One Big Beautiful Bill Act: Your Complete 2026 Tax Guide

The One Big Beautiful Bill Act (OBBBA) is the most significant piece of tax legislation since the Tax Cuts and Jobs Act of 2017. Signed into law on July 4, 2025, the OBBBA permanently extends many of the TCJA provisions that were set to expire at the end of 2025—while also introducing several entirely new deductions and credits that directly benefit working Americans, retirees, families, and small business owners.

If you have been searching for what the OBBBA actually does, how it compares to the old TCJA rules, or how 2026 tax brackets work under the new law, this guide from Plootus covers everything you need to know—and more importantly, what you should do about it.

What Is the One Big Beautiful Bill Act?

The TCJA, passed in December 2017, was always meant to be temporary. Most of its major provisions—the lower tax rates, the higher standard deduction, the expanded child tax credit, the reduced estate tax exemption—were set to expire after 2025. Without new legislation, roughly 60 percent of American households would have faced a meaningful tax increase starting in January 2026.

The OBBBA prevents that from happening. It permanently extends the TCJA's core rate structure and then goes further, adding new deductions for tip income, overtime pay, seniors aged 65 and older, and buyers of U.S.-built vehicles. The result is a tax code that is simultaneously more stable and more generous for many Americans than anything that has existed in modern history.

2026 Tax Brackets: What You Will Actually Pay

The OBBBA permanently locks in the seven federal income tax brackets introduced by the TCJA, with annual inflation adjustments going forward. For 2026, single filers pay 10 percent on income up to roughly $11,925, 12 percent from there to about $48,475, 22 percent up to $103,350, 24 percent to $197,300, 32 percent to $250,525, 35 percent to $626,350, and 37 percent on income above that threshold. Married couples filing jointly see these thresholds roughly doubled at each level.

The permanence of these brackets is one of the most underappreciated aspects of the OBBBA. For the first time in years, taxpayers and financial planners can model multi-year strategies—Roth conversions, capital gains harvesting, retirement income planning—with confidence that the bracket structure will not change with the next election cycle.

How the OBBBA Compares to the TCJA

The OBBBA is not simply a renewal of the TCJA. Several provisions are new, and some existing provisions were modified. The standard deduction is permanently extended at the TCJA's higher levels and will continue to be adjusted for inflation each year. In 2025, the increased standard deduction amounts were: $15,750 for single filers, $23,625 for heads of household, and $31,500 for joint filers.

The child tax credit increases from $2,000 to $2,200 per qualifying child under age 17 beginning with the 2025 tax year, with the refundable portion set at $1,700 in 2025 and adjusted for inflation thereafter. Phaseouts begin at $200,000 for single filers and $400,000 for married couples filing jointly.

The qualified business income deduction—the 20 percent deduction for pass-through business owners—is made permanent rather than expiring as originally scheduled.

The estate and gift tax exemption, which was temporarily raised to approximately $13.99 million per person in 2025 under the TCJA, is permanently increased to $15 million per person ($30 million per married couple) beginning January 1, 2026, and will be indexed for inflation using 2025 as the base year.

The SALT Deduction Cap: A Major Change for High-Tax States

One of the most politically contentious provisions of the TCJA was the $10,000 cap on state and local tax (SALT) deductions. This cap hit hardest in high-tax states like New York, New Jersey, California, Connecticut, and Illinois, where property taxes and state income taxes frequently exceeded $10,000 per household. Under the TCJA cap, many of these taxpayers lost the ability to deduct the majority of their state and local taxes from federal income.

The OBBBA raises the SALT cap to $40,000 for 2025 ($20,000 for married filing separately). For 2026, it increases by 1 percent to $40,400 ($20,200 for separate filers). The cap continues to increase by 1 percent annually through 2029. However, there is a phase-down: the cap decreases by 30 percent of the amount by which modified adjusted gross income exceeds $500,000 (increasing annually), but cannot fall below $10,000. After 2029, the SALT deduction cap is scheduled to revert to $10,000 ($5,000 for separate filers) unless Congress takes further action.

For dual-income households in New York City or suburban New Jersey, this change can restore tens of thousands of dollars in previously non-deductible state taxes. Many taxpayers who have been taking the standard deduction for years may now find that itemizing makes sense again, particularly if their SALT taxes, mortgage interest, and charitable contributions together exceed the standard deduction.

