One Big Beautiful Bill: Every Tax Change for Individuals 2026–2027

What the One Big Beautiful Bill Act Changes for Your Taxes

The One Big Beautiful Bill Act (OBBBA) — formally the Tax and Spending Cuts Act — was signed into law on July 4, 2025. It is the most significant piece of US tax legislation since the Tax Cuts and Jobs Act (TCJA) of 2017, and for most individuals its primary effect is certainty: the TCJA rates and provisions that were set to expire in 2025 are now permanent. Beyond permanence, the OBBBA added several new individual tax benefits including a no-tax-on-tips exclusion, a senior deduction, and a meaningful increase to the SALT cap.

This guide covers every change in the OBBBA that affects individual taxpayers, with worked examples and clarity on which changes are permanent versus temporary. All figures are current for 2026.

What the OBBBA Did: The Tax Headline

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, is the largest tax legislation since the 2017 Tax Cuts and Jobs Act — largely because it made the TCJA permanent. Without Congressional action, every individual income tax rate, bracket threshold, and standard deduction amount introduced in 2017 would have automatically expired on December 31, 2025, reverting to the higher pre-2017 system.

The stakes were significant. Under the old scheduled law, the top marginal rate would have jumped from 37% back to 39.6%. The standard deduction — nearly doubled by TCJA — would have been cut roughly in half. The child tax credit would have dropped from $2,000 to $1,000. For most working Americans, their 2026 tax bill would have been noticeably higher without OBBBA.

The OBBBA avoided that cliff. TCJA rates are now permanent, inflation-adjusted annually. For 2026, the seven brackets remain: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The standard deduction for 2026 is approximately $15,200 for single filers and $30,400 for married filing jointly. Beyond permanence, the bill added several new provisions — tips, overtime, seniors, SALT, and the estate tax — covered in the sections below.

The OBBBA also extended and made permanent several business provisions (Section 199A QBI deduction, 100% bonus depreciation, domestic R&D expensing) that had been phasing down under TCJA's scheduled timelines. These are covered in the business provisions section.

New Deductions and Exclusions: Tips, Overtime, and Seniors

Three new individual provisions in the OBBBA target specific groups: tipped workers, hourly employees who work overtime, and seniors. All are defined narrowly.

No Tax on Tips (2025–2028)

Workers in traditional tip-receiving occupations — broadly defined as service and hospitality industries where tips are customarily received — can exclude up to $25,000 of qualified tip income from federal income tax annually. This exclusion is temporary: it applies for tax years 2025 through 2028. Note that tips still count as wages for Social Security and Medicare (FICA) purposes — the exclusion is from income tax only. To claim this exclusion, workers report qualifying tips but apply the exclusion on their return. The $25,000 limit is not indexed for inflation during the temporary period.

No Tax on Overtime Premium (2025–2028)

The overtime premium — the extra 50% of pay for hours worked over 40 in a workweek — is excluded from federal income tax for non-exempt workers under the Fair Labor Standards Act (FLSA). This is the additional half-rate portion only; the regular pay for overtime hours remains fully taxable. For example, if your regular rate is $20/hour and you earn $30/hour for overtime, only the $10 premium portion is excluded. Like tips, overtime premium income is still subject to FICA. The exclusion applies 2025–2028 and is temporary.

$6,000 Senior Deduction

Taxpayers aged 65 or older receive an additional $6,000 standard deduction on top of the regular standard deduction, subject to a modified AGI phase-out. The full $6,000 is available to single filers with modified AGI up to $75,000 and to married-filing-jointly filers up to $150,000. Above these thresholds, the deduction phases out. This is separate from the existing additional standard deduction for those 65+ (currently ~$1,950 for single filers in 2026) — meaning seniors who qualify receive both amounts.

SALT Cap, Child Tax Credit, and Auto Loan Interest

Several other individual provisions in the OBBBA directly affect homeowners and families.

SALT Cap: $10,000 → $40,000

The deduction for state and local taxes (SALT) — including property taxes and either income or sales taxes — was capped at $10,000 per return by the 2017 TCJA. The OBBBA raises that cap to $40,000 per return for tax years 2025 through 2029. The cap then reverts to $10,000 after 2029 unless Congress acts again.

