Summary
Several significant changes to the U.S. tax code will take place starting January 2026. These changes include tax exemptions for certain types of income, increased deductions, and modified credits aimed at easing financial pressures on Americans. The changes are a result of the One Big Beautiful Bill Act (OBBBA) signed by President Donald Trump.
Key Facts
- Tips up to $25,000 will be tax-free for certain workers for tax years 2025 through 2028.
- Overtime pay will be partially tax-free, with up to $12,500 for individuals and $25,000 for joint filers exempt from federal tax.
- The standard deduction will increase to $32,200 for married couples filing jointly, with adjustments for others based on filing status.
- The child tax credit will rise to $2,200 permanently, beginning with income earned in 2025.
- Seniors aged 65 and over will receive an additional $6,000 deduction, phasing out after $75,000 income for individuals and $150,000 for joint filers.
- The SALT deduction cap increases to $40,000 for under $500,000 earners, with annual increases for five years.
- Alongside existing deductions, a new $1,000 deduction ($2,000 for joint filers) will be available for charitable donations.
- Several green incentives, like the Energy Efficient Home Improvement Credit and Residential Clean Energy Credit, will expire by the end of 2025.
