Question 1

What is the SALT deduction limit for 2026 tax returns?

Accepted Answer

According to IRS Publication 17 (2025), the state and local tax (SALT) deduction limit has increased to $40,000 ($20,000 if Married Filing Separately). This covers the combined deduction for state and local income taxes (or general sales taxes) and property taxes. Foreign income taxes deducted on Schedule A are not subject to this limit.

Question 2

Who is required to file a federal income tax return?

Accepted Answer

Per IRS Publication 501 (2025), you must file a federal income tax return if your gross income exceeds the filing threshold for your filing status and age. Even if your income falls below the threshold, you may still need to file if you owe special taxes such as self-employment tax or recapture taxes, or if you want to claim a refund of withheld taxes or refundable credits like the Earned Income Credit.

Question 3

Can I deduct foreign income taxes instead of claiming a foreign tax credit?

Accepted Answer

Yes. According to IRS Publication 54 (2025), you may choose to either deduct or credit foreign income taxes, but you must treat all foreign income taxes the same way — if you claim a credit for any, you cannot deduct any. In most cases, the credit is more advantageous because it directly reduces your tax liability rather than just lowering taxable income. You should calculate your tax both ways to determine which option benefits you more.

Question 4

What is the 2026 information reporting threshold for business payments?

Accepted Answer

IRS Publication 334 (2025) confirms that for reportable payments made after 2025, the threshold increases to $2,000 for both information reporting and backup withholding, per section 6041(a). This means businesses must issue information returns such as Forms 1099 for payments of $2,000 or more to applicable payees.

Question 5

How does the qualified business income (QBI) deduction work for 2026?

Accepted Answer

Under P.L. 119-21 (the OBBBA), as referenced in IRS Publication 334, the 20% QBI deduction has been made permanent for qualified active trades or businesses. Income thresholds for QBI deduction limitations have increased. This deduction allows eligible self-employed individuals and owners of pass-through entities to deduct up to 20% of their qualified business income, subject to those thresholds and other limitations. Consult the most current IRS instructions for the specific 2026 income phase-out amounts.

Income Taxes

Guides

What Is Tax Form 4835: What It Is And How To Use It

Common questions