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The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, is the most significant tax legislation since 2017. It permanently extended the 2017 Tax Cuts and Jobs Act provisions that were scheduled to expire at the end of 2025, created new deductions and credits, changed savings account rules, and reformed student loans. Most changes took effect January 1, 2026. This guide covers everything that affects your personal taxes — organized by who you are and how it affects you specifically.
For Workers: New Deductions on Your Paycheck
No Tax on Tips
Workers in traditionally tipped occupations can deduct up to $25,000 in qualifying tip income annually. Above-the-line deduction, no itemization required. Phases out above $150,000 AGI. Full guide: No Tax on Tips 2026.
No Tax on Overtime
FLSA non-exempt employees can deduct their overtime premium (the extra 0.5x) up to $12,500 single/$25,000 married. Above-the-line deduction. Full guide: No Tax on Overtime 2026.
What Has Not Changed for Most Workers
Standard deduction, tax brackets, and marginal rates are essentially unchanged from 2025 for most filers. The standard deduction is now permanent and inflation-indexed at $15,000 single and $30,000 married. W-2 employees saw no rate changes.
For Families
Child Tax Credit: $2,200 Per Child
Increased from $2,000 to $2,200 per qualifying child under 17. Refundable portion up to $1,800. Phase-out at $400,000 married, $200,000 single.
Dependent Care FSA: $7,500
Limit increased from $5,000 to $7,500 for married filing jointly — the first increase in decades. Working parents with daycare costs save up to $550 more in federal taxes annually at the 22% bracket. Full guide: Dependent Care FSA 2026.
Trump Accounts
New custodial IRA for children, $5,000 annual contribution limit, $1,000 government seed for children born 2025-2028. Launched July 4, 2026. Full guide: What Is a Trump Account.
For Seniors
$6,000 Additional Deduction for Age 65+
New above-the-line deduction of $6,000 per qualifying senior ($12,000 for married couples both 65+). Phases out above $75,000 AGI single/$150,000 married. Expires 2028 unless extended.
Social Security Partial Tax Relief
Lower-income seniors can deduct a portion of their otherwise taxable Social Security benefits. Benefits phased in below $34,000 combined income single, $44,000 married.
Medicare Changes
The OBBBA contained Medicaid spending reductions that affect some beneficiaries. See current CMS guidance for your specific state.
For Self-Employed and Small Business Owners
QBI Deduction: Permanent at 23%
The 20% qualified business income deduction is now permanent and increased to 23%. If you are a sole proprietor, S-corp owner, or partnership member, you deduct 23% of qualifying net business income from your taxable income. This is the largest single tax benefit for self-employed people in the OBBBA.
Section 127 Student Loan Repayment: Permanent
Employers can contribute $5,250/year in tax-free student loan repayment to employees, now permanently. Full guide: Section 127 Guide.
Bonus Depreciation: 100% Restored
100% bonus depreciation for qualifying business assets (equipment, machinery, vehicles) is restored and made permanent. Previously phased down from 100% toward 0%. Businesses can immediately expense eligible asset purchases rather than depreciating over years.
For Homeowners and Real Estate
SALT Cap Increased to $40,000 (2026-2029)
The $10,000 SALT deduction cap increased to $40,000 for 2026-2029, then reverts to $10,000. Benefits itemizers in high-tax states. No impact on the 90% of filers who take the standard deduction.
Mortgage Interest Deduction: Permanent at $750,000
The $750,000 mortgage interest deduction limit is now permanent. Was set to revert to $1 million. For most homeowners, no change.
Auto Loan Interest for U.S.-Made Vehicles
New above-the-line deduction for interest on auto loans for qualifying U.S.-assembled vehicles, up to $10,000 annually. New benefit for 2026, phases out at higher incomes.
For Savers and Investors
HSA Expansion
Direct primary care fees, qualified fitness expenses (with doctor’s note), and telehealth before deductible are now HSA-eligible. Contribution limits: $4,300 individual, $8,550 family. Full guide: HSA Changes 2026.
Capital Gains and Dividends: Unchanged
Long-term capital gains tax rates remain at 0%, 15%, and 20% based on income thresholds. No change from prior law.
For Student Loan Borrowers
New RAP Repayment Plan
The SAVE plan is eliminated and replaced by the Repayment Assistance Plan (RAP), launched July 1, 2026. Payments based on 1-10% of AGI. Forgiveness after 30 years. Full guide: RAP Plan Guide.
Forgiveness Tax Bomb Returns
The temporary exemption making IDR forgiveness tax-free expired December 31, 2025. Forgiven loan balances from January 1, 2026 forward are taxable income. PSLF forgiveness remains permanently tax-free. Full guide: Forgiveness Tax Bomb 2026.
What the OBBBA Did NOT Change
- Roth IRA income limits and contribution rules: unchanged
- 401(k) contribution limits: unchanged (inflation-indexed as before)
- Capital gains rates: unchanged
- Home office deduction for W-2 employees: still not available
- Credit card interest: still not deductible
- Estate tax exemption: increased and made permanent
Sources: One Big Beautiful Bill Act (P.L. 119-21); IRS OBBBA implementation notices; Kiplinger, NerdWallet, and Fidelity OBBBA analyses 2026. This article is for informational purposes only. Tax situations vary significantly. Consult a qualified tax professional before making decisions based on OBBBA provisions.
