deductions to $10,000. But the OBBBA increased that limit to $40,000 through 2030 for taxpayers earning less than a threshold.

For 2025 tax returns, the increased deduction will start to phase out with $500,000 of modified adjusted gross income (MAGI) and will be fully phased out by $600,000 of MAGI. (For most taxpayers, MAGI is the equivalent of AGI). For those with a MAGI of $600,000 or more, the deduction is $10,000.

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The state and local tax limit as well as the MAGI phaseout ranges will be adjusted for inflation. Notably, the deduction limit and phaseout ranges are the same for both joint and individual filers, save those whose tax status is married filing separately.

Charitable deductions: For 2027 tax returns, you can deduct charitable contributions, within limits, without itemizing. Specifically, single filers can deduct up to $1,000 in cash contributions to qualified charities; joint filers can deduct up to $2,000 in cash contributions. This should allow more taxpayers to deduct charitable contributions.

However, there is a flip side to this deduction. Taxpayers who itemize deductions will only be able to deduct charitable contributions that exceed a 0.5%MAGI floor. For example, if your MAGI is $100,000, your first $500 of charitable contributions will not be deductible.

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Educator expenses: The above-the-line deduction for educator expenses remains available for educators. As of this year, it will be supplemented by an unlimited itemized deduction for any qualified expenses that exceed the above-the-line limit. Additionally, starting this year, “coaches and athletic administrators” will be considered eligible educators for the unlimited itemized deduction.

The bad news is if you don’t itemize, you won’t get the unlimited deduction.

Limitations: High-earning taxpayers will also see a change this year, as they will receive less of a benefit from itemized deductions. For taxpayers in the 37% bracket, their itemized deductions will reduce their tax by 35% of the deductions instead of 37%.

New Deductions

For the most part, the new deductions created under the OBBBA deliver on a campaign promise of then-presidential candidate Trump: to make certain types of deductions tax-free.

For seniors: For the 2025-28 tax years, individuals who are age 65 or older can claim an additional $6,000 deduction regardless of whether they are receiving Social Security benefits.

While this deduction is related to a promise to not tax Social Security, it actually isn’t related to Social Security at all. The deduction is per individual, meaning a married couple can take a $12,000 deduction. You can take this deduction on top of the other new deductions without itemizing, and it does not affect AGI.

There is an income limit, and the phaseout range starts at $150,000 of MAGI for those whose tax status is married filing jointly; it’s $75,000 for others. In this case, the deduction is reduced by 6% of the amount MAGI exceeds the limit. Married taxpayers must file jointly to claim the deduction.

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No taxes on overtime: Like no taxes on Social Security, this deduction is the result of another campaign promise and partially lives up to its name.

The deduction is up to $12,500 for single taxpayers and $25,000 for married couples filing jointly. If you are both married filing jointly and your MAGI exceeds $300,000, the deduction starts to phase out. For all other taxpayers, the phaseout begins at $150,000. The phaseout is $100 per $1,000 over the limit.

Like the deduction for seniors, if you are married, you must file jointly to claim this deduction.

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No taxes on tips: For the 2025-28 tax years, taxpayers who receive qualified tips of up to $25,000 can take a deduction for those tips. Qualified tips apply to those in an occupation that customarily and regularly received tips on or before Dec. 31, 2024.

Like the other new deductions, if you make too much money, you start to lose the deduction. The income limit and phaseout range is the same as that related to no taxes on overtime, and you must file jointly, if married.

Car loan interest: This deduction, in effect 2025-28, allows a taxpayer to deduct up to $10,000 of interest paid on a loan for a qualified passenger vehicle. Among other requirements, the purchase of the vehicle must have taken place in 2025 or later. After applying the $10,000 limit, the car loan interest deduction is reduced by $200 for each $1,000 of MAGI over $150,000 ($250,000 for joint filers).

Permanent Provisions

The Tax Cuts and Jobs Act (TCJA) was to sunset at the end of 2025. Several of its provisions were made permanent by OBBBA. Some include:

Child tax credit: The TCJA temporarily increased the child tax credit to $2,000. OBBBA made that change permanent and increased the credit to $2,200, indexed for inflation.

Personal exemptions: Prior to the TCJA, taxpayers would deduct a set amount for each person on their tax return. The act removed that deduction, with OBBBA making the removal permanent.

Tax brackets: The TCJA lowered tax brackets, and OBBBA makes that change permanent.

Mortgage interest deduction: The TCJA only allowed the mortgage interest deduction for home acquisition debt on balances of $750,000 or less. The change is permanent under OBBBA.

Standard deduction: The TCJA nearly doubled the standard deduction. OBBBA made that change permanent and then increased it by 5%to $31,500 for those whose tax status is married filing separately; $23,625 for heads of household; and $15,750 for single taxpayers.

Estate tax exclusion: As of 2026, the estate tax exclusion has permanently increased to $15 million. It continues to be adjusted for inflation.

It’s likely your tax preparer or software will handle most calculations to determine how the new law applies to you. Still, don’t ignore the changes. After all, when filing your return, you’re saying it is truthful to the best of your knowledge.

Col. Curt Sheldon, USAF(Ret), CFP®, is president of C.L. Sheldon and Co., an IRS-enrolled agent, and a MOAA Life member.