The One Big Beautiful Bill Act (OBBBA), signed into law by President Donald Trump on July 4, 2025, represents one of the most significant overhauls of the U.S. tax code since the 2017 Tax Cuts and Jobs Act (TCJA). Often referred to as the “Big Beautiful Bill” or “Working Families Tax Cut,” this legislation makes many TCJA individual tax provisions permanent—preventing a massive tax increase that was scheduled for 2026—while introducing new deductions, credits, and reforms for individuals, families, and businesses.
Without this bill, the expiration of TCJA provisions would have led to higher tax rates, a smaller standard deduction, and other changes affecting roughly 62% of taxpayers. Instead, the OBBBA delivers an average tax cut of around $2,300 per taxpayer in 2026, according to estimates.
Major Individual Tax Changes Effective in 2026
1. Permanent Extension and Enhancement of TCJA Core Provisions The bill locks in the seven individual income tax brackets (10%, 12%, 22%, 24%, 32%, 35%, and 37%) with inflation adjustments. It also makes permanent the near-doubling of the standard deduction and the elimination of personal exemptions.
For tax year 2026, the standard deduction rises further under the bill and inflation adjustments:
- Single filers: $16,100 (up from $15,750 in 2025)
- Married filing jointly: $32,200 (up from $31,500)
- Head of household: $24,150 (up from $23,625)
2. Expanded Child Tax Credit The Child Tax Credit increases to $2,200 per qualifying child under age 17 for 2025 and 2026 (up $200 from the prior $2,000 level). Additional family-friendly measures include enhancements to the Child and Dependent Care Credit, with the maximum percentage rising to 50% from 35%.
3. New Deductions for Workers
- No Tax on Tips: Eligible tipped income becomes deductible (with some limitations and income caps, temporary through 2028 in some forms).
- Overtime Pay: Premium overtime pay qualifies for a deduction (also with caps and temporary aspects).
- Senior Deduction: Taxpayers age 65 and older may claim an additional $6,000 deduction.
- Auto Loan Interest: New deduction for qualified auto loan interest payments.
4. SALT Deduction Relief The cap on State and Local Tax (SALT) deductions rises to $40,400 for 2026 (from $40,000 in 2025 under the bill), with annual 1% increases through 2029 before potentially reverting later. This benefits taxpayers in high-tax states.
5. Other Notable Individual Provisions
- Trump Accounts: New savings accounts for children (born 2025–2028) with a one-time $1,000 federal contribution and limits on private contributions.
- HSA Compatibility: More health plans (including certain bronze/catastrophic and direct primary care arrangements) become eligible starting in 2026.
- Changes to energy credits, gambling loss deductions, and reporting thresholds.
Business and Economic Provisions
The bill makes 100% bonus depreciation permanent, restores full R&D expensing, and includes international tax reforms. It also addresses Opportunity Zones with updates and provides stability for businesses by avoiding the TCJA phase-outs.
Who Benefits and Key Considerations
These changes are broadly aimed at middle-class families, workers in service and manufacturing sectors (via tips/overtime relief), seniors, and businesses. Higher-income taxpayers see benefits from permanent lower rates and estate tax exemption increases, though critics argue the bill disproportionately favors the wealthy while cutting certain spending programs.
Important Notes for Taxpayers:
- Many provisions are retroactive to 2025 (affecting returns filed in 2026), while others phase in during 2026 or later.
- Temporary elements (e.g., some worker deductions) expire after 2028.
- Always consult a tax professional or use updated software, as IRS guidance continues to roll out with inflation adjustments and implementation details.
Planning Ahead for 2026 and Future Years
The One Big Beautiful Bill provides welcome certainty after years of uncertainty around the TCJA sunset. Taxpayers should review withholding, estimate 2026 liabilities, and consider opportunities like maximizing new deductions or contributing to Trump Accounts where eligible.
As with any major tax reform, details matter—stay informed via IRS.gov or trusted preparers. This legislation reshapes the tax landscape for individuals and businesses well into the next decade.
Disclaimer: This article is for informational purposes only and is not tax advice. Tax laws are complex and subject to interpretation.
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