As Americans prepare to file their 2025 tax returns in early 2026, significant updates from the One Big Beautiful Bill Act (OBBBA)—signed into law on July 4, 2025—are set to impact millions of taxpayers. The legislation, often called President Trump’s “big beautiful bill,” primarily makes permanent many provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that were scheduled to expire at the end of 2025, while introducing new temporary deductions and adjustments.

These changes could lead to larger refunds for many filers, as withholding tables did not adjust in real-time for 2025 reductions.
Experts anticipate the 2026 filing season could see record refunds, with some estimates suggesting averages could rise by $300 to $1,000 compared to prior years, thanks to retroactive cuts totaling around $144 billion for 2025. However, not all provisions benefit everyone equally, and some introduce new complexities.

Key Changes Effective for 2025 Taxes (Filed in 2026)

Several popular campaign promises take effect retroactively for 2025:

• No Tax on Tips: Qualified tipped income in traditional service occupations is fully deductible through 2028, phasing out for higher earners.
• No Tax on Overtime: Workers can deduct up to $12,500 ($25,000 for joint filers) in qualified overtime premium pay through 2028.
• Car Loan Interest Deduction: Up to $10,000 in interest on loans for U.S.-assembled passenger vehicles is deductible (above-the-line) for 2025–2028, with phaseouts for higher incomes.
• Senior Deduction: Taxpayers aged 65+ get an additional $6,000 deduction (above-the-line) through 2028, phasing out above certain income thresholds.
• Higher Standard Deduction: Boosted for 2025, with further inflation adjustments.
• Increased Child Tax Credit: Raised to $2,200 per child for 2025, with expansions in later years.
• Raised SALT Deduction Cap: The state and local tax deduction limit increases from $10,000 to $40,000 (with annual 1% increases through 2029), benefiting residents in high-tax states.

These retroactive provisions mean many workers didn’t see immediate paycheck increases in 2025, setting the stage for bigger refunds when filing in 2026.

Permanent Extensions and Long-Term Changes

The OBBBA prevents a broad tax hike by locking in TCJA elements:

• Individual tax brackets remain at 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
• Higher standard deductions and alternative minimum tax exemptions are made permanent.
• Business incentives, such as full expensing for R&D and certain investments, are extended or enhanced.

Starting in 2026 (affecting returns filed in 2027):

• Standard deduction rises further (e.g., $16,100 for singles).
• New above-the-line charitable deduction up to $1,000 (single)/$2,000 (joint) for non-itemizers.
• Enhanced child care credits and other family supports.
• Some limitations on high-income charitable deductions.

Potential Drawbacks and Complexities

While many see cuts, certain groups face changes:

• Gambling losses deductible at only 90% starting in 2026, potentially increasing taxes for frequent bettors.
• Phaseouts and caps for high earners on new deductions.
• New reporting requirements for employers (e.g., tips and overtime).

The IRS has issued guidance and transitional relief for 2025 reporting, urging taxpayers to organize records early, including new forms for qualified income and interest.

Tax professionals recommend consulting experts, as these rules add layers to preparation. The filing season typically starts late January, with the deadline April 15, 2026. For personalized impact, use IRS tools or calculators from sources like the Tax Foundation.

These reforms aim to boost take-home pay and economic growth, but outcomes vary by income, occupation, and location. Stay updated via IRS.gov for final 2026 adjustments.

Staff Writer Jason Leading Edge Senior Care