One Big Beautiful Bill: What It Means for Your 2025–2026 Taxes
- Karen M. Millard
- Dec 19, 2025
- 7 min read
If you have seen headlines about “No Tax on Tips,” “No Tax on Overtime,” or “Trump Accounts,” you might be wondering what any of this really means for your refund.
The One Big Beautiful Bill Act, sometimes called OBBBA, is a large tax law that takes pieces of the 2017 Tax Cuts and Jobs Act and makes many of them permanent. It also adds new tax breaks for certain workers, seniors, families, and car buyers, and changes how some money transfers and deductions work starting in 2026.
In this article, I’m going to focus on what most people want to know:
What actually changes for my 2025 and 2026 taxes, and what should I do about it?
2025: What really changes and what stays the same
Let’s start with the good news. A lot of the rules you have gotten used to are still in place.
For 2025, the law:
Keeps the same seven tax brackets you know now, with rates from 10 percent to 37 percent.
Keeps the larger standard deduction and no personal exemptions, instead of going back to the old pre-2017 system.
Raises the SALT deduction cap for many households, so more state and local tax can count if you itemize.
So for many people, the basic structure of the return will look familiar. Where you’ll notice the difference is in a few new deductions and credits.
Here are the main 2025 changes most families will feel.
“No Tax on Tips”
Starting with your 2025 return, if you work in a job where tips are customary, some or all of your reported tips may qualify for a special deduction.
In simple terms:
You still report your tips as income.
Then you may be able to take a matching deduction for qualified tips, up to a yearly cap (currently 25,000).
This deduction comes “above the line”, which means you can use it even if you take the standard deduction.
Your employer will have new reporting rules so your W-2 shows tip information clearly. If you are a server, bartender, stylist, or anyone whose pay depends heavily on tips, this could lower your taxable income in 2025.
“No Tax on Overtime”
There is also a new deduction aimed at the overtime premium in jobs covered by the Fair Labor Standards Act.
In general:
It focuses on the “extra” part in time and a half, not the base hourly rate.
Qualified overtime premium can be deducted, up to set limits (12,500 for single filers and 25,000 for joint filers), with phaseouts at higher income levels.
It is also an above-the-line deduction.
If you regularly work overtime, this may reduce the income that is actually taxed, even if nothing else in your life changes.
Both of these worker deductions come with details and exceptions, so it is important to look at your actual W-2 and pay history, not just the headline.
“No Tax on Car Loan Interest”
If you are planning to buy a new car in 2025, there is another new deduction to know about.
For qualifying vehicles:
You may be able to deduct up to 10,000 of interest per year on a new car loan
The vehicle has to be new and finally assembled in the United States
There are income limits, so the full benefit will not apply to everyone
If you are already planning a car purchase, this is worth reviewing before you pick the model and sign the loan paperwork.
Seniors: A new extra deduction
For 2025 through 2028, there is a new additional deduction for many people who are 65 or older.
In addition to the usual standard deduction or itemized deduction, eligible seniors can claim an extra:
6,000 if you are 65 or older and filing as a single taxpayer
Up to 12,000 if you are married filing jointly and both spouses are 65 or older
This benefit phases out at higher income levels, so very high-income seniors may not qualify, but for many retirees on fixed or moderate incomes, it provides a little more breathing room.
If you or a parent are close to these age and income thresholds, this is one of the provisions we will want to look at together, especially before taking large IRA withdrawals or realizing big gains.
Families: Child credits, adoption, and education
The One Big Beautiful Bill also touches several family-oriented tax breaks.
For 2025:
The Child Tax Credit (CTC) is made permanent at a slightly higher amount, generally 2,200 per qualifying child, with income phaseouts similar to recent years
The Other Dependent Credit of 500 for dependents who do not qualify for the CTC (like some older relatives) is made permanent
The Adoption Tax Credit becomes partially refundable, so some families can receive part of the credit as a refund even if they do not owe that much tax
529 plans get more flexibility, with higher limits for K–12 expenses and an expanded list of qualified education costs
These changes do not rewrite the rules from scratch, but they give families a little more support and a bit more stability going forward.
