Sellers CPA Newsletter – May 2026 Tax Update

From the Desk of Carol Sellers, CPA 

Sellers CPA LLC 

https://sellerscpa.net 

108 W Cusseta St, Dadeville, AL 36853 

(256) 825-8259

Dear Valued Clients and Friends,

As the vibrant blooms of May paint the Alabama countryside in shades of azalea pink, dogwood white, and fresh green, we at Sellers CPA extend our warmest greetings from Dadeville. Spring has fully arrived, bringing not only warmer days and longer evenings but also a perfect moment to pause after the intensity of tax filing season and look ahead with clarity and confidence. With the April 15, 2026 filing deadline now behind us (and extensions running through October 15 for those who needed more time), many of you are shifting focus to quarterly estimated tax payments, mid-year planning, and maximizing the significant new federal and state tax relief measures that continue to reshape our financial landscapes.

This May 2026 edition of our monthly newsletter continues the tradition of our recent updates—January through April 2026—providing the same in-depth, practical coverage you’ve come to expect. We review the latest federal developments under the landmark One Big Beautiful Bill Act (OBBBA, signed July 4, 2025), key Alabama state tax reforms (including brand-new relief taking effect this very month), actionable planning strategies for individuals, families, and small businesses, retirement and savings opportunities, compliance reminders, and a forward look at legislation on the floors of Congress and the Alabama Legislature that could affect future tax years. Our goal remains unchanged: to equip you with clear, timely insights so you can make informed decisions, minimize your tax burden legally and ethically, and build long-term financial security.

 2025 Tax Filing Season Wrap-Up and Transition to 2026 Planning

The 2026 filing season (covering 2025 tax year returns) was one of the smoothest in recent memory for many, thanks in large part to the OBBBA’s targeted relief that applied retroactively or immediately to 2025 returns. Standard deductions rose to $15,750 for single filers and $31,500 for married filing jointly (with inflation adjustments and other enhancements from the bill), making itemizing less necessary for many middle-income households. The Child Tax Credit increased to $2,200 per qualifying child, and new above-the-line deductions for certain tips and overtime pay (subject to income phaseouts) provided welcome relief for service and hourly workers.

If you filed an extension, remember that your full payment was still due April 15 to avoid penalties and interest—estimated taxes for the second quarter of 2026 are now due June 16, 2026 (Monday, as the 15th falls on a weekend). We strongly recommend reviewing your 2025 return now with your prior-year documents in hand to identify any carryovers, new credits claimed under OBBBA, or adjustments that will flow into 2026 planning. Digital asset investors should note the new Form 1099-DA reporting requirements for cryptocurrency, NFT, and broker transactions, which began impacting 2025 filings and will be even more prominent going forward.

 Major Federal Tax Law Updates Under the One Big Beautiful Bill Act (Effective 2025–2026)

The OBBBA stands as the most significant tax legislation since the 2017 Tax Cuts and Jobs Act (TCJA). By making most TCJA provisions permanent and layering on new targeted relief, it prevents the previously scheduled 2026 “tax cliff” and delivers inflation-adjusted benefits for individuals, families, seniors, and businesses. Here are the key provisions in detail, as they apply now and looking ahead:

- Tax Rates and Brackets Made Permanent: The seven-bracket structure (10%, 12%, 22%, 24%, 32%, 35%, 37%) remains in place with no expiration. Income thresholds continue to be inflation-adjusted annually by the IRS (latest adjustments released October 2025 for tax year 2026). This stability is a game-changer for long-term planning.

- Standard Deduction Increases: For tax year 2025: $15,750 single / $31,500 MFJ / $23,625 HoH (approximate, per OBBBA enhancements). For tax year 2026: $16,100 single / $32,200 MFJ / $24,150 HoH (with further inflation indexing). These higher amounts, combined with the new above-the-line charitable deduction for non-itemizers ($1,000 single / $2,000 joint starting 2026), make the standard deduction even more attractive.

- SALT Cap Relief and Itemized Deductions: The state and local tax (SALT) deduction cap rose significantly (to $40,000 in many analyses), providing substantial benefit to Alabama residents in higher-property-tax areas.

- Child Tax Credit and Family Relief: Expanded to $2,200 per qualifying child, with improved phaseout thresholds. Additional family-focused provisions (including enhanced dependent care credit in some cases) remain in effect.

- Senior Bonus Deduction: Taxpayers age 65 and older may claim an additional $6,000 deduction (phased based on income) for tax years 2025–2028, offering meaningful relief for retirees on fixed incomes.

- Tips, Overtime, and Worker Deductions: New federal deductions for qualified tips and overtime pay (with phaseouts for higher earners) reward hard-working Americans in service, manufacturing, and trade industries. These took effect for 2025 and carry forward.

- Business Incentives Restored/Enhanced: 100% bonus depreciation is available for qualified property (with certain post-January 19, 2025 timing rules in some interpretations), Section 179 expensing limits increased (up to approximately $2.5 million in many analyses), and R&D expensing remains favorable despite federal complexities.

