The TCJA did NOT sunset. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, made most TCJA provisions permanent. Income tax rates remain at 10–37% — the feared return to 39.6% will not happen. The standard deduction stays at current levels ($16,100 single / $32,200 married for 2026). The estate tax exemption was raised to $15,000,000 per person and made permanent. The child tax credit was raised to $2,200 per child. The 20% QBI pass-through deduction is now permanent. The SALT cap was raised to approximately $40,400 for 2026 — but this expires in 2030 (reverts to $10,000). OBBBA also created new provisions: a tip income exclusion (up to $25,000), an overtime pay exclusion (up to $12,500), an auto loan interest deduction (up to $10,000), and a $6,000 senior deduction for those age 65+.
At a glance
Key Facts
Income Tax Rates: Permanent at 10–37%
OBBBA made the TCJA's seven-bracket structure permanent: 10%, 12%, 22%, 24%, 32%, 35%, 37%. The feared return to the pre-TCJA top rate of 39.6% will not happen. Brackets are inflation-adjusted annually. The same rates that applied in 2026 will apply in 2027, 2028, and beyond — permanently.
Estate and Gift Tax: Raised to $15,000,000 per Person — Permanent
OBBBA raised the federal estate and gift tax exemption to $15,000,000 per person ($30,000,000 per married couple) effective 2026. This is permanent and inflation-indexed. Under previous law (TCJA), the exemption was $15,000,000 in 2026 and was scheduled to drop to approximately $7,000,000 in 2027. Neither the drop nor the TCJA-level cap applies — $15M is the new permanent floor.
Child Tax Credit: Raised to $2,200 per Child — Permanent
OBBBA raised the child tax credit from $2,000 (TCJA level) to $2,200 per qualifying child and made it permanent. The refundable portion ($1,400) is now also inflation-indexed annually. The feared reversion to $1,000 per child will not occur. Phase-out thresholds ($400,000 for married couples) remain.
SALT Cap: Raised to ~$40,400 for 2026 — Expires 2030
The TCJA's $10,000 SALT cap was raised by OBBBA to $40,000, adjusted to $40,400 in 2026, rising by approximately 1% per year through 2029. In 2030, the cap reverts to $10,000 unless Congress acts again. Married filing separately: $10,000 (unchanged). This is a significant improvement for residents of high-tax states (California, New York, New Jersey, Connecticut, Illinois) — but it is temporary.
The 20% qualified business income deduction for pass-through entities (sole proprietors, S-corps, partnerships, REITs) is now permanent under OBBBA. 2026 phase-out thresholds: single filers $201,750–$276,750; married filing jointly $403,500–$553,500. A new minimum deduction of $400 applies for taxpayers with QBI above $1,000. Previously this deduction was scheduled to disappear in 2027.
New OBBBA Provisions (Not in Original TCJA)
OBBBA added four new deductions beyond extending TCJA: (1) Tip income exclusion — deduct up to $25,000 of qualifying tip income; phases out at MAGI above $150,000 single / $300,000 MFJ; through 2028. (2) Overtime pay exclusion — deduct the overtime premium (the 'half' portion of time-and-a-half) up to $12,500 single / $25,000 MFJ; same phase-out; through 2028. (3) Auto loan interest — deduct up to $10,000 in interest on a new US-assembled passenger vehicle or light truck; loan must originate after OBBBA enactment; through 2028. (4) Senior deduction — an additional $6,000 deduction per person age 65 or older (stackable with existing standard deduction); phases out at MAGI above $75,000 single / $150,000 MFJ; through 2028.
Introduction
For several years, the potential expiration of the Tax Cuts and Jobs Act (TCJA) at the end of 2026 loomed over tax planning for millions of Americans. The sunset would have raised income tax rates, roughly halved the standard deduction, cut the child tax credit, and brought back the pre-2018 estate tax regime. None of that happened.
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. The legislation made most TCJA individual provisions permanent and went further — raising the estate tax exemption to $15 million, bumping the child tax credit to $2,200, and adding new deductions for tip income, overtime pay, auto loan interest, and seniors. This guide explains what the sunset would have meant, what OBBBA actually did, what remains temporary, and what the planning landscape looks like now.
Section 01
What Was Supposed to Happen: The TCJA Sunset
Understanding what OBBBA prevented requires understanding what the TCJA sunset actually meant. The Tax Cuts and Jobs Act of 2017 — passed under Senate budget reconciliation rules — was required to expire after December 31, 2026. Without new legislation, on January 1, 2027 the US tax code would have automatically reverted to its pre-2018 structure.