The Four New Deductions Under the OBBBA

Beyond extending existing provisions, the OBBBA introduces four genuinely new tax benefits that have no precedent in the modern U.S. tax code.

The $6,000 Senior Deduction for Ages 65 and Older

Taxpayers who are 65 or older can claim an additional $6,000 deduction for tax years 2025 through 2028. A married couple where both spouses are 65 or older can claim $12,000 in combined senior deductions. The deduction phases out at higher income levels: full benefit available to singles with MAGI below roughly $75,000 and married couples below $150,000, with complete phase-out at MAGI of $175,000 for singles and $250,000 for married couples.

The Tip Income Exclusion

For the first time in U.S. tax history, workers in tip-eligible occupations can deduct up to $25,000 per year in tip income from their federal gross income. This applies to restaurant servers, bartenders, hotel staff, rideshare drivers, hairstylists, and others in occupations where tipping is customary. The deduction eliminates federal income tax on those tip dollars—though Social Security and Medicare payroll taxes still apply. This deduction is available for tax years 2025 through 2028.

The Overtime Pay Exemption

Overtime compensation—wages earned beyond 40 hours per week under Fair Labor Standards Act definitions—can be deducted from federal gross income under the OBBBA, up to specified annual limits. The deduction is available for the overtime premium portion of pay (the additional half-time rate beyond the regular hourly wage). For 2025, the maximum deduction is $12,500 for single filers and $25,000 for joint filers, with income phaseouts beginning at $100,000 for single filers and $200,000 for joint filers. This is a significant benefit for hourly workers in healthcare, manufacturing, logistics, and other industries where overtime is routine. Like the tip deduction, payroll taxes continue to apply to overtime wages, and this deduction is available for tax years 2025 through 2028.

The U.S.-Built Car Tax Credit

The OBBBA introduces an annual above-the-line deduction of up to $10,000 for qualified auto loan interest paid on a new passenger vehicle assembled in the United States. This deduction applies to new vehicles purchased with a loan on or after January 1, 2025, that are assembled in the U.S., weigh less than 14,000 pounds, and are used for personal purposes (not business). Used vehicles and leased vehicles do not qualify. Income limits apply: the deduction begins to phase out at $100,000 of modified adjusted gross income for single filers and $200,000 for joint filers, and is fully phased out at approximately $150,000 for single filers and $250,000 for joint filers. This deduction is available for tax years 2025 through 2028 and can be claimed whether you itemize or take the standard deduction. Note that the OBBBA also repealed the clean vehicle tax credit for EVs purchased after September 30, 2025.

The Child Tax Credit and 529 Expansion

Families with children receive two meaningful upgrades under the OBBBA. The child tax credit increases to $2,200 per qualifying child under age 17, up from $2,000. The refundable portion expands, meaning lower-income families who owe little or no federal income tax can still receive a meaningful portion of the credit as a refund. Phaseouts begin at $200,000 AGI for single filers and $400,000 for married couples. A valid Social Security number for both the child and at least one parent is now required to claim the credit.

The OBBBA also doubles the annual limit for using 529 education savings plan distributions for K-12 private school tuition, from $10,000 to $20,000 per student per year. Families using 529 accounts for private elementary or secondary education can now shelter twice as much annual tuition from taxes.

What You Should Do Right Now

The OBBBA creates immediate action items for most American households. Start by recalculating your 2026 estimated taxes using the updated standard deduction, the new SALT cap, and any new deductions that apply to your situation. If you are 65 or older, model your tax liability with the $6,000 senior deduction. If you earn tips or overtime, understand how the new deductions affect your withholding and annual return. If you live in a high-tax state, run the numbers on whether itemizing now beats the standard deduction.

For families with children, update your child tax credit projections and consider funding or expanding 529 accounts if you are paying private school tuition. For business owners, confirm that your pass-through deduction planning accounts for the now-permanent 20 percent QBI deduction. And if you have a substantial estate, review your trust documents and gifting strategy with the new $15 million permanent exemption ($30 million for married couples) in mind.

Sources: Congress.gov OBBBA legislative text, Tax Foundation 2026 analysis, Tax Policy Center, IRS.gov, Investopedia OBBBA guide. This article is for informational purposes only and does not constitute tax or legal advice. Consult a qualified professional for your specific situation.