The One Big Beautiful Bill Act, signed into law on July 4, 2025, introduces significant changes to federal tax deductions and credits for 2026, including higher standard deductions and new temporary tax breaks for workers and families.
For the 2026 tax year, the standard deduction increases across all filing statuses. Single filers see a rise to $16,100 from $15,750, married couples filing jointly jump to $32,200 from $31,500, and heads of household reach $24,150 from $23,625, according to the IRS. These increases follow inflation adjustments and represent a modest boost for most taxpayers.
The Child Tax Credit also grows under the new law. For 2026, the credit increases to $2,200 per child under age 17, up from $2,000, providing families with an additional $200 per child. The credit remains partially refundable up to $1,700 per child, meaning eligible families can receive a refund even if they owe no tax.
The state and local tax (SALT) deduction cap rises to $40,400 for 2026, up from $40,000 in 2025. This cap will increase by 1% annually through 2029 before reverting to the previous $10,000 limit in 2030, according to the IRS.
New Deductions and Credits for Workers and Seniors
Beyond standard deduction increases, the Big Beautiful Bill introduces several new temporary deductions available through 2028. Taxpayers age 65 and older can claim an additional $6,000 deduction, providing enhanced relief for seniors. Workers who earned tips can deduct up to $25,000 annually, while those who worked overtime can claim up to $12,500 in overtime pay deductions. A new deduction for auto loan interest allows up to $10,000 per year on interest paid on new vehicle loans.
For families with children born between 2025 and 2028, the law creates Trump Accounts—special savings accounts where the federal government deposits a one-time $1,000 contribution. Parents and employers can add up to $5,000 annually ($2,500 from employers), with funds invested in U.S. stock index funds and treated similarly to traditional IRAs once the child turns 18.
The expansion of the Child and Dependent Care Credit also increases the maximum credit percentage to 50% from 35%, meaning families with lower adjusted gross incomes can receive between $600 and $1,500 per dependent, or up to $3,000 for multiple dependents, according to Jackson Hewitt Tax Services.
These changes build on the foundation laid by the 2017 Tax Cuts and Jobs Act, which nearly doubled the standard deduction from $6,500 to $12,000 for single filers and from $13,000 to $24,000 for married couples filing jointly. The Big Beautiful Bill makes those expanded standard deductions permanent and now increases them further, ensuring long-term certainty for tax planning.
The law also makes permanent the current tax brackets—10%, 12%, 22%, 24%, 32%, 35%, and 37%—eliminating uncertainty about future rate changes. This permanence provides stability for individuals and businesses as they plan for 2026 and beyond.
Sources
- Internal Revenue Service (IRS) — Official guidance on One Big Beautiful Bill provisions, including standard deduction amounts, Child Tax Credit increases, SALT deduction cap changes, and new deductions for seniors, tips, overtime, and auto loan interest
- Jackson Hewitt Tax Services — Detailed breakdown of 2026 tax changes including standard deduction increases, Child Tax Credit enhancements, and Child and Dependent Care Credit modifications
- Tax Policy Center — Historical comparison of how the 2017 Tax Cuts and Jobs Act increased the standard deduction from pre-2018 levels
