Observations From Tax Filing Season 2026

As we wrapped up the 2026 tax return filing season for 2025 returns, we identified several key observations about the impact of the new tax law:

1. The most significant tax savings appeared in middle- and lower-middle-income brackets. Phaseouts limited many widely publicized benefits – such as “no tax on tips,” “no tax on overtime,” “no tax on Social Security benefits,” and the increased SALT deduction under the OBBBA – once income exceeded $150,000 ($75,000 for single filers). Although higher-income taxpayers can still access some of these benefits, they must engage in early, careful tax planning to reduce reportable taxable income and qualify.
2. We saw clear evidence of the rise of AI-driven investment management. Many clients held portfolios with hundreds of individual stock positions, suggesting that advanced tools – not human managers – now drive investment selection and allocation decisions. This trend raises several concerns:
   • Individual investors often cannot realistically participate in managing or understanding portfolios with that many positions. Investors should still strive to understand how and why their portfolios are structured.
   • Investment advisors also appear limited in their ability to actively manage these portfolios. In many cases, they function more as intermediaries – sales clerks, rather than skilled investment advisors – executing decisions generated by automated systems.
   • This raises an important question: what value do advisory fees provide in this context? Investors should evaluate whether their advisors actively manage portfolios or instead focus on broader planning areas such as estate planning, insurance, education funding, retirement planning, and asset allocation.
   • AI-driven portfolios often increase tax compliance costs. Frequent trading activity generates a high volume of reportable transactions, many involving small or fractional shares. These systems do not appear to adequately factor in the tax compliance burden when executing trades, which can create inefficiencies.
3. The new tax provisions introduce complexities that require individualized analysis and planning. For example, retroactive changes to the deductibility of research and development costs and updates to Section 168(k) depreciation rules for business property require careful interpretation. Taxpayers benefit most when they apply multi-year, strategic planning to these provisions rather than taking a simple, year-to-year approach.

The experienced professionals at DBMCPA are ready to help you maximize the benefits available under the new tax law. Contact us to schedule an appointment and discuss these and other planning opportunities.