Federal Changes

Due to the One Big Beautiful Bill Act of July, 2025, most forms and many publications will change in 2025 and in 2026. The following is a brief list of the forms affecting most individuals.

Changes Affecting Your 2026 Tax Return

• Redesigned Form 1040 and supporting forms
• Redesigned Form 1040 Schedule 1-A to determine the new tax provsions (tip income, overtime, car interest and senior deduction)
• There have been major changes to the 1099 Forms you will receive early next year to account for new no-tax-on-tips and no-tax-on-overtime including: W-2, 1099-MISC, 1099-NEC, 1099-K, and 1099-R; Your employer is now required to report deductible tips and your occupation code (to ensure you qualify) and qualified overtime income on the appropriate form.
• 1099-NEC & MISC
• W-9: Request for Taxpayer Identification Number and Certification

Pennsylvania Changes (not yet updated for 2026)

In August, 2023 the Commonwealth of Pennsylvania expanded the Property Tax/Rent Rebate Program, effective January 1, 2024. Eligible individuals include: those aged 65 and older, widows and widowers aged 50 years and older, and those over age 18 with disabilities:

• The maximum rebate has increased from $650 to $1000. In addition, all of the rebates at the various income levels have increased:
• The income cap for both renters and homeowners has increased to $45,000, (up from $15,000-renters/$35,000-homeowners).
• Going forward, the income caps will be tied to the cost of living, so increases in Social Security will not cause otherwise eligible individuals to lose their rebate.

We recommend going to your State Senator or Reprersentative's office to have your PROPERTY/RENT REBATE Forms completed.

On July 4, 2025, Congress passed the "One Big Beautiful Bill (OBBBA)". It includes many personal and business tax code changes affecting 2026 and future years. The following is a brief summary of those provisions that will impact your 2026 tax return.

• Code Changes for 2026 Tax Year
  • Refundable Credits: proof of citizenship required
  • Estate Deduction raised to $15.5 million
  • The above-the-line Educator Expense Deduction increases to $350 per eligible educator (up to $700 for married educators filing jointly who both qualify, capped at $350 each). A new itemized deduction also takes effect for 2026, allowing educators to deduct unlimited unreimbursed expenses if they choose to itemize.
  • Schedule A deductions are phased out for high earning taxpayers
  • Gambling Loss Deduction on Schedule A is limited to 90% of losses up to winnings reported on Schedule 1. Though all gambling income must be reported, Casinos will only issue a W-2G if the winnings (minus the wager) is $2,000 or more, or at least 300 times the amount wagered.
  • Child Dependent Credit expense limit raised to $7,500 (from $5,000)
  • Child Tax Credit raised to $2,200 (from $2,000).
  • New Charitable Deduction of $2,000 “above the line” on the 1040.
  • Charitable Schedule A Deduction floor of .5% of income (similar to medical deduction)
  • Premium Tax Credit: total recapture of credit if income exceeds 401% of poverty level.
• New Provisions for 2027 Tax Year
  • Saver’s Match:
    • An annual government matching contribution of up to $1,000 directly into a 401(k)-type plan or IRA if taxpayer contributes at least $2,000 to that plan.
    • Subject to income phase-outs (S: $20,500, HH: $30,750; MFJ:$41,000)
    • In 2028, individuals will claim the Saver’s Match by filing Form 8880-A with their 2027 federal tax return. More information will be provided when Form 8880-A and its instructions become available.
  • Federal Scholarship Tax Credit:
    • Reduces the tax you owe by up to $1,700 by making a charitable donation to an approved Scholarship Granting Organization (SGO).
    • Scholarships by the SGO can be granted to individuals for private school tuition, tutoring, special education needs, school technology, etc.
    • State opt-in required. Pennsylvania has not yet made a decision and has until December 31, 2026 to decide.
  • Trump Accounts
    • Trump Accounts are tax-advantaged custodial individual retirement investment accounts for U.S. citizen under 18.
    • Children born between January 1, 2025 and December 31, 2028 qualify for a one-time $1,000 contribution from the U.S.
    • Yearly contributions, limited to $5,000, are made with after-tax dollars and are NOT deductible; and can be made by parents, family members, friends and employers. Investments must be in ETF(s) with expenses less than .1%.
    • At 18, the child owns the account and can transfer the funds to a traditional IRA or use it penalty-free for college expenses, job training, a first home or starting a business. Withdrawals are subject to standard IRA rules (e.g., money withdrawn for non-qualified use is treated as ordinary income and subject to 10% penalty.)
    • Excess contribution above $5,000 are subject to an annual 6% penalty on the over-contributed amount and any gains generated by the excess money is taxed at 100%.