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2026 FILING SEASON
OBBBA (One Big Beautiful Bill Act): IRS Tax Updates for 2026
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, changes how businesses report income, wages, and payments to the IRS starting with the 2026 tax year. Key updates include higher 1099 thresholds, new W-2 boxes for tips and overtime, and new reporting rules for digital assets, auto loans, and gambling winnings. Some changes apply to nearly every business that files information returns, others only to specific industries.
01 · Filing thresholds
1099 and 1099-K Reporting
Threshold Changes
For payments made after December 31, 2025, the Form 1099-NEC threshold and
several Form 1099-MISC categories increase from $600 to $2,000. Form 1099-K
continues to use its separate $20,000 and 200 transaction threshold.
Form 1099-NEC
The nonemployee compensation reporting threshold increases from $600 to $2,000. Starting in 2027, the threshold will be adjusted annually for inflation in $100 increments.
Form 1099-K
Form 1099-K follows a separate rule. The threshold remains $20,000 in gross payments and more than 200 transactions.
Backup withholding
Backup withholding generally follows the updated reporting thresholds. It can still apply when a payee does not provide a valid taxpayer ID.
Form 1099-MISC: what changed
Not every Form 1099-MISC category moves to $2,000. Some payment types retain their existing thresholds.
| Rents | Box 1 |
| Other income, prizes & awards | Box 3 |
| Medical & health care payments | Box 6 |
| Crop insurance proceeds | Box 9 |
| Royalties | $10 · Box 2 |
| Substitute payments | $10 · Box 8 |
| Direct sales for resale | $5,000 · Box 7 |
| Attorney gross proceeds | $600 · Box 10 |
| Fish purchases for resale (cash) | $600 |
| Fishing boat proceeds | Any amount |
What doesn't change
- Payment income is still taxable to the recipient even when no form is issued.
- Businesses should keep accurate internal records for every payment, not just the ones that cross a filing threshold.
- State filing thresholds are separate from federal ones and may not match.
Who this affects most
Businesses that pay contractors or vendors, and payment platforms or marketplaces handling third-party transactions.
CHECK THE THRESHOLD FOR EACH PAYMENT TYPE
02 · Payroll reporting
W-2 Changes for Qualified Tips and Overtime
Form W-2 includes new reporting for qualified tips and qualified overtime compensation,
supporting deductions available to eligible employees under OBBBA.
The deductions behind the change
For tax years 2025 through 2028, eligible employees may claim deductions for qualified tip income and the premium portion of qualified overtime pay. These amounts remain subject to applicable payroll tax and withholding rules.
New W-2 reporting
Form W-2 includes new reporting fields for qualified tips, qualified overtime, and employer contributions to Trump Accounts.
Overtime reporting
The deduction applies to the overtime premium portion of qualifying overtime compensation, not necessarily the employee's entire overtime payment.
2025 transition period
2025 forms and withholding tables did not fully reflect these changes. Employers were encouraged to begin tracking qualified tips and overtime so the data would be available for future reporting.
Tip reporting
Only tips earned in qualifying occupations are eligible. The IRS uses Treasury Tipped Occupation Codes to identify eligible occupations.
Eligible occupation categories
- Food and beverage service
- Entertainment and events
- Hospitality and guest services
- Home and personal services
- Personal appearance and wellness
- Recreation and instruction
- Transportation and delivery
- Other customarily tipped occupations
Who this affects most
Employers in tipped industries, payroll and HCM providers, and any business with non-exempt hourly employees who regularly work overtime.
CALCULATE THE DEDUCTION-ELIGIBLE OVERTIME PREMIUM
03 · Digital assets
Digital Asset Reporting (Form 1099-DA)
Brokers report gross proceeds from reportable digital asset sales. Cost basis reporting
becomes mandatory for covered securities beginning with the 2026 tax year.
What counts as a covered security
A digital asset is generally covered when acquired through the broker's custodial platform on or after January 1, 2026. Assets acquired earlier or transferred from another wallet or exchange may be treated as noncovered.
Who counts as a broker
Reporting applies to businesses that meet the applicable broker requirements. Not every platform involved with digital assets is automatically treated as a reporting broker.
What this means in practice
| Requirement | Applies to | Mandatory? |
|---|---|---|
| Gross proceeds | Every reportable sale | Yes, no exceptions |
| Cost basis | Covered securities, 2026 transactions onward | Yes |
| Cost basis | Noncovered securities (pre-2026 or transferred in) | Not required |
Who this affects most
Digital asset exchanges, custodial wallet providers, and platforms that facilitate reportable digital asset sales for customers.
04 · Lender reporting
Auto Loan Interest Reporting (Form 1098-VLI)
Lenders receiving $600 or more in qualifying vehicle loan interest must report the interest
using Form 1098-VLI and furnish the required information to the borrower.
The deduction behind the requirement
Eligible taxpayers may deduct up to $10,000 of qualifying vehicle loan interest annually, subject to applicable requirements and income limitations.
What counts as a qualifying loan
- Vehicle must be new to the taxpayer
- Purchased after December 31, 2024
- Gross vehicle weight under 14,000 pounds
- Final assembly in the United States
- Loan secured by the vehicle
- Vehicle used for personal purposes
Form 1098-VLI
Form 1098-VLI, Vehicle Loan Interest Statement, reports qualifying interest when the lender receives $600 or more during the year.
2025 transition
Special transitional reporting rules applied to interest received in 2025. Full Form 1098-VLI reporting applies beginning with interest received in 2026.
