Sellers CPA Newsletter – March 2026 Tax Update

 March 2026 Tax Landscape Overview

Dear Valued Customer, It's that time of year again and filing season for 2025 tax year returns is active, with the April 15, 2026 deadline approaching. The One Big Beautiful Bill Act (OBBBA, signed July 4, 2025) drives major changes effective for 2025 returns.

- Filing Deadline: April 15, 2026 for most individual and calendar-year business returns. Extensions to October 15 via Form 4868.

- Standard Deduction (2025 tax year): $15,750 (single), $31,500 (married filing jointly), $23,625 (head of household). Additional for age 65+ or blind; new temporary senior bonus deduction up to $6,000 (phases out at higher MAGI).

- New Deductions (2025 returns): No tax on tips (up to $25,000, phases out over $150,000/$300,000 MAGI), no tax on overtime (up to $12,500/$25,000 joint), auto loan interest deduction (up to $10,000 on qualifying vehicles, phases out). Claim via new Schedule 1-A.

- Key Credits: Child Tax Credit up to $2,000; EITC/ACTC refunds mostly available by March 2, 2026 via direct deposit.

- Refund Processing: IRS prioritizes direct deposit (phasing out paper checks per executive order). Expect 21 days for e-filed returns with direct deposit.

Alabama State Tax Changes Coming in 2026/2027

Alabama individual income tax rates remain 2% on first $500 (single/MFS), 4% on next $2,500, and 5% on income over $3,000—no bracket or rate changes for 2025 returns filed in 2026.

Key upcoming state-level changes:

- Nonresident 30-day safe harbor exemption: Effective January 1, 2026 (for 2026 tax year returns filed in 2027), nonresident employees working in Alabama 30 days or less per year may be exempt from Alabama income tax and withholding if requirements met.

- Overtime pay deduction proposal: Legislation introduced in February 2026 (HB527) would allow deduction of up to $1,000 in qualified overtime pay for tax years 2025–2027, aligned with federal definitions. Status pending.

- Data processing center abatements: Proposed limit to 20-year maximum exemption period starting January 1, 2027; large centers would pay state sales/use tax on certain purchases from that date.

- Other credits/caps: Statewide cap on certain tax credits increases to $20 million in 2026, $25 million in 2027, and $30 million thereafter.

Federal OBBBA provisions generally conform for Alabama unless decoupled—most apply.

Trump Administration Updates

No new executive orders in March 2026 directly impact tax filing or 2025 returns. Focus remains on OBBBA implementation.

Business Tax Planning Advice

With OBBBA enhancing provisions for 2025 (and beyond), prioritize these:

- Section 179 expensing: Allows immediate deduction of the full cost of qualifying property (machinery, equipment, off-the-shelf software, certain vehicles, qualified real property improvements) placed in service during the tax year—instead of depreciating over years. Boosts cash flow and reduces taxable income upfront. 

For 2025 returns (filed 2026): Maximum deduction $2.5 million (inflation-adjusted post-OBBBA). Phase-out starts when total qualifying purchases exceed $4 million (dollar-for-dollar reduction). Full phase-out around $6.5 million. Applies to new and used property. Election required on timely filed return; document purchases carefully.

- Maximize Section 179: Deduct up to limit on qualified assets.

- Claim 100% bonus depreciation: Restored for qualified property.

- Accelerate domestic R&E expenses: Immediate full expensing.

- Review business interest limitation: Favorable under Section 163(j).

- Optimize QBI deduction: Permanent with enhancements.

- Timing strategies: Defer income/accelerate deductions; retirement contributions.

- Explore energy credits/deductions: Monitor changes.

For personalized application to your business, Alabama-specific impacts, or return prep, contact us directly for consultation.