So, you’re looking at your paycheck or staring down your upcoming tax return and wondering if the "big tax cuts" everyone’s talking about are actually happening. Kinda feels like there’s a new headline every five minutes, right? Honestly, if you’re confused, you’re in good company. Between campaign promises and the actual laws passing through Congress, it’s a lot to untangle.
The short answer is yes. But—and this is a big but—it’s not a simple "everyone pays less" situation. In July 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. This was the massive legislative move that basically decided the fate of your wallet for the next few years.
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Is Trump Going to Lower Taxes? The Reality of the OBBBA
For a while there, we were staring at a "tax cliff." The original 2017 tax cuts were supposed to expire at the end of 2025. If that had happened, almost everyone would have seen a pretty nasty spike in their tax rates starting January 1, 2026.
The OBBBA changed that. It basically took those 2017 rates and made them permanent. So, if you were worried about your tax bracket jumping from 12% back up to 15%, or the top rate hitting 39.6% again, you can breathe a little easier. Those lower brackets are staying right where they are.
The Standard Deduction is Growing (Again)
Most of us don't itemize. We just take the standard deduction and call it a day. For the 2026 tax year, that number is moving up.
- Single filers: Jumping to $16,100.
- Married filing jointly: Moving up to $32,200.
- Heads of household: Hitting $24,150.
This isn't just a random gift; it's a mix of the OBBBA's structural changes and the usual inflation adjustments the IRS puts out. It means a larger chunk of your income is shielded from the taxman before the percentages even start to apply.
New Targeted Breaks You Might Actually Use
This is where it gets interesting. Trump campaigned hard on a few specific "no tax" ideas, and several of them actually made it into the final bill. These aren't just minor tweaks; they’re brand-new deductions that didn't exist a couple of years ago.
The "No Tax on Tips" Rule
If you work in service—think bartenders, servers, or hair stylists—this is huge. You can now deduct up to $25,000 of your tip income from your taxable total. There’s a catch, though. It starts to phase out if you’re making over $150,000. But for the average person working for tips, it’s a significant win.
Overtime Pay Relief
Similar to tips, there’s now a deduction for overtime. If you’re a non-exempt hourly worker putting in more than 40 hours a week, you can deduct up to $12,500 of that extra pay. Just keep in mind, as Andy Phillips from H&R Block pointed out, you only deduct the extra part of the pay (the "time-and-a-half" portion), not the base hourly rate you earned during those hours.
The $6,000 Senior Bonus
This was a way to address the "no tax on Social Security" promise without actually overhauling the Social Security system itself. If you’re 65 or older, you get an extra $6,000 deduction ($12,000 for couples). It’s basically a workaround that lowers the tax burden for seniors who might be paying taxes on their benefits because of other income.
The SALT Cap is Moving
Remember the drama over the State and Local Tax (SALT) deduction? The $10,000 limit was a massive pain for people in high-tax states like New York, California, or New Jersey.
The new law raises that cap to $40,000 for the years 2025 through 2029. This is a massive change for homeowners who were previously losing out on thousands in deductions. If you’re a high-earner making over $500,000, though, don't get too excited—it phases back down to the old $10,000 limit for you.
Business Taxes and the 100% Bonus Depreciation
If you own a business, the landscape just got a lot more predictable. The 20% pass-through deduction (Section 199A) for small businesses is now permanent. No more "will they or won't they" every few years.
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Also, 100% bonus depreciation is back. This allows businesses to write off the full cost of equipment or machinery in the first year they buy it. It’s a huge incentive to spend money on the business, which is exactly what the administration wants to see.
What about Corporate Rates?
While there was a lot of talk about dropping the corporate rate from 21% down to 15%, that hasn't fully materialized for everyone yet. The focus in 2026 is largely on companies that produce goods specifically in the United States. It's a "Buy American" incentive baked right into the tax code.
The Trade-Off: What’s Getting More Expensive?
Nothing is free, especially not a tax cut. To help pay for some of these changes, other areas are getting hit.
- Green Energy Credits: Many of the "clean energy" tax credits from previous years (like the ones for electric vehicles or home efficiency upgrades) are being phased out or ended early. If you were planning on a big credit for a new Tesla in late 2026, you might be out of luck.
- Tariffs: This is the big one. Trump’s strategy involves using tariffs (basically taxes on imported goods) to generate revenue. While your income tax might go down, the price of a toaster or a new car might go up if those goods are imported. It’s a different kind of tax that hits your wallet at the cash register instead of on April 15th.
- The Remittance Tax: Starting in 2026, there’s a new 1% excise tax on money sent abroad using cash or money orders.
Practical Steps to Take Right Now
Tax planning isn't just for people with accountants on speed dial. Since the OBBBA is already in effect, your 2025 return (the one you file in early 2026) will be the first time you see some of these changes.
Adjust your withholding. The IRS hasn't always been fast about updating the withholding tables. If you want that tax cut in your monthly paycheck rather than as a big refund next year, you might need to manually update your W-4 with your employer.
Document your tips and overtime.
If you’re eligible for those new "no tax" deductions, you need ironclad records. The IRS is notoriously picky about what counts as "tipped income," so keep every digital receipt and log your hours.
Look at your car loan.
There is a new deduction for interest paid on certain vehicle loans (up to $10,000). If you’re planning on buying a car, check if the model and your income level qualify before you sign the paperwork.
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Check your age.
If you're turning 65 in 2026, that $6,000 senior deduction is waiting for you. It’s an easy win that many people might overlook because it’s tucked away in the new "Schedule 1-A" form.
The reality of tax law is that it's rarely as simple as a campaign slogan. While the OBBBA definitely lowers the burden for a lot of people—especially seniors, tipped workers, and families with children—the shift toward tariffs and the loss of green credits means your overall "cost of living" might feel different even if your tax bill is lower.