The Pre-TCJA Rates That Would Have Returned
Under pre-TCJA law, the top income tax rate was 39.6%. The brackets were different: the 15%, 25%, 28%, 33%, 35%, and 39.6% structure would have replaced today's 12%, 22%, 24%, 32%, 35%, and 37% structure. Most taxpayers earning above approximately $50,000 would have faced higher marginal rates.
Other Provisions That Would Have Expired
Standard deduction: Would have roughly halved from $16,100 (single) to approximately $8,300
Estate tax exemption: Would have dropped from $15,000,000 to approximately $7,000,000 per person
Child tax credit: Would have reverted from $2,000 to $1,000 per child
SALT cap: Would have expired entirely — full SALT deductibility would have returned
QBI 20% deduction: Would have disappeared, raising effective tax rates on pass-through income significantly
This was not a theoretical risk. The sunset was the law as written. Congress had to act — and it did.
Section 02
What OBBBA Did: Provisions Made Permanent vs. Temporary
The One Big Beautiful Bill Act addressed the TCJA sunset comprehensively, but not all provisions were treated the same way:
Made Permanent by OBBBA
Provision
TCJA Level
OBBBA Result
Income tax rates (10–37%)
Scheduled to expire
Permanent
Standard deduction
Scheduled to halve
Permanent (inflation-adjusted)
Estate/gift tax exemption
$15M → ~$7M drop
Raised to $15M, permanent
Child tax credit
$2,000 → $1,000 drop
Raised to $2,200, permanent
QBI 20% deduction (§199A)
Scheduled to expire
Permanent
100% bonus depreciation
Was phasing down
Restored at 100%, permanent
R&D immediate expensing
Had reverted to 5-yr amortisation
Reinstated, permanent
AMT exemption amounts
Scheduled to fall
Permanent (with modified phase-out thresholds)
Extended Through a Fixed Date
Provision
Amount
Expires
SALT cap increase
~$40,400 (2026, +1%/yr)
2030 (reverts to $10,000)
Tip income exclusion
Up to $25,000
End of 2028
Overtime pay exclusion
Up to $12,500 ($25,000 MFJ)
End of 2028
Auto loan interest deduction
Up to $10,000
End of 2028
Senior deduction ($6,000 age 65+)
$6,000 per person
End of 2028
Section 03
The New OBBBA Deductions in Detail
OBBBA added four new above-the-line deductions with no direct TCJA precedent. All are claimed on IRS Schedule 1-A (a new form released by the IRS for OBBBA provisions).
Tip Income Exclusion
Workers in occupations that customarily and regularly received tips before 2025 can deduct up to $25,000 in qualifying tip income from federal taxable income. Tips must be received directly from customers or through a valid tip pool and properly reported on a W-2, 1099, or Form 4137. The deduction phases out for taxpayers with MAGI above $150,000 (single) or $300,000 (married). Available for tax years 2025 through 2028. Tips are still subject to FICA (Social Security and Medicare taxes).
Overtime Pay Exclusion
Employees and qualifying workers may deduct the overtime premium — specifically the 'half' portion of 'time-and-a-half' required under the Fair Labor Standards Act — up to $12,500 (single) or $25,000 (married filing jointly). The exclusion applies only to FLSA-mandated overtime, not voluntary overtime arrangements. Must be reported on a W-2 or 1099. Same MAGI phase-out as tips ($150,000/$300,000). Through 2028.
Auto Loan Interest Deduction
Deduct up to $10,000 per year in interest paid on a loan for a new passenger automobile or light truck that was assembled in the United States. Key restrictions: used vehicles are excluded; vehicles assembled outside the US are excluded; the loan must have originated after the OBBBA enactment date. Through 2028.
Senior Deduction — Additional $6,000 Age 65+
Taxpayers who are age 65 or older by December 31 of the tax year may claim an additional deduction of $6,000 per eligible person ($12,000 for a married couple where both spouses qualify). This is in addition to the regular standard deduction and the existing age-65 additional standard deduction. It is available to both itemisers and non-itemisers. Phases out at MAGI above $75,000 (single) or $150,000 (MFJ). Through 2028.
