The One Big Beautiful Bill changed more about your taxes than any law since the 2017 Tax Cuts and Jobs Act. This summary covers the most significant changes that affect taxpayers for 2026.
Four new deductions – Schedule 1A
These new deductions can be claimed on top of the standard deduction without the need to itemize. They are reported on Schedule 1-A:
No tax on tips
Tipped workers can deduct up to $25,000 of qualifying tip income from federal taxes. Servers,bartenders, delivery drivers, salon workers, and about 70 other occupations qualify. The deduction phases out above $150,000 (single), $300,000 (married couples). Gig workers on DoorDash and Uber qualify too, the deduction is limited to the net Schedule C profit.
No tax on overtime
Hourly workers can deduct the premium half of time-and-a-half pay. If your regular rate is $30 and your overtime rate is $45, the $15 premium is deductible. This is capped at $12,500 for singles and $25,000 married filing jointly. Only FLSA required overtime counts. For 2026, the deductible amount should appear on your W-2.
Car loan interest
You can deduct up to $10,000 of interest on a loan for a new car that was assembled in the United States. the car must be new, not used or leased, and bought after December 2024, and it must have been assembled in a US plant. You must check the VIN on a website that provides the plant location, and the lender must have provided a Form 1098-VLI showing the interest paid.
Senior deduction
Everyone age 65 or older gets an extra $6,000 deduction Married couples where both are 65+ thus get $12,000. This phases out over $75,000 single and $150,000 married. This is in addition to the normal standard or itemized duction.
Updated standard deduction
The standard deduction for 2026 if $16,100 for single filers, $32,200 for married filing jointly, and $24,150 for head of household.
Capital gains
Capital gains brackets shifted up with inflation: a single filer now pays 0% on taxable income of up to $49,450 and a married couple up to $98,900.
Child tax credit increase
The child tax credit increased from $2,000 to $2,200 per qualifying child under 17, with up to $1,700 refundable. This phases out at $200,000 for single and $400,000 married. Also, the child and dependent care credit now covers up to 50% of daycare and camp expenses.
Trump Accounts
This is a new tax-advantaged investment account for children. The government deposits $1,000 for children born 2025 through 2028. Parents can add up to $5,000 per per year. this grows tax deferred in US stock index funds until age 18 when it converts to a traditional IRA.
Charitable deduction for non-itemizers
This is new for 2026; up to $1,000 of cash charitable donations re now deductible without itemizing. ($2,000 for married.)
Filing Status
Married filing separately kills the tips and overtime deductions entirely. Neither spouse can claim either on. It also affects sudent load payments under RAP.
State conformity
The federal deductins do not automatically apply at the state level. Most states have not passed conformity legislation. If you live in California, New York, or most other states, you still pay state tax on your tips and overtime even though the federal deduction applies.
Expiration
Tips, overtime, car loan interest and senior deduction expire after tax year 2028. The SALT cap increase expires after 2029. Trump accounts are permanent.