The One Big Beautiful Bill (OBBB), also known as the “Working Families Tax Cut” signed in July of 2025 makes tax changes that take effect in 2026. Here is a breakdown of what to expect:
- The seven bracket federal income tax structure remains the same (10%, 12%, 22%, 24%, 32%, 35%, 37%). The top 37% applies to income above roughly 640,000 single and $768,700 joint.
- Standard deduction has been adjusted for inflation to
- single: $16,100
- Married Filing Jointly: $32,200
- Head of household: $24,150
- Child Tax Credit increased to $2,200 per qualifying child in 2025 and 2026, now indexed for inflation going forward.
- Qualified business income deduction (Sec. 199A) remains available at 20% for pass-through business owners.
- Estate and gift tax exemption rises to $15 million per person, roughly $30 million per couple.
- Social Security wage base increases to $184,500. Medicare tax rates remain unchanged.
- Effective 2025 through 2028, individuals age 65 and older may claim an additional $6,000 deduction. This is in addition to the standard deduction for seniors available under existing law. Applies per eligible individual (or $12,000 for a married couple if both spouses qualify).
OBBBA adds above-the-line deductions that can reduce your taxable income: (through 2028)
- Up to $25,000 of reported tips may be tax-free for eligible workers.
- Up to $12,500 (single) or $25,000 (joint) of overtime pay could be deductible.
- Interest on car loans (up to $10,000) for new, U.S.-assembled vehicles may be deductible.
(Limits and phase-outs apply based on income.)
Consult with your financial advisor for any additional information or questions.
Stay Diversified, Stay the Course!