Combined 2026 deductions for a qualifying single senior: $16,100 standard deduction + $2,050 existing age-65 additional deduction + $6,000 OBBBA senior deduction = $24,150 total income sheltered before any itemised deductions.
Section 04
The New 2030 SALT Cliff: What High-Tax State Residents Need to Know
The SALT cap story did not end with OBBBA — it simply moved the cliff date forward. Under OBBBA, the SALT cap is:
2025: $40,000 (the original floor)
2026: $40,400 (approximately)
2027: ~$40,800
2028: ~$41,200
2029: ~$41,600
2030: Reverts to $10,000
For residents of California, New York, New Jersey, Connecticut, and Illinois who pay $40,000–$80,000 in combined state income and property taxes annually, the 2030 reversion would again be a significant federal tax increase — equivalent to the original TCJA SALT cap pain. Whether Congress extends the cap again in 2029–2030 will depend on the political environment at that time.
Married filing separately: The SALT cap for MFS remains at $10,000 (unchanged by OBBBA). Couples filing MFS in high-tax states do not benefit from the $40,400 cap — this discourages MFS filing for most high-tax-state residents.
Planning Around the 2030 SALT Cliff
High-net-worth residents of high-tax states considering relocation (to Texas, Florida, Nevada, Washington) previously had the 2026 TCJA sunset as a potential inflection point. That inflection has moved to 2030. The logic remains: a California resident paying $60,000/year in state income and property taxes saves approximately $13,900/year in federal taxes from SALT deductibility at a 28% rate — value that disappears if the $10,000 cap returns in 2030.
Section 05
Planning Implications Now That TCJA Is Permanent
The TCJA's permanency significantly changes multi-year tax planning. Strategies premised on the sunset (Roth conversions to 'lock in' lower rates before 2027, urgency to use estate tax exemption before the drop) are no longer driven by the same deadline logic. Here is how planning shifts:
Estate and Gift Tax: Higher Permanent Floor Changes the Calculus
The old advice — 'make large gifts in 2026 before the exemption halves' — no longer applies in that form. The exemption is $15M and permanent. However, estate planning with SLATs, GRATs, and irrevocable trusts still makes sense for estates approaching or exceeding $15M, and the larger permanent exemption ($15M vs. the feared $7M) now allows more aggressive planning. For estates above $30M (married couple combined), the 40% estate tax on excess amounts still applies.
Roth Conversions: Rates Are Permanent, Not Time-Limited
Roth conversion strategies that were based on 'convert now while the 24% bracket exists' no longer carry the same urgency. The 24% bracket is permanent. However, Roth conversions remain strategically valuable for taxpayers expecting higher income in retirement, those in low-income years, and those planning for potential future policy changes. The 2026 deadline pressure is gone — but the long-term math still often favours Roth conversions in lower-income years.
Pass-through business owners no longer need to rush income into 2026. The 20% QBI deduction is permanent. However, the phase-out thresholds (single $201,750–$276,750; MFJ $403,500–$553,500) still reward income management — keeping taxable income below the phase-in threshold preserves the full 20% deduction. Retirement contributions, timing of business income, and entity structure remain important optimisation tools.
New Deductions to Capture (2026–2028)
Workers in tipped industries, overtime workers, seniors, and new car buyers have new above-the-line deductions to claim through 2028. These require awareness — they are not automatic and must be claimed on Schedule 1-A. Employers are not required to modify withholding automatically for the overtime exclusion, which means taxpayers in these categories may need to adjust their W-4 or make estimated payments.
OBBBA changed the planning landscape — permanent QBI deduction, $15M estate exemption, new tip and overtime deductions, and the 2030 SALT cliff. TaxHub connects you with CPAs who understand the new permanent rules and how they interact with your situation.
⚠ Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
No. The Tax Cuts and Jobs Act was scheduled to expire on December 31, 2026 under its original terms, but Congress prevented the sunset by passing the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025. OBBBA made most TCJA individual income tax provisions permanent. Income tax rates, the standard deduction, and the QBI deduction are now permanent features of the US tax code.
Q
What exactly did OBBBA change compared to original TCJA?
OBBBA made most TCJA provisions permanent and improved several figures. Key changes vs. original TCJA: estate tax exemption raised from $15,000,000 to $15,000,000 per person (and made permanent); child tax credit raised from $2,000 to $2,200 per child; SALT cap raised from $10,000 to approximately $40,400 for 2026 (but expires 2030); QBI deduction phase-out range for MFJ expanded. OBBBA also added entirely new provisions not in TCJA: tip income exclusion, overtime pay exclusion, auto loan interest deduction, and senior deduction.
