It may seem obvious to folks like you, but not everyone knows what’s on the line next year. Most may not even know taxes are changing.
The One Big Beautiful Bill Act (OBBBA) included seven major tax cuts that took effect for 2025:
Maximum child tax credit increase of $200
Standard deduction increase of $750 for single filers and $1,500 for joint filers
State and local tax (SALT) deduction cap increase to $40,000 for taxpayers earning under $500,000
New $6,000 additional deduction for seniors that starts phasing out when taxpayers make more than $75,000 ($150,000 joint)
New $10,000 auto loan interest deduction that starts phasing out when taxpayers make more than $100,000 ($200,000 joint)
New deduction for up to $25,000 in tip income that starts phasing out when taxpayers earn more than $150,000 ($300,000 joint)
New deduction for up to $12,500 in overtime income ($25,000 for joint filers) that starts phasing out when taxpayers earn more than $150,000 ($300,000 joint)
Tax Foundation estimates that, altogether, these seven provisions cut individual income taxes by $129 billion in 2025.
However, the OBBBA added significantly to the federal deficit, which was already on an unsustainable path. The insolvency of major entitlements like Social Security and Medicare is just a few years away.
If you are wondering what this means for taxpayers in 2026, don’t worry, you’re not alone.
Tax Foundation is dedicated to helping taxpayers understand exactly what is happening in the world of tax policy and how it affects their daily lives.
I’m Daniel Bunn, President and CEO of Tax Foundation. Since 1937, our principled research, insightful analysis, and engaged experts have informed taxpayers and lawmakers about smarter tax policy in the US.
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