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The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025 and taking effect January 1, 2026, is the largest tax legislation since the Tax Cuts and Jobs Act of 2017. It made most of the 2017 provisions permanent, created new deductions that benefit workers and families, and changed rules across credits, deductions, and savings accounts. Here is every change that affects your 2026 tax return.
Changes That Put Money Back in Your Paycheck Now
No Tax on Tips (New Deduction)
Workers in traditionally tipped occupations can deduct up to $25,000 in cash tip income from their federal taxable income. Applies to servers, bartenders, delivery drivers, stylists, and other qualifying occupations. Phases out above $150,000 AGI. See our full guide: No Tax on Tips 2026.
No Tax on Overtime (New Deduction)
FLSA non-exempt employees can deduct up to $12,500 ($25,000 married filing jointly) of their overtime premium pay. Applies to hourly workers and salaried employees below the FLSA exempt threshold. Phases out above $150,000 AGI. See our full guide: No Tax on Overtime 2026.
SALT Deduction Cap Increased to $40,000
The 2017 law capped the State and Local Tax (SALT) deduction at $10,000. The OBBBA increased this cap to $40,000 for tax years 2026-2029, then drops back to $10,000. This primarily benefits high-income taxpayers in high-tax states (California, New York, New Jersey, Illinois) who itemize deductions. For the 90%+ of filers who take the standard deduction, this change has no direct impact.
Standard Deduction Remains Permanent and Inflation-Indexed
The TCJA standard deduction amounts, which were set to expire after 2025, are now permanent under the OBBBA. For 2026:
- Single: $15,000
- Married filing jointly: $30,000
- Head of household: $22,500
These amounts are indexed to inflation annually.
Changes That Affect Families
Child Tax Credit: $2,200 Per Child
The Child Tax Credit increased to $2,200 per qualifying child under 17 in 2026, up from $2,000. The refundable portion (Additional Child Tax Credit) is up to $1,800 per child for families who owe less federal tax than the credit amount. Income phase-out begins at $400,000 for married filing jointly, $200,000 for single filers.
Dependent Care FSA Limit: $7,500
The Dependent Care FSA contribution limit increased from $5,000 to $7,500 for married filing jointly. The first meaningful increase in decades. Working parents with childcare costs can save up to $2,025 more in federal taxes annually at the 22% bracket. See our full guide: Dependent Care FSA 2026.
Trump Accounts Launched
The OBBBA created Section 530A Trump Accounts — custodial IRAs for children with a $5,000 annual contribution limit. Children born 2025-2028 receive a $1,000 government seed. Accounts launched July 4, 2026. See our full guide: What Is a Trump Account.
Changes That Affect Savers and Investors
HSA Expansion
The OBBBA expanded HSA eligible expenses to include direct primary care membership fees (up to $150/individual, $300/family monthly) and qualified physical fitness expenses with a physician’s recommendation. Telehealth before deductible is now permanent. Contribution limits for 2026: $4,300 individual, $8,550 family. See our full guide: HSA Changes 2026.
Senior Deduction: $6,000 Additional Standard Deduction
Taxpayers age 65 and older receive an additional $6,000 standard deduction for 2026-2028, phasing out above $75,000 AGI for single filers and $150,000 for joint filers. For a retired couple both over 65 earning $80,000, this is an additional $12,000 deduction reducing taxable income significantly.
No Tax on Social Security (Partial)
The OBBBA created an above-the-line deduction for Social Security benefits for lower-income seniors. Specifically, seniors with combined income below approximately $34,000 (single) or $44,000 (joint) can deduct a portion of their Social Security benefits. This does not eliminate taxation of Social Security for higher-income seniors but reduces it for many.
Changes That Affect Homeowners
Mortgage Interest Deduction: Permanent at $750,000
The $750,000 cap on mortgage interest deduction (down from $1 million pre-2017) is now permanent. This was set to revert to $1 million after 2025 under the TCJA sunset. For most homeowners with mortgages under $750,000, no change. For high-balance mortgage holders in expensive markets, the cap remains.
Changes That Affect Small Businesses and Self-Employed
Section 199A QBI Deduction: Permanent at 23%
The 20% qualified business income (QBI) deduction for pass-through businesses (sole proprietors, S-corps, partnerships, LLCs) was set to expire after 2025. The OBBBA made it permanent and increased it to 23%. If you are self-employed or own a small business, you can deduct up to 23% of qualified business income from your taxable income.
Section 127 Employer Loan Repayment: Permanent
Employers can contribute up to $5,250/year (indexed for inflation) in tax-free student loan repayment assistance to employees. Now permanent under the OBBBA. See our full guide: Section 127 Guide.
Summary Table: Key Changes for 2026
| Change | Who Benefits | Max Value |
|---|---|---|
| Tip deduction | Tipped workers | $5,500/year (at 22%) |
| Overtime deduction | FLSA non-exempt workers | $2,750/year (at 22%) |
| Senior deduction $6K | Age 65+ under income limit | $1,320/year (at 22%) |
| Child Tax Credit increase | Parents with children under 17 | $200 more per child |
| Dependent Care FSA $7,500 | Working parents with childcare | $550 more savings/year |
| QBI deduction 23% | Self-employed, small business | Varies by income |
| SALT cap $40,000 | High-income, high-tax states, itemizers | Up to $6,600 (at 22%) |
Sources: One Big Beautiful Bill Act (P.L. 119-21); IRS OBBBA implementation guidance; Kiplinger OBBBA tax guide 2026; Fidelity 2026 money trends. This article is for informational purposes only. Tax situations vary. Consult a tax professional for personalized advice.