Who this affects most
Auto lenders, credit unions, and finance arms of auto dealers and manufacturers.
CHECK IF A VEHICLE LOAN QUALIFIES FOR REPORTING
05 · Child savings accounts
Trump Accounts Reporting
Trump Accounts are tax-advantaged accounts for eligible children. Trustees
report account information and contributions using Form 5498-TA.
What a Trump Account is
A Trump Account is an individual retirement account established under Internal Revenue Code Section 530A for an eligible child under age 18.
Reporting requirements
Trustees use Form 5498-TA to report required account information. Employers making Section 128 contributions report those contributions on Form W-2 using the applicable Box 12 code.
Additional guidance
Some administrative and reporting details continue to depend on IRS guidance, so institutions offering these accounts should monitor future updates.
Contribution limits
| Source | Annual limit |
|---|---|
| Combined, all sources | $5,000 (2026 & 2027) |
| Employer (Section 128) | $2,500 |
| Federal pilot contribution | $1,000 one-time, children born 2025–2028 |
Who this affects most
Banks, credit unions, financial institutions acting as trustees, and employers considering contribution programs.
06 · Gaming & wagering
Gambling and Wagering Reporting
The Form W-2G reporting threshold increases to $2,000, and wagering loss deductions are
generally limited to 90% of losses, subject to the amount of gambling winnings.
W-2G threshold change
The new $2,000 threshold affects reporting of applicable gambling winnings that previously used lower thresholds.
Wagering loss deduction
Beginning with the 2026 tax year, deductible wagering losses are generally limited to 90% of losses, up to the amount of gambling winnings.
Who this affects most
Casinos, gaming platforms, and professional or frequent gamblers who track wins and losses closely for tax purposes.
SEE YOUR TAXABLE INCOME UNDER THE NEW 90% LOSS CAP
07 · Business investment
Bonus Depreciation and Section 179
100% bonus depreciation is permanently reinstated for eligible property, while
Section 179 provides higher annual expensing limits.
Bonus depreciation
Eligible businesses can immediately deduct the full cost of qualifying property placed in service after January 19, 2025, rather than depreciating it over several years.
Section 179 limits increase
| Tax year | Expensing limit | Phase-out begins at |
|---|---|---|
| 2025 | $2.5 million | $4 million |
| 2026 | $2.56 million | $4.09 million |
How they differ
Section 179 allows businesses to elect which qualifying assets to expense, subject to annual limits. Bonus depreciation applies more broadly to eligible property.
Who this affects most
Businesses planning equipment, vehicle, technology, or facility investments.
08 · Pass-through businesses
Qualified Business Income (QBI) Deduction
The 20% Qualified Business Income deduction for eligible pass-through business owners
is permanent, with wider phase-in ranges for certain taxpayers.
What QBI is
Eligible owners of sole proprietorships, partnerships, S corporations, and other pass-through businesses may deduct up to 20% of qualified business income.
Why permanence matters
OBBBA removes the previous expiration of the deduction after 2025, making it a permanent part of the tax code.
Wider phase-in ranges
The phase-in ranges that apply to certain specified service trades or businesses are expanded, allowing some taxpayers to retain more of the deduction at higher income levels.
Who this affects most
Owners of sole proprietorships, partnerships, S corporations, and other eligible pass-through businesses.
09 · Cross-border transfers
Remittance Excise Tax
Beginning in 2026, a 1% excise tax applies to certain cash-based remittance
transfers sent to recipients outside the United States.
What is taxed
The tax generally applies to qualifying remittance transfers funded with cash, money orders, or similar cash equivalents.
Who is responsible for the tax
Remittance transfer providers are generally responsible for collecting and remitting the applicable excise tax.
What is generally excluded
Transfers funded through certain U.S. bank accounts, debit cards, or credit cards are generally treated differently under the provision.
Who this affects most
Money transfer businesses and remittance service providers handling cross-border cash transfers.
Ready for the 2026 filing season?
TaxBandits supports the revised 2026 forms, IRIS transmission, and state filings, with free corrections included.
See How OBBBA Impacts Your Tax Compliance
Answer a few quick questions to see exactly which filing changes apply to you.
YOUR ROLE
What's your role?
The OBBBA affects routine filers in different ways. Choose your role to see what changes apply to your situation.
Your Activities
What does your work involve?
Select all that apply.
Approximate annual filing volume
Answer both questions above to continue.
FORMS YOU FILE
Which forms do you file?
Several OBBBA thresholds and box changes are specific to individual forms. Select the forms you currently file.
Note: This tool pre-selects forms that typically match the role and activities chosen in Steps 1 & 2. You can add or remove any form to match exactly what you file.
State Filings
Where do you file?
Federal threshold changes don't automatically apply at the state level. Use this tool to search and select every state you file in.
United States filing footprint
Select directly on the map or use the state list
Your OBBBA Preparation Checklist
Based on your role, activities, forms, and filing states, here's what applies to you.
KEY CHANGES THAT AFFECT YOUR FILING
WORTH KNOWING
Full expensing is back for equipment placed in service after Jan 19, 2025, and Section 179 limits are higher too, useful if you're planning purchases.
The 20% pass-through deduction is now permanent, so it's no longer a use-it-before-it-expires benefit.
A 1% tax now applies to certain cash transfers sent abroad starting 2026, relevant if your business handles cross-border payments.
Need Help With Your 2026 OBBBA Filing Requirements?
Tell us about your filing requirements and workflow. Our team will help you understand the OBBBA changes that apply to your organization and how TaxBandits can support your 2026 filing needs.
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