Critically, the $40,000 cap is per return, not per person — meaning married couples filing jointly get the same $40,000 as single filers. The SALT deduction increase phases out for taxpayers with AGI above $500,000. High earners in California, New York, New Jersey, Illinois, and Massachusetts benefit most — these are states with high income and property taxes that previously far exceeded the $10,000 cap. For example, a homeowner in New Jersey paying $18,000 in property tax and $15,000 in state income tax can now deduct the full $33,000 rather than being capped at $10,000.

Child Tax Credit: $2,200 per Child

The Child Tax Credit (CTC) is increased to $2,200 per qualifying child under age 17, up from $2,000, and is now permanently indexed to inflation going forward. The refundable portion (Additional Child Tax Credit) is also enhanced. The CTC phases out for high earners above $200,000 single / $400,000 MFJ.

Auto Loan Interest Deduction (2025–2028)

A new above-the-line deduction of up to $10,000 per year is available for interest paid on loans used to purchase US-assembled vehicles. This deduction is available to all taxpayers regardless of whether they itemize, and applies for 2025–2028. The vehicle must be new, and the deduction phases out for higher-income taxpayers.

Estate Tax: The $15 Million Permanent Exemption

The estate and gift tax exemption is the OBBBA provision with the largest dollar amounts — though it affects the fewest taxpayers.

What Would Have Happened Without OBBBA

The 2017 TCJA doubled the estate and gift tax exemption from approximately $5.5 million to $11.18 million per person, indexed for inflation. By 2025, that exemption had grown to approximately $13.6 million per person. However, this doubled exemption was always scheduled to expire. On January 1, 2026, the exemption would have reverted to approximately $7 million per person (the pre-TCJA level, inflation-adjusted). For a married couple, that would mean a drop from roughly $27 million to $14 million in combined exemption.

What the OBBBA Changed

The OBBBA made a higher, permanent exemption the law. The estate and gift tax exemption is now set at approximately $15,000,000 per person (inflation-adjusted going forward), made permanent. For married couples using portability, this means a combined $30,000,000 exemption. Assets above the exemption are taxed at rates from 18% to 40%.

The estate tax and gift tax share the same unified exemption — using your lifetime gift tax exclusion reduces the amount available for estate tax purposes. The annual gift tax exclusion (currently $19,000 per recipient in 2026) is separate and does not draw down the lifetime exemption. Married couples can split gifts, effectively doubling the annual exclusion to $38,000 per recipient.

Who This Affects

The estate tax only applies to estates exceeding the exemption. With a $15 million per-person exemption, only very high-net-worth individuals need active estate tax planning. However, the permanence matters for planning certainty — advisers can now make long-term recommendations without uncertainty about a sunset date.

Business Provisions: QBI, Bonus Depreciation, and R&D

The OBBBA also addressed several business provisions from the 2017 TCJA that were either expiring or had already phased down. These affect self-employed individuals, small business owners, and pass-through entity owners.

Section 199A QBI Deduction (Now Permanent)

The 20% qualified business income (QBI) deduction for owners of S-corporations, partnerships, LLCs, and sole proprietorships is made permanent by the OBBBA. Previously, this deduction was set to expire after 2025. For a business owner with $200,000 of qualifying pass-through income, this deduction reduces taxable income by $40,000 — worth up to $14,800 in tax savings at the 37% bracket. Limitations apply for high earners in specified service trades (law, accounting, consulting, financial services) and for businesses with significant W-2 wages or qualified property.

100% Bonus Depreciation (Restored and Permanent)

The TCJA had introduced 100% first-year bonus depreciation for qualified business property, but scheduled it to phase down: 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, and 0% after 2026. The OBBBA restores 100% bonus depreciation permanently for qualified property placed in service after the effective date. This allows businesses to immediately expense the full cost of equipment, machinery, and certain real property improvements rather than depreciating over multiple years.

Domestic R&D Expensing

The TCJA had required companies to amortise domestic R&D expenses over 5 years (15 years for foreign R&D) starting in 2022, eliminating the prior immediate expensing. The OBBBA restores immediate expensing for domestic research and development costs, which is particularly valuable for technology companies, manufacturers, and any business investing in product development.

Together with Section 199A permanence and the estate tax changes, these business provisions make the OBBBA a significant long-term win for small business owners and entrepreneurs — not just employees.