What is the One Big Beautiful Bill Act?
The One Big Beautiful Bill Act (OBBBA), enacted in 2025 as Public Law 119-21, is a major federal tax-and-spending law. For individuals, it made the 2017 tax brackets permanent and added a wave of new deductions, credits, and savings programs — most of them temporary for tax years 2025 through 2028. Below is each change explained, with the verified amounts and a calculator so you can see your own number.
1. No Tax on Tips
Eligible tipped workers can deduct up to $25,000 of qualified tips per return from federal taxable income (IRC §224), 2025–2028. It phases out above $150,000 (single) / $300,000 (joint) of income. Important: it reduces income tax only — tips still owe Social Security and Medicare. Calculate your tip savings →
2. No Tax on Overtime
Workers can deduct their overtime premium — the extra "half" of time-and-a-half — up to $12,500 (single) / $25,000 (joint) (IRC §225), 2025–2028, with the same income phase-out. Only the premium qualifies, not full overtime pay. Calculate your overtime savings →
3. Senior Bonus Deduction
People age 65+ get a $6,000 bonus deduction ($12,000 for couples both 65+) (IRC §151(d)(5)), 2025–2028, phasing out at 6% of income over $75,000 / $150,000. It's a deduction, not a Social Security exemption — but for many retirees it erases the tax on their benefits. Check your senior deduction →
4. Car Loan Interest Deduction
Interest on a qualifying new, U.S.-assembled vehicle loan is deductible up to $10,000 per year (IRC §163(h)(4)), 2025–2028, phasing out above $100,000 / $200,000. Calculate your car-loan savings →
5. Higher SALT Deduction Cap
The state-and-local-tax deduction cap rose from $10,000 to $40,000 (2025) / $40,400 (2026) (IRC §164(b)(6)), phasing down for incomes over $505,000 and reverting to $10,000 in 2030. SALT only helps if you itemize. Check your SALT deduction →
6. Bigger Child Tax Credit
The Child Tax Credit is now a permanent $2,200 per child under 17 (refundable up to $1,700), plus $500 per other dependent (IRC §24), phasing out above $200,000 / $400,000. Calculate your credit →
7. Trump Accounts
Children born 2025–2028 receive a $1,000 federal seed in a tax-deferred investment account; families can add up to $5,000/year until the child turns 18. Project your child's balance →
8. RAP Student Loan Plan
The new Repayment Assistance Plan (from July 1, 2026) replaces SAVE: payments are 1–10% of AGI minus $50 per dependent, with forgiveness after 30 years and no negative amortization. Estimate your RAP payment →
Frequently asked questions
What are the main 2026 tax changes in the OBBBA?
New deductions for tips, overtime, seniors, and car-loan interest; a higher $40,000 SALT cap; a permanent $2,200 Child Tax Credit; Trump Accounts; and the RAP student-loan plan. Most deductions apply for 2025–2028.
Are the OBBBA tax breaks permanent?
Most are temporary (2025–2028). The tax brackets and the $2,200 Child Tax Credit are permanent; the SALT cap reverts to $10,000 in 2030.
Can I claim several of these at once?
Yes — deductions stack, each subject to its own cap and phase-out. The Total Tax Change calculator combines them for you.
Sources
Disclaimer: Educational summary based on the 2026 OBBBA statute and IRS guidance; several provisions are still being finalized. Not tax advice. FedCalc is independent and not affiliated with the U.S. government or IRS.