One Big Beautiful Bill: What Actually Changed on Your 2026 Taxes

The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, and its provisions are now shaping real tax returns for the 2026 tax year. Without this law, the top tax rate was scheduled to jump from 37% back to 39.6%, and the standard deduction would have been roughly cut in half. OBBBA avoided that "tax cliff" — but it also introduced brand-new deductions, tighter limits in a few places, and several temporary breaks that expire in a few years. Here's exactly what changed, with real 2026 numbers.

1. Tax Brackets Stay the Same — Permanently

The seven tax brackets created by the 2017 Tax Cuts and Jobs Act (TCJA) — 10%, 12%, 22%, 24%, 32%, 35%, and 37% — are now a permanent part of the tax code instead of expiring at the end of 2025. The top 37% rate applies to single filers earning above $640,600 and married couples filing jointly above $768,700 for the 2026 tax year.

2. Standard Deduction Stays Higher

The TCJA's nearly-doubled standard deduction is now permanent and continues to receive annual inflation adjustments. For the 2026 tax year, the standard deduction is approximately:

Figures reflect OBBBA's inflation-adjusted amounts for 2025–2026; exact IRS figures may vary slightly by filing year.

3. SALT Deduction Cap Raised — Temporarily

The state and local tax (SALT) deduction cap — long stuck at $10,000 — has been raised to $40,000 for the 2026 tax year, with the cap increasing roughly 1% annually through 2029 before reverting to $10,000 in 2030. The higher cap phases down (but never below $10,000) for taxpayers with modified adjusted gross income above $500,000.

4. New (Temporary) Deductions for Workers

OBBBA introduced several new deductions aimed at workers, all currently set to run through 2028:

• No tax on tips: A new deduction worth up to $25,000 in qualifying tip income
• No tax on overtime: A new deduction worth up to $12,500 in overtime pay
• Senior deduction: An additional $6,000 deduction for taxpayers age 65 and older
• Auto loan interest deduction: Up to $10,000 per year in interest on loans for new, US-assembled vehicles, available even if you don't itemize (phases out for higher earners)

5. Child Tax Credit Increases

The Child Tax Credit rises to $2,200 per child under OBBBA, up from the prior $2,000 level. Without this law, the credit would have dropped to $1,000 per child in 2026.

6. Charitable Giving Changes

If you itemize and give to charity, two changes apply starting with the 2026 tax year:

• The 60%-of-AGI cap on cash donation deductions is now permanent (it had been scheduled to drop to 50%)
• A new 0.5%-of-AGI "floor" now applies — you can only deduct eligible charitable donations that exceed 0.5% of your adjusted gross income
• Non-itemizers can once again claim a modest charitable deduction, similar to the temporary break available in 2020–2021

7. Business & Self-Employment Changes

8. A Few Deductions Got Tighter

Not every change was a taxpayer win. Two provisions became less generous starting in 2026:

• Gambling loss deduction: Reduced from 100% to 90% of losses deductible against winnings
• High-bracket itemized deductions: For taxpayers in the top bracket, itemized deductions are now capped at a tax benefit of 35 cents per dollar deducted, rather than the full 37-cent value

9. Estate & Gift Tax Exemption

The estate and gift tax exemption — the OBBBA provision with the largest dollar figures, though it affects the fewest people — avoided a scheduled cliff. Without this law, the exemption (roughly $13.6 million per person in 2025) would have been cut to about $7 million per person on January 1, 2026. OBBBA kept the higher, inflation-adjusted exemption in place.

What This Means for Your 2026 Return

For most taxpayers, OBBBA is a "no news is good news" story — it simply prevented a scheduled tax increase by locking in the TCJA rates and standard deduction permanently. The bigger opportunities are the new, temporary deductions:

• Tipped workers and hourly employees with overtime should check whether the new deductions apply to them
• Homeowners in high-tax states benefit from the higher SALT cap — but should plan for its 2030 expiration
• Retirees 65+ get an extra deduction on top of the standard deduction
• Anyone buying a new, US-assembled vehicle in 2026 may want to factor in the auto loan interest deduction

Key Takeaways

• The 37% top tax rate and higher standard deduction are now permanent — no automatic 2026 tax hike
• SALT cap rises to $40,000 for 2026 but phases back down starting in 2030
• New temporary deductions for tips ($25,000), overtime ($12,500), seniors ($6,000), and auto loan interest ($10,000) run through 2028
• Child Tax Credit rises to $2,200 per child
• Charitable giving now has a new 0.5%-of-AGI floor before donations become deductible
• A few provisions got stricter — notably gambling loss deductions (now 90%) and top-bracket itemized deduction value (35 cents per dollar)