Author: Jack Haxton
As the year comes to a close, the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, stands out as one of the most significant financial developments of the year. The legislation permanently extends many popular provisions from the 2017 Tax Cuts and Jobs Act (TCJA), introduces new deductions aimed at working Americans and seniors, and prevents large tax increases that were looming when parts of the TCJA were set to expire at the end of this year. For everyday families, retirees and workers, 2026 will look far more favorable than it would have without the OBBBA. Below, I’ll highlight some of the key changes taking effect next year, who stands to benefit most, and how these updates compare to some of the common talking points we’ve all heard in the media.
Permanent Extension of TCJA
The One Big Beautiful Bill Act has a broad impact across all income levels. With the signing of the Act, the current seven progressive federal income tax brackets are permanently extended at their existing rates. Without Trump’s Act or the extension of the 2017 TCJA, tax rates would have reverted to pre-2018 levels, including a top marginal rate of 39.6%. The standard deduction would have been cut in half, and many widely used tax breaks would have expired altogether.
Instead, the new law locks in the current seven tax brackets, with a top rate of 37%, as well as a higher standard deduction for all filers. The 2026 standard deductions are as follows, $32,200 for married filing jointly, $16,100 for single filers, and $24,150 for head of household filers. Additionally, family-friendly provisions, including higher estate tax exemptions and the enhanced Child Tax Credit Structure, will also be available in 2026. These changes provide long-term certainty and meaningful savings for households across the income spectrum.
New Deductions for Tips and Overtime Pay
Two of the most talked-about provisions of the OBBBA are the new deductions for tipped income and overtime pay. While both offer real relief for working Americans, they do come with important limitations.
No Tax on Tips: Workers in traditionally tipped occupations are eligible to deduct up to $25,000 of their annual tip income. This is an above-the-line deduction, meaning the income is effectively exempt from federal income tax.
No Tax on Overtime: Premium overtime pay, the additional compensation earned above regular wages, is now deductible with phase-outs for higher-income earners. This provision primarily benefits hourly workers in physically demanding or essential fields such as nursing, manufacturing, trucking, construction, and emergency services.
It’s important to note that both deductions apply only to federal income tax, not payroll taxes. Workers will claim these new deductions when filing their returns. For many who fall into these categories, this may translate to thousands of dollars saved each year, which will significantly boost take-home pay for households across the US.
Relief for Seniors
The campaign promise of “No Tax on Social Security” created a lot of buzz. While the One Big Beautiful Bill Act does not fully eliminate taxation of benefits for Social Security, it introduces a powerful alternative. Under the new law, individuals age 65 or older qualify for an additional $6,000 standard deduction ($12,000 for couples where both spouses qualify). This deduction is in addition to the regular standard deduction, substantially reducing taxable income for many retirees. As a result, Social Security benefits are pushed out of the taxable range for a large share of seniors. Experts estimate that up to 88% of retirees will pay little or no federal tax on their Social Security benefits under this new structure.
Looking Forward
The One Big Beautiful Bill Act’s updates create plenty of opportunities for real savings, whether you’re taking advantage of the new overtime rules, the updated deduction with Social Security, or taking advantage of the new deduction with tips. If you would like help in building out a financial plan in light of these new changes on the horizon, please feel free to reach out and schedule a complimentary appointment with me, Jack Haxton, or one of our other financial professionals.
