Guide
The OBBBA Tax Guide: What the New 2026 Tax Brackets Mean for Your Wallet
If you've heard the term "OBBBA" floating around this tax season and had no idea what it meant, you're not alone. The One Big Beautiful Bill Act was signed into law on July 4, 2025. It's the biggest piece of federal tax legislation to take effect since the 2017 Tax Cuts and Jobs Act, and most of its provisions kick in starting with the 2026 tax year.
The short version: your 2017 tax cuts, which were scheduled to expire at the end of 2025, are now permanent. On top of that, several brand-new deductions have been added for tips, for overtime pay, and for seniors, and they could genuinely change what shows up on your paycheck or your refund next spring.
This guide breaks down exactly what changed, who benefits, and how to estimate the real dollar impact on your own income using our 2026 income tax calculator.
What the OBBBA Actually Changed
The One Big Beautiful Bill Act didn't rewrite the tax code from scratch. It mostly made the 2017 Tax Cuts and Jobs Act's temporary provisions permanent, while layering in a handful of genuinely new deductions. Here's what's locked in for good:
Tax rates stay at 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Without the OBBBA, the top rate was scheduled to jump back to 39.6% starting in 2026, so this reversal is the main reason the bill matters most to higher earners.
The standard deduction is now permanently higher, and continues adjusting for inflation every year going forward.
Personal and dependent exemptions remain eliminated, a carryover from the 2017 law, with a specific exception carved out for certain seniors (more on that below).
The New 2026 Standard Deduction Numbers
This is the number most people actually want. For the 2026 tax year, the standard deduction is:
$16,100 for single filers and those married filing separately $24,150 for head of household filers $32,200 for married couples filing jointly
These figures already include the annual inflation adjustment, and they'll keep adjusting every year. This isn't a one-time bump, it's now baked into how the deduction is calculated going forward.
For the roughly 90% of taxpayers who take the standard deduction rather than itemizing, this is the single most important number on your return. It's a straight, no-questions-asked reduction to your taxable income before any tax bracket math even begins.
Three New Deductions Worth Knowing About
Beyond the standard deduction bump, the OBBBA introduced three specific new deductions that didn't exist before.
Tipped workers can now deduct up to $25,000 of tip income per taxpayer, with the deduction phasing out once your Modified Adjusted Gross Income (MAGI) crosses $150,000 (single) or $300,000 (married filing jointly).
Overtime pay gets a similar treatment: up to $12,500 deductible for a single filer, $25,000 for joint filers, using the same $150,000/$300,000 MAGI phase-out thresholds.
Seniors age 65 and older get an additional $6,000 deduction on top of the existing age-65 standard deduction add-on. This one starts phasing out at a MAGI of $75,000 (single) or $150,000 (joint), and it's currently scheduled to run through the 2028 tax year rather than being permanent like the rate structure.
These are deductions, not full exemptions: they reduce the amount of income subject to tax. They don't mean tips or overtime are entirely tax-free for everyone, especially once income climbs past the phase-out thresholds.
What Changed for Itemizers and Business Owners
If you itemize deductions rather than taking the standard deduction, two changes are worth flagging.
The SALT (State and Local Tax) deduction cap rose sharply, from $10,000 to $40,000 for 2025, with the cap increasing roughly 1% annually through 2029 before phasing down for taxpayers with MAGI above $500,000. People in high-tax states who used to max out the old $10,000 ceiling fast will feel this one directly.
A new cap limits the value of itemized deductions for the highest tax bracket. Starting with the 2026 tax year, taxpayers in the top bracket see their itemized deductions capped at a tax benefit of 35 cents per dollar deducted, rather than the full 37 cents their bracket would otherwise imply.
Gambling loss deductions were trimmed from 100% to 90% of losses, starting in 2026. The Child Tax Credit rose from $2,000 to $2,200 per qualifying child under 17, for both 2025 and 2026.
How to Estimate Your Own 2026 Tax Impact
Reading about brackets and deduction amounts only gets you so far. What actually matters is what these changes do to your specific paycheck. The fastest way to see that is to run your real numbers:
Start with your expected 2026 gross salary. Use our free 2026 income tax calculator to see your baseline federal tax under the new permanent brackets. If you earn tips or overtime, subtract the applicable deduction (up to the phase-out limits above) before estimating your taxable income. If you're 65 or older, remember to factor in the additional $6,000 senior deduction on top of your standard deduction.
Because OBBBA's numbers are already reflected in current federal bracket structures, our calculator gives you an accurate, up-to-date estimate without needing to manually adjust for any of these changes yourself.