Q
Is the SALT cap now unlimited or permanent?
No to both. The SALT cap was raised by OBBBA to approximately $40,400 for 2026, increasing by about 1% per year through 2029. In 2030, the cap reverts to $10,000 unless Congress extends it again. Married filing separately taxpayers have a $10,000 SALT cap regardless of the OBBBA changes. Taxpayers in high-tax states (California, New York, New Jersey) have a new 2030 planning cliff — the same dynamic that made the original 2026 sunset so significant.
Q
Who qualifies for the new tip income exclusion?
The OBBBA tip income exclusion is available to workers in occupations that 'customarily and regularly' received tips before 2025. The exclusion covers up to $25,000 in qualifying tip income per year, and it phases out for taxpayers with MAGI above $150,000 (single) or $300,000 (married). Tips must be properly reported on a W-2, 1099-NEC, or Form 4137. The exclusion is from federal income tax only — tips are still subject to FICA taxes (Social Security and Medicare). It is available for 2025 through 2028, claimed on IRS Schedule 1-A.
Q
How does the overtime pay exclusion work?
Under OBBBA, the 'overtime premium' — specifically the additional 'half' portion of time-and-a-half compensation required under the Fair Labor Standards Act — is deductible from federal income tax, up to $12,500 per year (single) or $25,000 (married filing jointly). This is not a deduction for all overtime pay, only the overtime rate premium above regular pay. The deduction phases out at MAGI above $150,000 (single) or $300,000 (MFJ). It applies to overtime that must be reported on a W-2 or 1099. Available for 2025 through 2028.
Q
Does the QBI deduction still have income limits?
Yes — while the QBI 20% deduction is now permanent, the phase-out thresholds still apply. For 2026: single filers begin phasing out at $201,750 of taxable income and fully phase out at $276,750; married filing jointly phase-out begins at $403,500 and completes at $553,500. Above the phase-out, specified service trade or business (SSTB) owners (law, accounting, financial services, health, consulting) lose the deduction entirely, while non-SSTB owners may retain a partial deduction based on W-2 wages and qualified property. A new minimum $400 deduction was added for all taxpayers with at least $1,000 in QBI.
Q
How does the permanent estate tax change affect planning?
The permanent $15M estate tax exemption per person removes the urgency that existed before OBBBA — there is no longer a 2026 deadline to gift assets before an exemption drop. However, estate planning with the $15M exemption still produces significant tax savings for large estates. Married couples can shelter up to $30M from federal estate tax using portability or a bypass trust. For estates above $30M, the 40% estate tax rate still applies on the excess. The IRS inflation-indexing of the $15M means the exemption will grow over time, providing further planning flexibility.
Q
What is the new senior deduction under OBBBA?
OBBBA added an extra $6,000 deduction per person for taxpayers age 65 or older by December 31 of the tax year. This is in addition to the regular standard deduction and the pre-existing additional standard deduction for seniors (approximately $2,050 for single filers in 2026). A qualifying single senior in 2026 can shelter $24,150 of income ($16,100 standard + $2,050 age addition + $6,000 OBBBA senior deduction). A married couple where both spouses are 65+ can shelter $47,500. The deduction phases out for MAGI above $75,000 (single) or $150,000 (MFJ) and expires after 2028.
Q
How does OBBBA affect the Alternative Minimum Tax (AMT)?
OBBBA made the higher AMT exemption amounts from TCJA permanent, which keeps most middle-income households out of AMT exposure. However, OBBBA also tightened the AMT exemption phase-out thresholds — resetting them to $500,000 (single) and $1,000,000 (married), compared to the higher TCJA levels — and raised the phase-out rate from 25% to 50%. The net effect is that high-income taxpayers (particularly those now benefiting from a larger SALT deduction) face a moderately higher risk of AMT exposure than under pure TCJA rules. High earners in high-tax states should model AMT exposure alongside their SALT deduction recovery.
Disclaimer:This guide provides general tax information for educational purposes only. OBBBA provisions reflect the law as signed July 4, 2025. Some provisions have fixed expiration dates (SALT cap through 2029, tip/overtime/auto loan/senior deductions through 2028). The interaction of these provisions with individual tax situations is complex. Consult a CPA for personalised tax planning based on your specific situation.