If you’ve been scrolling through news feeds lately, you’ve probably seen some version of the same question: did trump’s tax plan pass? It’s a valid thing to wonder because for a while there, it looked like the 2017 Tax Cuts and Jobs Act (TCJA) was headed for a massive "cliff." Most of those individual tax cuts were legally scheduled to vanish at the stroke of midnight on December 31, 2025.
Basically, we were looking at a $4 trillion tax hike for nearly every American family. But things changed fast in the summer of 2025.
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The short answer is yes. But it wasn't just an extension. It was a massive, sprawling piece of legislation officially called the One Big Beautiful Bill Act (OBBBA), or Public Law 119-21. President Trump signed it into law on July 4, 2025. It didn't just keep the old rates; it added some wild new wrinkles like "no tax on tips" and a weirdly specific car loan interest deduction.
The One Big Beautiful Bill: What Actually Passed?
Honestly, the name sounds like a placeholder, but that's the real title on the IRS website. The OBBBA essentially "saved" the 2017 tax structure from expiring while layering on a bunch of new promises made during the 2024 campaign.
Before this bill passed, your 2026 tax return was going to look painful. The standard deduction was going to be cut in half. The 12% bracket was going to jump back to 15%. The 22% bracket was going to become 25%. You get the idea.
Instead, the new law made those lower 2017 rates permanent. It also bumped the standard deduction even higher for 2026. For single filers, you're looking at $16,100. If you're married and filing jointly, it’s $32,200.
What most people get wrong about the "No Tax on Tips" thing
There’s a huge misconception that bartenders and servers just don't pay taxes anymore. That's not quite right. The law allows workers in "customarily tipped occupations" to deduct up to $25,000 in cash and credit card tips from their federal income tax.
But here’s the kicker:
- It only applies to federal income tax.
- You still have to pay payroll taxes (Social Security and Medicare) on those tips.
- Most states haven't followed suit, so you’ll likely still owe state income tax on every dime.
- If you’re a high-earner in a fancy steakhouse, the benefit starts to phase out once your total income hits $150,000.
New Perks for 2026 (And a Few Trade-offs)
The 2025 bill introduced some stuff we haven't seen in the tax code for decades. For instance, there is now a deduction for car loan interest. If you bought a "qualified passenger vehicle" for personal use, you can deduct up to $10,000 in interest per year.
But it’s not for everyone. If you make over $100,000 (or $200,000 for couples), this perk disappears. Also, it only applies to loans, not leases.
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The SALT Cap Drama
Remember the $10,000 cap on State and Local Tax (SALT) deductions? It was the bane of existence for anyone living in New York or California. Well, the OBBBA didn't kill it, but it definitely loosened the leash. The cap jumped to **$40,000** for 2025 and is set at $40,400 for the 2026 tax year.
It’s a win for the upper-middle class in high-tax states, though critics like the Institute on Taxation and Economic Policy (ITEP) argue this mostly helps the top 20% of earners.
The "Trump Account" for Kids
This is a brand-new feature that honestly caught a lot of people by surprise. The government is now putting a one-time $1,000 contribution into a tax-exempt "Trump Account" for every child born between 2025 and 2028. Parents can add up to $5,000 a year. It’s sort of like a 529 plan, but more flexible—the kid can use it for a first home or retirement later in life.
Business Taxes: Permanent Wins and Losses
For small business owners, the "Pass-Through" deduction (Section 199A) was the big worry. It was supposed to die in 2025. The new law didn't just save it; it expanded it. The deduction for qualified business income is now 23%, up from the old 20%.
On the flip side, if you were a fan of the green energy credits from the Biden era, I have bad news. The OBBBA basically gutted the Inflation Reduction Act's incentives.
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- The Federal EV Tax Credit? Effectively gone for most new purchases.
- Residential Clean Energy Credits? They aren't allowed for any expenditures made after December 31, 2025.
Why the Deficit Hawks are Screaming
We have to talk about the cost. The Congressional Budget Office (CBO) and groups like the Penn Wharton Budget Model have been crunching the numbers. Extending these cuts and adding the new ones is projected to add roughly $3.8 trillion to $4 trillion to the federal deficit over the next decade.
To pay for some of this, the bill slashed funding elsewhere. The most controversial cut was to the SNAP program (food stamps). Work requirements were expanded to include adults up to age 64. If you're an able-bodied adult, you basically have to log 80 hours of work or training a month to keep your benefits.
Practical Steps: What Should You Do Now?
Since did trump’s tax plan pass is no longer a question of "if" but "how it affects me," you need to pivot your planning.
- Check Your Withholding: With the new "no tax on overtime" and "no tax on tips" rules, your HR department might be confused. You can deduct up to $12,500 in overtime pay. Make sure you aren't overpaying the IRS during the year only to wait for a refund in 2027.
- Re-evaluate Your Car Loan: If you were thinking about leasing a car, the new interest deduction for purchased vehicles might make a loan more financially attractive.
- Estate Planning: The estate tax exemption is now a massive **$15 million per person** ($30 million for couples) for 2026. If you're sitting on a family business or significant assets, now is the time to lock in those gift tax exclusions.
- Max Out the "Trump Account": If you have a newborn in 2026, don't leave that $1,000 government seed money on the table. Open the account as soon as the IRS portal goes live in July 2026.
The tax landscape is fundamentally different than it was two years ago. While the lower rates are now "permanent," tax laws are only as permanent as the next Congress. For now, though, the 2026 cliff has been replaced by a very different, very "Big and Beautiful" set of rules.
To stay ahead of these changes, you should review your 2025 tax data to see if you qualify for the retroactive refunds on tips or overtime, then consult with a CPA to adjust your 2026 estimated payments based on the new $40,400 SALT cap and the increased standard deduction.