On July 4, 2025, President Trump signed the sweeping tax and spending package known as the "One Big Beautiful Bill Act" (OBBBA, also called OB3 or H.R. 1) into law. Most of its individual tax provisions weren't just short-term extensions — they made permanent a large chunk of the 2017 Tax Cuts and Jobs Act (TCJA) that was otherwise set to expire at the end of 2025, while also introducing entirely new, temporary deductions like "no tax on tips" and "no tax on overtime." Some changes already applied to 2025 returns filed in early 2026, but the bulk of the law's impact lands on 2026 tax returns, due in April 2027. This guide walks through every major change in plain language, with real dollar figures and links to the official IRS and government sources behind each one.
OB3 Tax Law 2026: What Changed and How It Affects You (USA)
📑 Table of Contents
- What Is OB3/OBBBA, in One Paragraph
- Tax Brackets Made Permanent
- 2026 Standard Deduction Amounts
- No Tax on Tips
- No Tax on Overtime
- New $6,000 Senior Deduction
- SALT Cap Raised to $40,000
- Child Tax Credit Increase
- New Auto Loan Interest Deduction
- Business Tax Changes
- Estate Tax Exemption
- 1099 Reporting Threshold Change
- New "Trump Accounts" for Children
- Green Energy Credits Phased Out
- Full Effective Date Timeline
- Frequently Asked Questions
- References
📘 What Is OB3/OBBBA, in One Paragraph
OBBBA is the formal 2025 budget reconciliation law that permanently locked in the seven TCJA tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) that were otherwise scheduled to expire and revert to higher pre-2018 rates after 2025. On top of making the TCJA structure permanent, it layered on a series of brand-new, mostly temporary (2025–2028) deductions aimed at tipped workers, overtime earners, seniors, and car buyers, while also raising the SALT cap, increasing the Child Tax Credit, and reshaping several business tax rules. Because it's a reconciliation bill, many of its most taxpayer-friendly provisions carry hard expiration dates written directly into the statute — this isn't a "permanent forever" law across the board, so timelines matter.
📊 Tax Brackets Made Permanent
| Rate | Single Filers (2026) | Married Filing Jointly (2026) |
|---|---|---|
| 10% | $0 – $12,400 | $0 – $24,800 |
| 12% | $12,400 – $50,400 | $24,800 – $100,800 |
| 22% | $50,400 – $105,700 | $100,800 – $211,400 |
| 24% | $105,700 – $201,775 | $211,400 – $403,550 |
| 32% | $201,775 – $256,225 | $403,550 – $512,450 |
| 35% | $256,225 – $640,600 | $512,450 – $768,700 |
| 37% | Over $640,600 | Over $768,700 |
These seven rates, first introduced by the 2017 TCJA, are now permanent — OBBBA locked in the 37% top rate instead of letting it revert to the old 39.6% top bracket. OBBBA also added an extra inflation adjustment specifically for the bottom two brackets (10% and 12%), intended to reduce "bracket creep" for lower-income earners.
💵 2026 Standard Deduction Amounts
| Filing Status | 2025 | 2026 |
|---|---|---|
| Single / Married Filing Separately | $15,750 | $16,100 |
| Married Filing Jointly | $31,500 | $32,200 |
| Head of Household | $23,625 | $24,150 |
These figures come directly from IRS Revenue Procedure 2025-32. An additional $2,050 (single/HOH) or $1,650 per spouse (married) applies for filers who are 65+ or blind — and OBBBA made this entire elevated structure permanent, meaning it will continue rising with inflation each year rather than reverting to older, lower pre-2018 amounts. Roughly 90% of US taxpayers use the standard deduction rather than itemizing.
🍽️ No Tax on Tips
Workers in occupations that "customarily and regularly received tips on or before December 31, 2024" can now deduct up to $25,000 of reported qualified tip income per year — an above-the-line deduction available whether or not you itemize. The catch: it phases out above $150,000 MAGI (single) or $300,000 (joint), and it's temporary — available only for tax years 2025 through 2028. Tips must still be reported; this is a deduction on top of reporting, not an exemption from reporting. Starting with 2026, qualified tips will be separately identified on Form W-2 using a new "TP" code in Box 12.
⏱️ No Tax on Overtime
A separate deduction covers qualified overtime compensation — but only the "premium" half of FLSA-mandated overtime pay (the extra 0.5x on top of your regular rate in a standard 1.5x overtime scenario), not your entire overtime wage. The cap is $12,500 for single filers, or $25,000 for married couples filing jointly, with the same $150,000/$300,000 MAGI phase-out as the tips deduction. It applies only to overtime required under Section 7 of the Fair Labor Standards Act — state-law daily overtime or union contract overtime beyond FLSA requirements generally doesn't qualify. Also temporary, running through 2028.
👴 New $6,000 Senior Deduction
Taxpayers 65 or older can claim a brand-new deduction of up to $6,000 per qualifying person ($12,000 for a married couple where both spouses qualify), on top of the regular standard deduction and the existing age-65 add-on. This is an income-based deduction that phases out at higher incomes and — like the tips and overtime deductions — is temporary, running through 2028. Note: this does not make Social Security benefits tax-free — OBBBA did not exempt Social Security income itself.
🏛️ SALT Cap Raised to $40,000
The State and Local Tax (SALT) deduction cap — long capped at $10,000 under the original TCJA — jumped to $40,000 starting in 2025, a major relief for taxpayers in high-tax states. This higher cap phases down for income above roughly $500,000 and is scheduled to drop back to $10,000 in 2030 unless extended again by a future law.
