Factbox-Tax changes loom large for US economy in 2026

Core Viewpoint - Economists predict that the tax cuts in Trump's One Big Beautiful Bill will significantly drive the U.S. economy in 2026 for both individuals and businesses [1] Individual Tax Cuts - The law makes permanent the lower individual and business income tax rates from Trump's 2017 Tax Cuts and Jobs Act, which were set to expire [3] - It extends the standard deduction and expands the alternative minimum tax exemption, raising the estate tax exemption from $14 million to $15 million [3] - Taxes on up to $25,000 in tipped income will be exempt until 2029, phasing out for individuals earning over $150,000 [3] - Taxes on up to $12,500 in overtime pay will also be exempt until 2029, with similar income phase-out conditions [3] - A new deduction of up to $6,000 for individuals aged 65 and older will be available until 2029 [3] - A tax break for up to $10,000 in interest payments on auto loans will be created until 2029, applicable only to U.S.-assembled personal vehicles [3] - The deduction for state and local tax (SALT) payments will be expanded from $10,000 to $40,000 until 2029, benefiting affluent homeowners in high-tax states [3] Business Tax Breaks - The business tax changes aim to incentivize investment in enterprises through the extension of lower tax rates and larger write-offs for capital expenditures and R&D spending [4] - The lower corporate tax rates from the 2017 law will be made permanent [5] - Full expensing for certain equipment purchases will be allowed, enabling immediate deduction from taxable revenue [5] - Full expensing of U.S.-based R&D costs will be permitted, with small businesses able to retroactively deduct R&D expenses incurred since 2022 [5] - Limits on interest deductions will be loosened, broadening the deduction to include amortization costs [5] - A tax break for owners of "pass-through" businesses will be extended and increased, allowing a deduction of up to 20% of their income [5]