See How Trump’s Tax Cuts Will Change the Way You File in 2026
The One Big Beautiful Bill Act became law less than six months ago, but several major changes to the tax code have already gone into effect.
Now, as millions of American consumers prepare to file their taxes in early 2026, they will soon find out if they really are better off.
President Donald Trump’s second-term signature tax law extended key provisions from the 2017 Tax Cuts and Jobs Act that were set to expire at the end of 2025, including generous tax brackets and a larger standard deduction. While some of the new policies apply to nearly all taxpayers — for example, most filers take the standard deduction, which will jump from $750 to $16,100 for single filers by 2026 — many of the most notable changes benefit select groups, such as tipped workers or Americans 65 and older.
“There were a lot of deductions set aside or enhanced, but it’s also complicated how to qualify and what you can do to plan for yourself,” said Brian Schultz, tax leader for Plante Moran Wealth Management. “There are many opportunities – but there is more work to be done to pay attention to your taxes than in previous years.”
What exactly is different in 2025 and 2026? Here’s what you need to know:
New tax breaks for tips and overtime pay
The tax law created massive new deductions for tipped workers and overtime workers, both of which Trump is campaigning for in 2024. The “no overtime” and “no overtime” tax deductions are in effect from 2025 to 2028, and millions of taxpayers will benefit.
Under the tip tax break, some hard-working waiters, bartenders and baristas will save thousands of dollars, and the policy aims to eliminate discrepancies in the taxability of reported and unreported tips.
Employees who receive tips can now deduct up to $25,000 of their income from their taxable income, and eligibility requirements have recently become more generous. On Nov. 21, the IRS announced that this filing season, it will take a more liberal approach to assessing what counts as income.
The original guidelines identified 68 categories of work that would qualify for the deduction. However, due to confusion about the new rules and who exactly meets the definitions, the IRS announced a transition period intended to provide temporary relief to tipped workers, namely those who work in a “certain service trade or business,” such as the health or legal field.
The “no tax on tips” deduction occurs if the individual’s total adjusted income is over $150,000. The same is true of the new overtime deduction, which is similarly set to expire after 2028.
The overtime deduction is a new tax benefit for non-hourly employees under the Fair Labor Standards Act who work more than 40 hours per week. Eligible employees are able to deduct up to $12,500 with this new policy.
An important caveat: The deduction only applies to payments above the employee’s average rate, explains Andy Phillips, head of The Tax Institute at H&R Block. So if an employee makes $20 an hour normally, with an overtime rate of $30 an hour, they can only deduct an additional $10 per hour earned.
“That’s misunderstood,” Phillips said.
$6,000 maximum bonus: Who is eligible
Millions of taxpayers age 65 and older will benefit from a “high bonus withholding” of $6,000 for individuals or $12,000 for couples. Federal government officials described this provision of the bill as a fulfillment of Trump’s campaign promise to eliminate taxes on Social Security benefits, which are currently paid to recipients with incomes above $25,000 per person.
In a November 20 letter to Congress, Social Security Commissioner Frank Bisignano described the new benefit as “a tax deduction that eliminates Social Security federal income tax for nearly all beneficiaries.”
However, tax experts say the draft has created confusion, as the bonus tax break clearly does not include the Social Security system. It’s classified as an additional deduction for taxpayers age 65 and older that comes out when a person’s adjusted gross income exceeds $75,000.
“Many people may think they won’t pay taxes on any of their Social Security benefits, but that’s not how the law works,” Phillips said.
Social Security beneficiaries under the age of 65 are not eligible for the maximum bonus. Also, people age 65 and older who are not yet receiving benefits can still claim the deduction, further indicating that the deduction is not actually tied to Social Security, he adds.
1099-K rules for 2025 and 2026
Taxpayers who receive payments from apps or online marketplaces are issued 1099-K forms if the amounts exceed a certain threshold.
As of late last year, the IRS was expected to lower that limit to $600 in 2026, down from $5,000 in 2024, causing panic among sellers who fear increased IRS scrutiny of their sales. However, the OBBBA rejected that plan.
The tax law ensures that the old cutoff for transactions of $20,000 and 200 will be the standard for 2025 and beyond. That means that many people selling casually on sites like eBay and Ticketmaster won’t need to deal with this form, which has caused tons of confusion in recent years.
However, they are still responsible for paying taxes on the income they make.
“It doesn’t change the reporting obligation to declare the income, but it reduces the amount of administrative burden to issue all the documents related to those payments,” said Schultz.
What other tax laws are changing?
Smaller groups of taxpayers will benefit from other, more specific pieces of the OBBBA.
For one, filers claiming the state and local tax (SALT) deduction can now deduct up to $40,000 of their income, up from $10,000. This change will make things more attractive to high earners and residents of high tax jurisdictions.
Families may want to keep an eye on the child tax credit, which has increased to $2,200 per child by 2025: up from $2,000 last year. And parents of children born in 2025 — and future parents of children born in 2026 to Jan. 1, 2029 — they will be able to set up so-called “Trump Accounts” for their children. The government will deposit the first $1,000 into tax-advantaged accounts. From there, additional contributions of up to $5,000 can be made to Trump accounts, which can be accessed when the owner becomes an adult.
Drivers can expect to see what the IRS calls “no tax on car loan interest” thanks to a new car loan interest deduction aimed at middle-income families. The deduction ends when income exceeds $100,000, which limits who can access the deduction. (Research shows that new car buyers typically have six-figure incomes.)
Finally, beginning in 2026, taxpayers can deduct up to $1,000 in new income for qualified charitable gifts. This is an above-the-line deduction, which means you don’t have to do anything to claim it.
The rules are also changing for sellers who donate to nonprofit organizations.
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