One Big Beautiful Bill tax changes: what individuals need to know

What the 2025 law changed for individuals

The one big beautiful bill tax changes fall into three groups. Some rules that were due to expire after 2025 were made permanent. Four new deductions were added for a limited window. And several credits were shut off early. The IRS now calls the individual provisions the Working Families Tax Cuts in its guidance.

For most households the biggest effect is that nothing snapped back. Without the law, the 2017 rate cuts and the larger standard deduction would have ended with tax year 2025. Instead, the rates of 10%, 12%, 22%, 24%, 32%, 35% and 37% continue, and the IRS set the 2026 tax brackets with inflation adjustments on October 9, 2025.

New deductions for 2025 to 2028

Four deductions apply only to tax years 2025, 2026, 2027 and 2028. Each one is figured on the new Schedule 1-A and subtracted after adjusted gross income, so you can take them on top of the standard deduction or itemized deductions. They lower taxable income, not AGI, and they do not reduce Social Security or Medicare tax.

No tax on tips

Workers in an occupation that customarily received tips before 2025 can deduct up to $25,000 of voluntary cash or charged tips. The limit shrinks by $100 for each full $1,000 of modified AGI above $150,000 ($300,000 joint). Details and a worked example are in no tax on tips, and the job list is in the tipped occupations list.

No tax on overtime

Only the extra half in time-and-a-half pay that the Fair Labor Standards Act requires is deductible, up to $12,500 ($25,000 joint), with the same $100 per $1,000 reduction above $150,000 ($300,000 joint). See no tax on overtime for how to separate the premium from the rest of your overtime pay.

Car loan interest

Interest on a loan taken out after December 31, 2024 to buy a new, US-assembled personal vehicle is deductible up to $10,000 a year. The cap drops by $200 for each $1,000 (or part of $1,000) of modified AGI above $100,000 ($200,000 joint). The car loan interest deduction page covers the VIN check and paperwork.

Senior deduction

Each person age 65 or older gets up to $6,000 extra, reduced by 6% of modified AGI above $75,000 ($150,000 joint). For tax year 2026 you qualify if you were born before January 2, 1962. The senior deduction page walks through the phaseout.

Permanent changes in the Working Families Tax Cuts

These provisions have no end date in the law. Most are inflation adjusted each year, which is why the 2027 amounts are not known yet.

Two changes hit higher earners. Starting in 2026, itemized deductions are cut by 5.4% of the smaller of total itemized deductions or taxable income above $768,700 on a joint return ($640,600 single or head of household). Gambling losses are limited to 90% of losses, capped at winnings. The standard deduction figures for every filing status are in the standard deduction amounts guide.

The SALT cap rise is temporary

The state and local tax deduction limit rose from $10,000 to $40,000 for 2025 and $40,400 for 2026, with a phase-down above $505,000 of modified AGI in 2026. Unlike the rates, this is set to return to $10,000 for tax years after 2029.

Credits that ended

Several energy credits were closed years ahead of their original schedule. If you bought something expecting a credit, the date it was acquired or placed in service now decides everything.

• New, used and commercial clean vehicle credits: not available for vehicles acquired after September 30, 2025. A binding written contract plus a payment made on or before that date counts as acquired.
• Energy Efficient Home Improvement Credit: no credit for property placed in service after December 31, 2025, so nothing can be claimed for 2026 work.
• Residential Clean Energy Credit (solar, batteries, geothermal): also ended for property placed in service after December 31, 2025.
• Alternative fuel vehicle refueling property credit: ends for property placed in service after June 30, 2026.

At the same time, a few credits got bigger. The child and dependent care credit rate can reach 50% starting in 2026, and the Child Tax Credit rose to $2,200. The law also created Trump accounts, a new IRA for children born after 2024 and before 2029, with a possible $1,000 federal pilot deposit elected on Form 4547.

Big beautiful bill tax changes for 2026 returns: what changed for seniors

The law did not make Social Security benefits tax free. Up to 85% of benefits can still be taxable once your income passes the base amount of $25,000 single or $32,000 joint. What changed is the new $6,000 senior deduction, which lowers taxable income for people 65 and older with modified AGI under the phaseout range.

The senior deduction stacks with the existing extra standard deduction for age 65, which is $2,050 for a single filer in 2026 and $1,650 per qualifying spouse on a joint return. A single retiree with $60,000 of modified AGI would have $16,100 plus $2,050 plus $6,000, or $24,150, of deductions before any itemizing.

What it means for your 2027 filing

The return you file in 2027 is the second year of the new deductions but the first with dedicated reporting boxes. Use this order to check whether the changes help you.

1. Estimate modified AGI first. For most people it equals AGI on Form 1040; excluded foreign earned income and Puerto Rico income are added back. Every Schedule 1-A deduction depends on it.
2. Look at Form W-2 box 12 for code TP (qualified tips) and code TT (qualified overtime), and box 14b for your tipped occupation code. Contractors should check Form 1099-NEC boxes 1b and 1d.
3. Pull your auto lender's year-end interest statement and your vehicle identification number if you bought a new car after 2024.
4. Check each spouse's birth date against January 2, 1962 for the senior deduction.
5. If you expect a large Schedule 1-A total in 2027, enter it on Form W-4 Step 4(b) so less tax is withheld during the year instead of waiting for a refund.

Figures for tax year 2027 itself, including brackets and the standard deduction, are not yet announced. The IRS usually publishes them in October or November. The tax changes 2027 page tracks what starts and ends in that year.