OBBBA Tax Changes 2026: What the One Big Beautiful Bill Means for Your Wallet

The Big Picture

Change	What It Does	Who Benefits Most
2017 tax cuts made permanent	Locks in lower brackets and higher standard deduction	Nearly all taxpayers
New deductions (tips, overtime, car loan, seniors)	Above-the-line deductions for 2025–2028	Workers, seniors, car buyers
Higher SALT cap	Raised from $10,000 to $40,000	High-tax-state itemizers
Permanent QBI deduction	Keeps the 20% small-business deduction	Self-employed, pass-throughs

Last updated: June 2026. Tax rules change and many provisions have income phase-outs and expiration dates — verify current details at IRS.gov.

1. The 2017 Tax Cuts Are Now Permanent

The biggest structural change is that OBBBA makes the Tax Cuts and Jobs Act (TCJA) framework permanent instead of letting it expire. That means the seven tax brackets — 10%, 12%, 22%, 24%, 32%, 35%, and 37% — stay in place, with inflation adjustments. For most households, this avoids the automatic tax increase that would have hit if the old rules had sunset.

2. A Higher Standard Deduction, Locked In

The elevated standard deduction is now permanent and continues to adjust for inflation. For 2026, it is roughly $16,100 for single filers and $32,200 for married couples filing jointly. Because the standard deduction is so high, the large majority of taxpayers will keep taking it rather than itemizing.

3. New Deduction for Tips

OBBBA created a new above-the-line deduction for qualified tip income of up to $25,000. This is aimed at workers in tipped occupations. It applies for tax years 2025 through 2028 and phases out at higher incomes, so confirm whether your job and income qualify.

4. New Deduction for Overtime Pay

Workers can deduct qualified overtime premium pay up to $12,500 per taxpayer ($25,000 for joint filers). Like the tips deduction, it is temporary and subject to income limits. Only the premium portion of overtime — the extra above your regular rate — counts.

5. New Car Loan Interest Deduction

For the first time in decades, you may deduct up to $10,000 of interest on a car loan, subject to conditions (such as the vehicle being for personal use and meeting assembly requirements). This is also an above-the-line deduction with income phase-outs.

6. New Senior Deduction

Taxpayers age 65 and older get an additional $6,000 deduction per qualifying individual. For a married couple where both spouses are 65+, that is up to $12,000. It phases out at higher incomes and is scheduled to be temporary, so seniors should factor it into near-term planning.

7. The SALT Cap Jumped to $40,000

The cap on deducting state and local taxes (SALT) rose from $10,000 to $40,000, effective for tax year 2025. This is a meaningful change for homeowners and high earners in high-tax states who itemize. The higher cap also has its own income-based limits.

8. Mortgage and Small-Business Breaks Stay

OBBBA made permanent the $750,000 mortgage interest deduction limit ($375,000 if married filing separately) and the 20% Qualified Business Income (QBI) deduction for pass-through businesses. The mortgage insurance premium (PMI) and charitable provisions were also made permanent, and starting in 2026 non-itemizers can take a charitable deduction of up to $1,000 (single) or $2,000 (joint).

Quick Comparison: New Above-the-Line Deductions

Deduction	Max Amount	Notes
Tips	Up to $25,000	Tipped workers; income limits
Overtime premium	Up to $12,500 / person	Premium portion only
Car loan interest	Up to $10,000	Personal-use vehicle conditions
Senior (65+)	$6,000 / person	Income phase-out
Charitable (non-itemizers)	$1,000 / $2,000	Starts 2026

What This Means for Your Wallet

For most households, OBBBA means stability — the lower rates and high standard deduction you have been using are no longer set to expire. If you earn tips, work overtime, recently financed a car, or are 65+, you may have new ways to reduce taxable income, provided you fall under the income thresholds. Homeowners in high-tax states gain the most from the larger SALT cap. The catch: several of the headline new deductions are temporary (generally 2025–2028) and phase out as income rises, so they reward near-term planning.

How We Researched This

This summary draws on IRS guidance, the Tax Foundation, and major tax-preparer analyses of OBBBA (Public Law 119-21). We focused on the individual provisions most likely to affect everyday taxpayers. Dollar figures and phase-outs are subject to inflation adjustment and IRS rulemaking. Last updated: June 2026. We review tax content at least annually.

Frequently Asked Questions

When was the One Big Beautiful Bill Act signed?

It was signed into law on July 4, 2025, as Public Law 119-21.

Did OBBBA raise or lower taxes?

For most households it prevented a scheduled tax increase by making the 2017 cuts permanent, and it added several new deductions. Effects vary by individual situation.

Is the tip income deduction permanent?

No. The tips deduction (up to $25,000) currently applies for tax years 2025 through 2028 and phases out at higher incomes. Confirm current status before relying on it.

How much is the senior deduction?

$6,000 per qualifying taxpayer age 65 or older, subject to income phase-outs.

What is the new SALT cap?

OBBBA raised the state and local tax deduction cap from $10,000 to $40,000, effective tax year 2025, with its own income limits.

Can I deduct car loan interest now?

Yes, up to $10,000 of interest on a qualifying personal-use vehicle loan, subject to conditions and income phase-outs.

Is the QBI deduction still available?

Yes. OBBBA made the 20% Qualified Business Income deduction permanent for pass-through businesses.

Do I need to itemize to claim the new deductions?

No. The tips, overtime, car loan interest, and senior deductions are above-the-line, meaning you can claim them even if you take the standard deduction.

Important Disclosures

This content is for general informational purposes only and does not constitute tax advice. OBBBA provisions include income phase-outs, eligibility conditions, and expiration dates that may change through IRS rulemaking. Dollar amounts are estimates subject to inflation adjustment. Consult the IRS or a qualified tax professional about your specific situation before making any tax decisions.