In Brief:
- Lower individual income tax rates and higher standard deductions were made permanent under the new federal tax law.
- The State and Local Tax (SALT) deduction cap rises to $40,000 for eligible Long Island taxpayers.
- Seniors, families with children, tipped workers, overtime earners and small businesses all gain new tax relief.
- While inflation-driven costs remain high, the changes could help make life on Long Island more affordable in 2026.
Few will argue that 2025 continued the economic uncertainties of an American economy struggling to grow out from under the pandemic economy, and the inflation that descended on Americans from the overzealous government subsidies and spending.
While we all remember watching gasoline and home heating fuel prices increase daily, those prices have fallen as oil production has increased. The same can’t be said for the prices of food, energy, insurance and rents—all of which have increased and show no signs of returning to pre-pandemic levels. While wages have increased, it’s hard to find consumers who aren’t frustrated that their household budgets have become more difficult to navigate. For these folks, help may be on the way in 2026, when taxpayers file their 2025 income tax returns and get the benefits contained in the ‘One Big Beautiful Bill Act.’
For individuals, the expiring lower income tax rates that taxpayers have grown used to were made permanent as was the increase in the inflation adjusted standard deduction of $31,500 for joint filers and $15,750 for single taxpayers who do not itemize their deductions. Fixed seniors will also benefit from an additional $6,000 senior deduction, which begins to phase out for taxpayers making over $150,000. For seniors who are joint filers and are in the 15% tax bracket, this means $1,800 additional dollars in their pockets. It is no secret that childcare is unaffordable for many. For these parents, the expiring maximum child credit of $2,200 is made permanent, and will be adjusted for inflation next year.
Long Islanders who itemize will find that the State and Local Tax deduction (SALT)—which was capped at $10,000 (the limit for those earning below $500,000)—was raised to $40,000 for 2025. This increase will continue 1% per year until 2029. For example, taxpayers in the 20% tax bracket who have mortgage interest and tax deductions of $40,000 would benefit from $1,800 of tax refunds that will contribute toward making their financial struggles on Long Island more affordable.
Long Island small businesses—the backbone of the regional economy—will also find something that will make their operations more affordable. With over 89% of Long Island businesses having fewer than 10 employees, they will be able to expense capital investments in their businesses in the year of acquisition rather than depreciate the investment over years of use. This will provide immediate tax benefits in the year of acquisition. Additional benefits include the now-permanent Sec. 199A deduction for sole proprietors,
S corporations and limited liability companies, which provides for up to 20% deduction of their taxable income when calculating their tax liability.
There is also relief for Long Island’s workforce. Those who rely on tips to sustain their household budgets, can include up to $25,000 in tip income as a deductible for the years 2025 to 2028. This could amount to as much as $5,000 more in taxpayer pockets. For employees who work overtime to make financial ends meet, between 2025 and 2028 up to $12,500 in overtime wages would not be taxable, amounting to nearly $2,000 in new tax refunds.
While it is difficult to see food, energy, insurance and housing costs coming down, the One Big Beautiful Act will contribute toward making Long Island life in 2026 more affordable.
Martin Cantor is director of the Long Island Center for Socio-Economic Policy and former Suffolk County economic development commissioner. He can be reached at [email protected].
Opinion
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