You’ve probably heard the name by now. It’s hard to miss. The "One Big Beautiful Bill," or the OBBB as the policy wonks are calling it, isn't just a catchy campaign slogan anymore. It is the law of the land. Signed on July 4, 2025, this massive piece of legislation has basically rewritten the rules for your 2026 taxes and beyond. Honestly, it’s a lot to take in.
If you were worried about the 2017 tax cuts expiring and your rates jumping back up, you can breathe a bit easier. Most of those lower rates are now permanent. But that’s just the tip of the iceberg. There are new deductions for things like car loan interest and overtime pay that we haven’t seen in decades.
The New Brackets and That Massive Standard Deduction
Let's talk numbers. The seven tax brackets we’ve become used to—10%, 12%, 22%, 24%, 32%, 35%, and 37%—aren't going anywhere. They are permanent now. For the 2026 tax year, the IRS has already adjusted these for inflation.
For example, if you're a single filer, that top 37% rate doesn’t even kick in until you cross $640,600 in taxable income. For married couples, that threshold is $768,700. Most people, though, are looking at the standard deduction.
The OBBB didn't just keep the "nearly doubled" standard deduction from the old law; it gave it a bit of a boost. For 2026, the standard deduction for married couples filing jointly is $32,200. Single filers get $16,100. It’s a clean, simple way to lower your taxable income without hunting for receipts.
Why the SALT Deduction Change is a Big Deal
The $10,000 cap on State and Local Tax (SALT) deductions was arguably the most hated part of the 2017 tax law, especially if you live in high-tax states like New York, California, or New Jersey. Well, it’s been fixed—sorta.
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The cap has been raised from $10,000 to $40,000.
That is a huge jump. It means if you pay a lot in property taxes or state income tax, you can actually deduct a significant chunk of it again. But there is a catch: this isn't for everyone. If you make over $500,000, that $40,000 cap starts to phase out. It eventually slides back down toward the old $10,000 limit for the highest earners. Also, this fix is temporary. It’s set to run through 2029, and then in 2030, it’s scheduled to snap back to $10,000 for everyone unless Congress acts again.
Tipping, Overtime, and Your Car Loan
This is where the bill gets really unique. Trump’s new tax law introduced some very specific breaks designed for the "working family."
First, the "no tax on tips" promise made it into the final bill. Effective now through 2028, individuals can deduct qualified tip income up to $25,000 ($50,000 for joint filers). There are income limits, though. If you make more than $150,000 ($300,000 for couples), you won't qualify.
Then there's the overtime pay deduction. This is basically a tax break for the "half" in "time-and-a-half." If you work 50 hours a week, the extra pay you get for those 10 hours of overtime can be deducted from your taxable income, up to $12,500 for individuals.
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And for the first time in a long time, you can deduct interest on your car loan.
- It has to be a "qualified vehicle" for personal use.
- You can't deduct lease payments.
- The maximum deduction is $10,000.
- It phases out if your income is over $100,000 (single) or $200,000 (joint).
The "Senior Deduction" and Kids
If you are 65 or older, there’s a new "bonus" deduction of $6,000 on top of everything else. It’s a straight-up gift to seniors, though like everything else in this bill, it starts to disappear once you earn over $75,000.
For parents, the Child Tax Credit (CTC) is now $2,200 per child. It’s a slight bump from the previous $2,000, and more importantly, it’s now indexed for inflation. The refundable portion—the part you get back even if you don't owe any taxes—is capped at $1,700 for 2026.
What Most People Get Wrong
People keep saying this bill is just a "rich person's tax cut." It’s more complicated than that. While the corporate tax rate remains low and the estate tax exemption was hiked to a massive $15 million ($30 million for couples), the specific deductions for tips, overtime, and car loans are aimed squarely at the middle class.
However, the bill is expensive. The Congressional Budget Office (CBO) and groups like the Bipartisan Policy Center have pointed out that these changes could add over $3 trillion to the deficit over the next decade.
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Actionable Next Steps
The 2026 tax year is already underway. You don't want to wait until April 2027 to figure this out.
Check your withholding now. The IRS has issued new withholding tables (IR 2025-103) because of the OBBB. If you haven't updated your W-4 with your employer, you might be getting too much—or too little—taken out of your paycheck.
Track your overtime and tips separately. Since these are now deductible, you need clean records. Don't rely on your employer to do all the math; keep your own logs of hours worked and tips received.
Rethink your car purchase. If you were planning on buying a new SUV or truck, the $10,000 interest deduction might change the math on whether you should buy or lease. Since leases don't qualify for the deduction, buying might actually be cheaper in the long run once you factor in the tax savings.
Look at your health plan. Starting January 1, 2026, many "Bronze" and "Catastrophic" plans are now considered HSA-compatible. This means you could potentially open a Health Savings Account, which is one of the best "triple-tax-advantaged" ways to save money for the future.
This tax law is a massive shift in how the government collects money. Whether you love it or hate it, the "One Big Beautiful Bill" is here, and it's going to affect your wallet for the next several years.