Trump's Tax Cuts Will Change How Millions of Americans File in 2026: Are You One of Them?
The One Big Beautiful Bill Act became law less than six months ago, but several major changes to the tax code have already taken effect.
Now, as millions of American consumers gear up to file their taxes in early 2026, they'll soon find out whether they're truly better off.
President Donald Trump's signature second-term tax law extended key provisions from the 2017 Tax Cuts and Jobs Act that were due to expire at the end of 2025, including more generous tax brackets and a significantly larger standard deduction. While some of the new policies apply to almost all taxpayers — for instance, most filers take the standard deduction, which will jump by $750 to $16,100 for single filers in 2026 — many of the most notable changes benefit select groups, like tipped workers or Americans 65 and older.
"There were a lot of new deductions put in place or enhanced, but there's also more complexity on how you qualify for them or what you can do to plan for them," says Brian Schultz, leader of the Plante Moran Wealth Management tax practice. "More opportunities — but more work to be done to pay attention to your taxes than in previous years."
What's actually different in 2025 and 2026? Here's what you need to know:
New tax breaks for tips and overtime pay
The tax law created major new deductions for tipped workers and overtime workers, both of which Trump campaigned on in 2024. The "no tax on tips" and "no tax on overtime" deductions are in effect for 2025 through 2028, and millions of taxpayers stand to benefit.
Under the tip deduction tax break, some hard-working waiters, bartenders and baristas will save thousands of dollars, and the policy aims to put an end to discrepancies in taxation of reported and unreported cash tips.
Workers receiving tips can now deduct up to $25,000 of tip income from their taxable income, and the eligibility requirements recently became more generous. On Nov. 21, the IRS announced that for this filing season, it will be taking a relaxed approach to assessing what counts as tipped income.
Preliminary guidance listed 68 job categories that would be eligible for the deduction. However, due to confusion about the new rules and who exactly meets the definitions, the IRS announced a transition period meant to provide temporary relief for tipped workers, namely those who work in a "specified service trade or business," like a health or law field.
The "no tax on tips" deduction phases out if an individual's modified adjusted gross income is over $150,000. That is also the case for the new overtime pay deduction, which is similarly set to expire after 2028.
The overtime deduction is a new tax benefit for non-exempt hourly employees under the Fair Labor Standards Act who work over 40 hours a week. Eligible workers are able to deduct up to $12,500 with this new policy.
An important caveat: The deduction only applies to pay on top of the employee's regular rate, explains Andy Phillips, head of The Tax Institute at H&R Block. So if a worker makes $20 per hour normally, with an overtime pay rate of $30 per hour, they can only deduct the extra $10 per hour earned.
"That's not super well-understood," Phillips says.
$6,000 senior bonus: Who qualifies
Millions of taxpayers 65 and older will benefit from the new "senior bonus" deduction of $6,000 for individuals or $12,000 for married couples. Federal government officials have described this provision of the bill as fulfillment of Trump's campaign pledge to end taxes Social Security benefits, which are currently paid by recipients with income over $25,000 for individuals.
In a Nov. 20 letter to Congress, Social Security Commissioner Frank Bisignano described the new benefit as a "tax deduction that eliminates federal income taxes on Social Security for almost all beneficiaries."
However, tax experts say this framing has created confusion, as the senior bonus tax break doesn't explicitly involve the Social Security program. It's structured as an extra deduction for taxpayers 65 and older that phases out if the person's modified adjusted gross income exceeds $75,000.
"A lot of people may still think that they're not going to pay tax on any of their Social Security benefits, but that's not exactly how the rule works," Phillips says.
Social Security beneficiaries under 65 are not eligible for the senior bonus. Also, people 65 and over who aren't yet receiving benefits can still claim the deduction, further demonstrating that the deduction is not actually tied to Social Security, he adds.
1099-K rules for 2025 and 2026
Taxpayers who receive payments from apps or online marketplaces are issued 1099-K forms when amounts exceed a certain limit.
As of late last year, the IRS was expected to lower that threshold to $600 for 2026, down from $5,000 in 2024, creating panic among sellers fearing additional IRS scrutiny of their sales. However, the OBBBA scrapped that plan.
The tax law ensures that the old cutoff of $20,000 and 200 transactions will instead be the standard for 2025 and beyond. That means most people who sell casually on sites like eBay and Ticketmaster won't need to deal with this form, which has caused tons of confusion in recent years.
They still, however, are responsible for paying taxes on the money they make.
"It's not changing the reporting obligation to declare income, but it is reducing the amount of administrative burden to issue all the paperwork related to those payments," Schultz says.
What other tax rules are changing?
Smaller groups of taxpayers will benefit from other, more specific pieces of the OBBBA.
For one, itemizers who claim the state and local tax (SALT) deduction can now deduct up to $40,000 from their income, an increase from $10,000. This change will make itemizing more attractive for high-earners and residents of high-tax areas.
Families may want to keep an eye on the child tax credit, which was bumped up to $2,200 per child for 2025: an increase from $2,000 the year before. And parents of children born in 2025 — and future parents of children born 2026 through Jan. 1, 2029 — will be able to establish so-called "Trump Accounts" for their kids. The government will deposit an initial $1,000 in the tax-advantaged accounts. From there, additional contributions of up to $5,000 can be made to Trump Accounts, which can be accessed when the owner becomes an adult.
Drivers can expect to see what the IRS calls "no tax on car loan interest" thanks to a new car loan interest deduction aimed at middle-income households. The deduction phases out if income is over $100,000, which limits who can access the deduction. (Research shows new car buyers typically have six-figure incomes.)
Finally, starting in 2026, taxpayers can take a new deduction of up to $1,000 for qualifying charitable gifts. This is an above-the-line deduction, meaning it's not necessary to itemize to claim it.
The rules are also changing for itemizers who donate to nonprofits.
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