- Retirement and Health Savings Enhancements: IRA and 401(k) contribution limits rose again for 2026. Starting January 1, 2026, bronze and catastrophic health plans qualify as HSA-compatible, expanding access to tax-advantaged health savings. Direct primary care arrangements also gained favorable HSA treatment.

- Other Notable Changes: Charitable giving incentives for standard deduction filers, estate and gift tax adjustments, and targeted energy credit modifications (some scaled back from prior law).

These changes create powerful planning opportunities—especially for Roth conversions, charitable bunching, and business capital investments—before year-end.

 Alabama State Tax Updates and New 2026 Relief Measures

Alabama continues its pro-growth tax reforms, building on 2025 changes and delivering fresh relief signed into law in April 2026. Governor Kay Ivey has acted on key bills from the recently concluded 2026 Regular Session (which adjourned sine die around April 9–10). Highlights include:

- Overtime Income Tax Deduction: House Bill 527 (signed April 2026) creates a new individual income tax deduction of up to $1,000 per taxpayer for qualified overtime compensation earned between January 1, 2026 and December 31, 2028. This follows the expiration of the prior overtime exemption in June 2025 and provides targeted relief for hourly workers. At Alabama’s top marginal rate of 5%, this can save up to $50 per year—modest but meaningful when combined with federal overtime relief.

- Grocery Tax Holiday – Starting THIS MONTH: The same HB 527 suspends the remaining 2% state sales tax on groceries from May 1 through June 30, 2026. This timely relief directly lowers your grocery bill during peak summer months. Local sales taxes may still apply—check with your municipality—but the state portion is off the table for two full months. Stock up wisely and plan larger purchases accordingly!

- Mobile Workforce Relief (Effective 2026): The 30-day safe harbor for nonresident employees exempts out-of-state workers (and their employers) from Alabama income tax and withholding on wages earned in Alabama for 30 or fewer days per year. This benefits remote and traveling professionals while protecting Alabama businesses from compliance headaches. (Note: professional athletes, entertainers, and certain high-profile individuals are excluded.)

- Tangible Personal Property (TPP) Tax Exemption: Raised to $100,000 in market value (effective October 2025 onward), with no filing requirement for qualifying small businesses. Local jurisdictions may opt in, but this is a major win for manufacturers, contractors, and equipment-heavy operations.

- Senior Property Tax Exemptions: Multiple county-specific constitutional amendments (e.g., Mobile, Monroe, Wilcox, Covington) passed or advanced in 2026, allowing qualified seniors (age 65+) additional homestead or property tax relief in those jurisdictions.

- R&D Expensing Decoupling: Alabama fully decouples from restrictive federal amortization rules, allowing immediate expensing of research and development costs—encouraging innovation in our state’s growing tech and manufacturing sectors.

These state-level changes make Alabama increasingly competitive for workers, families, and businesses.

 Legislation on the Floor: What’s Next in Congress and Alabama

The Alabama 2026 Regular Session has ended, with most tax-related bills (including the overtime/grocery package) now law. Any further changes would require a special session called by the Governor. Watch for potential utility tax exemptions for agriculture or data center incentive tweaks that could indirectly affect business taxes.

At the federal level, the 119th Congress continues to debate refinements to the OBBBA, including possible technical corrections, expansions to the earned income tax credit for parents of young children, and ongoing discussions around Social Security solvency and Medicare adjustments that could have future tax implications. No major new comprehensive tax overhaul is currently on the immediate floor, but mid-term election-year politics may accelerate proposals on capital gains, estate taxes, or energy incentives later in 2026. We will continue monitoring and updating you monthly.

 Practical Planning Tips and Reminders for May and Beyond

- Quarterly Estimated Taxes: Due June 16—use the IRS withholding estimator or our firm’s guidance to avoid underpayment penalties.

- Retirement Contributions: Maximize 2026 limits (higher than ever) and consider Roth strategies while brackets remain favorable.

- Business Owners: Accelerate qualified capital expenditures to capture 100% bonus depreciation; review TPP filings under the new exemption.

- Families & Seniors: Coordinate the enhanced Child Tax Credit, senior deduction, and grocery tax holiday for maximum household savings.

- Digital Assets: Maintain detailed records—Form 1099-DA reporting is here to stay.

- Charitable Giving: Non-itemizers can now deduct up to the new limits starting next year—plan ahead.

At Sellers CPA, we pride ourselves on personalized service. Whether you need help with estimated payments, a mid-year tax projection, or strategic planning for these exciting new laws, our team is here. Call us at (256) 825-8259 or reply to this email/webpage to schedule a convenient paid consultation.

Thank you for trusting us with your tax and financial needs. Here’s to a productive, tax-efficient spring and summer ahead!

Warm regards, 

Carol Sellers, CPA 

Sellers CPA LLC 

Dadeville, Alabama 

This newsletter is for informational purposes only and does not constitute tax or legal advice. Consult your CPA or tax professional for advice specific to your situation. Tax laws are complex and subject to change.