👶 Child Tax Credit Increase
The Child Tax Credit rises to $2,200 per qualifying child starting with the 2025 tax year, up from $2,000. At least one taxpayer on the return must include a valid Social Security Number to claim the credit — a stricter requirement than before.
🚗 New Auto Loan Interest Deduction
A brand-new deduction allows up to $10,000 of interest on loans for new (not used) qualified passenger vehicles — cars, minivans, vans, SUVs, pickups, or motorcycles under 14,000 lbs GVWR, with final assembly in the United States, purchased after December 31, 2024. It phases out starting at $100,000 single / $200,000 married, fully phasing out at $150,000 / $250,000. Available for non-itemizers too, for tax years 2025 through 2028.
🏢 Business Tax Changes
- 100% bonus depreciation: Restored and made permanent for qualifying business property.
- 20% QBI (Qualified Business Income) deduction: Made permanent for pass-through businesses.
- Section 179 expensing cap: Raised to $2.56 million.
- R&D expensing: Full, immediate expensing for domestic research and development restored as permanent.
🏠 Estate Tax Exemption
The federal estate and gift tax exemption rises to $15 million per individual (roughly $30 million per married couple) starting in 2026, made permanent and indexed for inflation going forward — up from just over $14 million in 2024 under the prior TCJA schedule.
🧾 1099 Reporting Threshold Change
The reporting threshold for Form 1099-NEC and 1099-MISC rises from $600 to $2,000 starting with payments made in 2026 — meaning freelancers, contractors, and landlords won't receive (or need to issue) a 1099 until payments cross this higher bar. Separately, the 1099-K threshold for payment platforms like PayPal and Venmo reverts to $20,000 and 200 transactions, undoing a lower $600 threshold that had been phased in previously.
👶 New "Trump Accounts" for Children
A new type of tax-deferred savings account, similar to an IRA but with investment restrictions, becomes available starting July 2026 for children who haven't turned 18. The federal government contributes a one-time $1,000 for children born between 2025 and 2028.
🔋 Green Energy Credits Phased Out
- EV/Clean Vehicle Credit: No longer available for vehicles purchased after September 30, 2025.
- Energy Efficient Home Improvement Credit: Ends for property placed in service after December 31, 2025.
- Residential Clean Energy Credit: Similarly wound down on the same timeline.
📅 Full Effective Date Timeline
| Provision | First Effective | Expires |
|---|---|---|
| Tax brackets, standard deduction | Permanent (2025 baseline) | Never (inflation-adjusted annually) |
| No tax on tips / overtime | 2025 tax year | 2028 |
| Senior $6,000 deduction | 2025 tax year | 2028 |
| Auto loan interest deduction | Loans after 12/31/2024 | 2028 |
| SALT cap $40,000 | 2025 tax year | Reverts to $10,000 in 2030 |
| Child Tax Credit $2,200 | 2025 tax year | Permanent |
| 1099 threshold $2,000 | Payments made in 2026 | Permanent |
| Estate tax exemption $15M | 2026 | Permanent |
| Trump Accounts | July 2026 | Contributions through 2028 |
| EV/Clean Vehicle Credit | — | Ended 9/30/2025 |
❓ Frequently Asked Questions
OB3 (One Big Beautiful Bill Act, also called OBBBA or H.R. 1) is a major 2025 tax and spending reconciliation law signed July 4, 2025. It made the 2017 TCJA tax brackets and higher standard deduction permanent, while adding new temporary deductions for tips, overtime, seniors, and auto loan interest through 2028.
Not entirely. Qualifying tip income is still reported, but up to $25,000 can be deducted above the line for tax years 2025-2028, phasing out above $150,000 MAGI (single) or $300,000 (joint). It doesn't eliminate payroll taxes (Social Security/Medicare) on tips.
Only the "premium" portion of FLSA-mandated overtime (the extra half in a standard 1.5x rate) can be deducted, up to $12,500 (single) or $25,000 (married filing jointly), through 2028, with the same income phase-out as the tips deduction.
Yes. For 2026, it's $16,100 (single/MFS), $32,200 (married filing jointly), and $24,150 (head of household) — up slightly from 2025 due to annual inflation adjustment on the OBBBA baseline, per IRS Revenue Procedure 2025-32.
No. It's in effect from 2025 through 2029, phasing down for income above roughly $500,000, and is scheduled to revert to the original $10,000 cap starting in 2030 unless a future law extends it again.
No. OBBBA did not exempt Social Security benefits from tax. Instead, it created a separate new $6,000 deduction (per qualifying person 65+) available through 2028, which is a different benefit from Social Security taxation itself.
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📚 References
This article is compiled from official government sources and leading tax publications, current as of publication:
- IRS — One, Big, Beautiful Bill: No Tax on Tips and Overtime
- IRS — Tax Inflation Adjustments for Tax Year 2026 (Rev. Proc. 2025-32)
- Tax Foundation — One Big Beautiful Bill Act Tax Changes Explained
- H&R Block — One Big Beautiful Bill Tax Changes
- Congress.gov — H.R. 1, One Big Beautiful Bill Act (Full Bill Text)
- QuinetCalc Tax Refund Estimator — updated for 2026 OBBBA figures
This article is for general informational purposes only and does not constitute tax or legal advice. Tax law is complex and provisions may be subject to further IRS guidance or legislative amendment — consult a licensed CPA or tax attorney, or the official IRS.gov guidance linked above, before making filing decisions.
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