The tax rules just changed in a big way. The One Big Beautiful Bill Act, signed into law on July 4, 2025, locked in most of the 2017 Tax Cuts and Jobs Act provisions that were set to expire and introduced several new breaks for workers, seniors, and families. But not everything stayed the same. Here is what the new tax landscape looks like for 2026, who stands to benefit, and which changes could still cost you.
TCJA Tax Rates Made Permanent Under New Law
35 The OBBBA permanently extends the individual tax rates Trump signed into law in 2017, which were set to expire at the end of 2025.
That means the dreaded sunset never happened. 31The legislation generally makes permanent the seven rates created by the TCJA. The permanent brackets are: 10%, 12%, 22%, 24%, 32%, 35% and 37%.
Had Congress done nothing, 3more than 62 percent of tax filers would have experienced tax increases in 2026. The 12% bracket would have jumped back to 15%. The 22% bracket would have climbed to 25%. And the top rate would have reset from 37% to 39.6%.
For most American households, the extension of these lower rates is the single biggest piece of financial relief in the bill. 11The income thresholds are moving higher as a result of the One Big Beautiful Bill Act. 11For 2026, most federal income tax parameters are rising by roughly 2.7%.
Here are the 2026 federal income tax brackets for married couples filing jointly:
| Tax Rate | Income Range (Married Filing Jointly) |
|---|---|
| 10% | Up to $24,800 |
| 12% | $24,800 to $100,800 |
| 22% | $100,800 to $211,400 |
| 24% | $211,400 to $403,550 |
| 32% | $403,550 to $512,450 |
| 35% | $512,450 to $768,700 |
| 37% | Over $768,700 |
27 The standard deduction for 2026 will increase to $16,100 for single tax filers and $32,200 for married couples filing jointly.
2026 federal tax bracket changes under One Big Beautiful Bill Act
New Tax Breaks for Workers, Seniors, and Families
The OBBBA did not just preserve old rules. It created several brand new deductions that could put real money back in the pockets of millions of Americans.
No Tax on Tips. 42
No Tax on Overtime. 38Individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay, such as the “half” portion of “time-and-a-half” compensation, that is required by the Fair Labor Standards Act. 38Maximum annual deduction is $12,500 ($25,000 for joint filers).
Both deductions phase out for earners with modified adjusted gross income above $150,000 ($300,000 for joint filers). 28The “No Tax on Tips” and “No Tax on Overtime” provisions are structured as deductions, not refundable credits. That distinction matters. If you already owe zero in federal income tax because of the standard deduction, these new breaks offer you nothing extra.
Senior Deduction. 27The OBBBA established a new tax deduction for taxpayers who are at least 65 years old. For tax years 2025 through 2028, eligible seniors can deduct an additional $6,000 from their taxable income. The deduction phases out for individuals with modified adjusted gross income over $75,000.
Child Tax Credit Increase. 28The act increases the maximum credit from $2,000 to $2,200 per qualifying child. It introduces a permanent inflation adjustment for this tax credit starting in 2026.
Key Takeaway: A married couple with two kids, both working hourly jobs and earning a combined $90,000 with $5,000 in overtime premiums and $8,000 in tips, could see thousands of dollars shaved off their 2026 tax bill through these new deductions alone.
The SALT Cap Gets a Temporary Boost
One of the most fought over pieces of the TCJA was the $10,000 cap on state and local tax deductions. 36Following the enactment of the TCJA, individual federal income tax returns claiming a SALT deduction decreased from 37% in 2017 to roughly 9% in 2022.
The OBBBA offered partial relief. 9For 2025, the SALT deduction is limited to $40,000. For 2026, the deduction cap is $40,400. But this is not a permanent fix.
34 In 2030, the SALT deduction cap will revert back to $10,000.
There is also an income phasedown. 9The applicable limitation amount is to be reduced by 30% of the excess of the taxpayer’s modified adjusted gross income over the threshold amount, which for 2026 is $500,500.
Bottom line: If you live in a high tax state like California, New York, or New Jersey and earn under $500,000, you could deduct up to four times what you could last year in state and local taxes. But if your income is above $600,000, the SALT cap effectively stays at $10,000.
What Got Cut and What Taxpayers Should Watch
Not everything in the new law is good news. Several popular credits are going away or getting restricted.
Here is a quick snapshot of key changes beyond the headline items:
- Energy credits eliminated. 35The tax credit for making qualified energy-efficient improvements to one’s home is no longer available after December 31, 2025. The tax credit for installing solar panels, wind turbines, and geothermal heat pumps is also gone.
- Itemized deduction cap for top earners. 31Under the cap, taxpayers in the highest bracket see their itemized deductions limited to a tax benefit equal to 35 cents for every $1 they deduct.
- Personal exemptions stay at zero. 17For tax year 2026, personal exemptions remain at 0. The elimination of the personal exemption was a provision in the TCJA and was made permanent by OBBB.
- Gambling loss limits tighten. 31Only 90% of wagering losses are now deductible, up to the amount of winnings.
- Clean vehicle credit phased out. 35The tax credit for buying a new qualified electric vehicle is no longer available for purchases made after September 30, 2025.
If you were counting on a home energy rebate or an EV credit this year, that money is gone. Plan accordingly.
Smart Moves to Lower Your 2026 Tax Bill
With the new rules now locked in, there are clear steps every taxpayer should consider before year end.
Max out retirement contributions. 27Employees will be able to set aside more money in 401(k), 403(b), and 457 plans. The maximum amount a person can contribute is $24,500 for 2026, an increase of $1,000 from 2025.
Run the numbers on itemizing. With the SALT cap raised to $40,400 and mortgage interest still deductible, some filers who took the standard deduction for years might save more by itemizing in 2026.
Track tips and overtime carefully. 41The IRS announced that Forms W-2 will be updated for the 2026 to 2028 tax years to include separate reporting of qualified overtime compensation. Only overtime pay that is separately reported on these forms will be deductible beginning with the 2026 tax year.
Seniors, claim your extra $6,000. 24The senior deduction is available whether you itemize or take the standard deduction. That is unusual. Most deductions force you to pick one path or the other. This one does not.
Talk to a tax professional now, not in April. The OBBBA is one of the largest tax bills in a generation. 28The legislation represents $5 trillion in tax provisions over 10 years. A single conversation with a CPA or enrolled agent could save you hundreds or even thousands of dollars.
The 2026 tax year is unlike anything Americans have seen in nearly a decade. Whether you are a server pocketing tips, a factory worker logging overtime, a retiree on a fixed income, or a homeowner in a high tax state, the rules have shifted under your feet. The winners and losers in this new system will be decided by who pays attention and who does not. Take the time to understand what changed. Your wallet will thank you.
Drop your thoughts in the comments below. Are the new tax breaks helping your household, or are the lost energy credits hitting you hard
