OBBBA Tax Law Updates (2025–2026)
The One, Big, Beautiful Bill Act (OBBBA), also known as the Working Families Tax Cut, was signed into law on July 4, 2025, as Public Law 119-21.
The Act makes several core Tax Cuts and Jobs Act provisions permanent and introduces new deductions, credits, and structural changes affecting both individuals and businesses.
Source: IRS Newsroom – One, Big, Beautiful Bill provisions (Public Law 119-21)
Last Updated: February 16, 2026
Immediate Impact Summary
- 37% Top Bracket: Permanently extended.
- 20% QBI Deduction: Now permanent.
- 2025 Standard Deduction: $15,750 (Single), $31,500 (Joint).
- SALT Cap: Increased to $40,000 for 2025 returns, with 30% phasedown beginning at $500,000 MAGI.
- Child Tax Credit: Permanently increased to $2,200 per qualifying child.
Individual & Family Provisions
- Deduction for Overtime Income: Up to $12,500 per taxpayer ($25,000 combined for Married Filing Jointly) for qualified overtime compensation. Phaseout begins at $150,000 MAGI (Single) and $300,000 MAGI (Joint).
- Deduction for Tip Income: Up to $25,000 per taxpayer for qualified tip income, subject to the same MAGI phaseout thresholds.
- Senior Bonus Deduction: Additional $6,000 deduction for taxpayers age 65+. Phases out between $75,000–$175,000 MAGI (Single) and $150,000–$250,000 (Joint).
- Vehicle Loan Interest Deduction: Up to $10,000 annually for interest paid on qualifying U.S.-assembled vehicles purchased after January 1, 2025.
Business & Investment Provisions
- Permanent restoration of 100% bonus depreciation (property acquired after January 19, 2025).
- Permanent immediate expensing of domestic R&D (Section 174).
- 1099-K reporting threshold maintained at $20,000 / 200 transactions.
- Clean energy credits phased out (EV credit expired Sept. 30, 2025; solar credits expire Dec. 31, 2025).
2026 Structural Changes & Offsets
- 2026 Standard Deduction: $16,100 (Single), $32,200 (Joint).
- Charitable deduction floor: Only donations exceeding 0.5% of AGI deductible (itemizers).
- Itemized deduction benefit capped at 35% marginal value.
- New above-the-line charitable deduction for non-itemizers up to $1,000 ($2,000 Joint).
Disclaimer
This information is provided for general educational purposes only and should not be considered tax advice. Tax laws are complex and your specific situation may differ. Please consult with a qualified tax professional to understand how these changes apply to your circumstances.
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