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

Source: https://taxbracketsdesk.com/new-tax-law
Publisher: Tax Brackets Desk (taxbracketsdesk.com), independent editorial site
Topic: New Tax Law Deductions
Last updated: 2026-09-18

> The One Big Beautiful Bill tax changes (Public Law 119-21, signed July 4, 2025) did three things for individuals. They made the seven tax rates and the larger standard deduction permanent, added four temporary deductions for 2025 through 2028 (tips, overtime premium pay, new-car loan interest and a $6,000 senior deduction), and ended the home energy and electric vehicle credits.

## Key facts

- Law: Public Law 119-21, signed July 4, 2025
- IRS name for the individual provisions: Working Families Tax Cuts
- New temporary deductions: Tips, overtime, car loan interest, seniors (2025 to 2028)
- Where they are claimed: Schedule 1-A, itemizing or not
- 2026 standard deduction: $16,100 single, $32,200 joint, $24,150 head of household

## 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](https://taxbracketsdesk.com/federal-tax-brackets/tax-brackets-2026-irs) with inflation adjustments on October 9, 2025.

> **Which return is affected:** Returns filed in early 2026 covered tax year 2025, the first year of the new deductions. Returns filed in 2027 cover tax year 2026, the first year employers must show tips and overtime separately on Form W-2.

## 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](https://taxbracketsdesk.com/new-tax-law/no-tax-on-tips-deduction), and the job list is in the [tipped occupations list](https://taxbracketsdesk.com/new-tax-law/tipped-occupations-list-deduction).

### 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](https://taxbracketsdesk.com/new-tax-law/no-tax-on-overtime-deduction) 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](https://taxbracketsdesk.com/new-tax-law/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](https://taxbracketsdesk.com/new-tax-law/senior-deduction-rules-limits) page walks through the phaseout.

> **Two rules shared by tips, overtime and seniors:** The person claiming must have a valid Social Security number, and married couples must file a joint return. Married filing separately rules out all three.

## 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.

| Provision | 2026 amount or rule | Notes |
| --- | --- | --- |
| Seven tax rates | 10% to 37% | Bracket ranges indexed each year |
| Standard deduction | $16,100 single, $32,200 joint, $24,150 head of household | Indexed each year |
| Child Tax Credit | $2,200 per child, up to $1,700 refundable | Indexed after 2025 |
| Qualified business income deduction | 20% deduction kept; $400 minimum with $1,000 of active QBI | Minimum starts in 2026 |
| Charitable gifts, non-itemizers | Up to $1,000 ($2,000 joint) of cash gifts | Starts in 2026 |
| Charitable gifts, itemizers | Only the part above 0.5% of AGI counts | Starts in 2026 |
| Mortgage insurance premiums | Deductible again as mortgage interest | Starts in 2026 |
| Estate tax exclusion | $15,000,000 per person | Indexed from 2027 |

Main permanent individual provisions and their 2026 amounts

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](https://taxbracketsdesk.com/deductions).

### 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](https://taxbracketsdesk.com/new-tax-law/tax-changes-2027) page tracks what starts and ends in that year.

## Common questions

### What tax changes are in the One Big Beautiful Bill?

For individuals it made the 10% to 37% rates and the larger standard deduction permanent, raised the Child Tax Credit to $2,200, added deductions for tips, overtime, new-car loan interest and seniors for 2025 to 2028, raised the SALT cap through 2029 and ended the clean vehicle and home energy credits.

### When do the new tax deductions expire?

The tips, overtime, car loan interest and senior deductions apply to tax years 2025 through 2028. Unless Congress extends them, they will not be available on 2029 returns filed in 2030.

### Do I have to itemize to get the new deductions?

No. All four are claimed on Schedule 1-A and are allowed whether you take the standard deduction or itemize on Schedule A.

### Did the big beautiful bill eliminate tax on Social Security?

No. Social Security benefits are taxed under the same rules as before. The law instead added a temporary deduction of up to $6,000 per person age 65 or older, which reduces taxable income.

### Is the One Big Beautiful Bill the same as the Working Families Tax Cuts?

Yes. The IRS uses the name Working Families Tax Cuts for the individual provisions of Public Law 119-21, the law signed on July 4, 2025.

## Sources

- [One Big Beautiful Bill provisions: individuals and workers](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions-individuals-and-workers)
- [Publication 505 (2026), Tax Withholding and Estimated Tax](https://www.irs.gov/pub/irs-pdf/p505.pdf)
- [IRS releases tax inflation adjustments for tax year 2026](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill)
- [Revenue Procedure 2025-32](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf)
- [Schedule 1-A: what to know about the new form](https://www.irs.gov/newsroom/schedule-1-a-additional-deductions-what-to-know-about-the-new-form)
- [Clean vehicle tax credits](https://www.irs.gov/clean-vehicle-tax-credits)