Side income and payment apps
If you sell items online, take payments for side work through apps, or use third-party platforms like PayPal or Venmo for business activity, you have probably heard about Form 1099-K.
OBBBA settles on a higher reporting threshold:
Starting in 2025, these platforms have to issue a 1099-K only if you have more than 20,000 in payments and 200 or more transactions on a single platform in one year
Income rules do not change, just the reporting threshold. You still need to report taxable income, even if you do not receive a form. The big practical impact here is how many people get an extra tax form in the mail in January.
2026 and after: What is coming next
The law also builds in a second wave of changes that really start to matter for 2026 returns and beyond. Here are the ones most people ask about.
Same brackets, new dollar ranges
The same seven tax rates stay in place, but the income ranges for each bracket and the standard deduction amounts adjust up again for inflation. The goal is to keep the system from quietly pulling people into higher brackets just because prices are higher.
Starting in 2026, families will see a new type of savings option called Trump Accounts, aimed at children under 18.
In short:
Babies born between 2025 and 2028 may receive a one-time 1,000 federal contribution into a Trump Account
Parents and others can contribute each year, and some employers may choose to add money as a benefit
Money in the account grows tax-deferred, then is taxed when withdrawn later in life, with rules that are similar in spirit to other long-term savings tools
This is not a magic solution, but it is one more tool that families may be able to use alongside 529 plans, Roth IRAs, and regular savings.
Childcare, education, and student loans
Beginning mainly in 2026, the law:
Improves the Child and Dependent Care Credit for many households by increasing the share of expenses that can qualify
Adjusts some rules around education credits like the American Opportunity Credit and the Lifetime Learning Credit
Makes employer student loan repayment help a permanent, tax-favored benefit up to an annual limit
1 percent tax on some money transfers abroad
Starting January 1, 2026, there will be a 1 percent excise tax on certain money transfers from the United States to other countries when the transfer is funded with cash, money orders, cashier’s checks, or similar methods through a remittance service.
Transfers funded directly from bank accounts, debit cards, or credit cards are generally treated differently and are not in the main target group for this tax.
If you send money to family overseas, we will want to look at how you send it and whether this new rule might apply.
One more wrinkle: Your state may not follow all of these rules
Everything we’ve talked about so far is federal law. Your state can choose to:
Follow the new federal rules
Or decouple from some of them, especially the newer deductions and credits
That means you might get a break on your federal return, but not on your state return, and the reverse is also sometimes true.
This is one reason tax software and quick estimates can be confusing in the next few years. There are simply more moving parts underneath, and it is one reason we keep our Resources page handy if you want to double-check how your state is handling these changes.
How to prepare, without burning out
You do not have to memorize any of this. You also do not have to pretend you are not worried when the rules keep changing.
Here are a few simple steps that will help:
Know which buckets you are in
Earn tips or overtime
Age 65 or older, or close to it
Raising kids or planning to adopt
Thinking about a new car, home upgrades, or education costs
Sending money abroad regularly
Save and organize your records
Pay stubs that show tips and overtime
Auto loan paperwork if you buy a new car
Childcare, education, adoption, and medical receipts
Any information about money transfers outside the United States
Do not forget the state side
When we sit down together, we will look at federal and state rules side by side so you are not surprised by one while focusing on the other.
Ask for help before big decisions
If you are about to buy a car, change jobs, take a lump sum from retirement, or make big education or childcare commitments, it’s worth checking how these choices interact with the new rules.
How I can walk through this with you
My role is to stand between you and the noise, so you don’t have to go through every IRS notice and tax article alone. If you would rather hand this off, our tax planning and preparation services can take care of the details for you.
With the One Big Beautiful Bill Act, that means:
Translating the new worker and senior deductions into real numbers for your situation
Checking whether it makes sense for you to itemize or take the standard deduction under the new SALT and mortgage rules
Looking ahead to 2026 so things like Trump Accounts, childcare credits, and remittance rules do not blindside you
If you’re not sure where to start, you do not have to figure it out by yourself.
Next step: Bring your most recent tax return and a short list of your 2025 changes, and schedule a time with me at All American Tax. We will go through what the “one big beautiful bill” really means for you, one piece at a time, until it feels a lot less overwhelming and a lot more manageable.
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