The One Big Beautiful Bill Act, signed into law in 2025, brought several changes that affect 2026 tax filings: a higher standard deduction and Child Tax Credit, a SALT deduction cap raised to $40,000 (subject to income phase-outs), a permanent Section 199A qualified business income deduction, restored 100% bonus depreciation for qualifying business property, and new deductions for qualified tips and overtime pay. There’s also a temporary additional deduction for taxpayers 65 and older, and higher reporting thresholds for 1099-K and 1099-NEC forms. Not all of these will apply to every client — we’ll flag the ones that matter for your return.
Updated November 2026. Most of these changes took effect for tax year 2025, the returns filed in 2026. The 2026 amounts shown below apply to the return you will file in 2027.
On this page:
- The changes at a glance
- What changed for individuals and families
- What changed for business owners
- Which tax year these changes apply to
- Frequently asked questions
The changes at a glance
| Provision | What changed | Key amounts |
|---|---|---|
| Standard deduction | Larger deduction made permanent and indexed for inflation | 2026: $16,100 single, $24,150 head of household, $32,200 married filing jointly (2025: $15,750, $23,625, $31,500) |
| Child Tax Credit | Raised and made permanent | $2,200 per qualifying child under 17, indexed for inflation |
| SALT deduction cap | Raised from $10,000, temporarily | $40,000 for 2025, $40,400 for 2026; reduced above $500,000 (2025) or $505,000 (2026) of income |
| Qualified tips | New deduction, 2025 through 2028 | Up to $25,000; phases out above $150,000 ($300,000 joint) |
| Overtime pay | New deduction for the premium portion, 2025 through 2028 | Up to $12,500 ($25,000 joint); phases out above $150,000 ($300,000 joint) |
| Age 65 and older | Additional deduction, 2025 through 2028 | $6,000 per eligible person; phases out above $75,000 ($150,000 joint) |
| Car loan interest | New deduction, 2025 through 2028 | Up to $10,000 per year; see our car loan interest deduction guide |
| Qualified business income (Section 199A) | Deduction made permanent | 20% deduction for qualifying pass-through business income |
| Bonus depreciation | 100% expensing restored | Qualifying property acquired after January 19, 2025 |
| Form 1099-K | Threshold restored | $20,000 and more than 200 transactions |
| Forms 1099-NEC and 1099-MISC | Threshold raised from $600 | $2,000 for payments made in 2026, indexed starting in 2027 |
What changed for individuals and families
A higher standard deduction
The One Big Beautiful Bill Act (Public Law 119-21, signed July 4, 2025) made the larger standard deduction permanent and raised it. For 2025 it is $15,750 for single filers, $23,625 for heads of household and $31,500 for married couples filing jointly. For 2026 it is $16,100, $24,150 and $32,200.
A larger Child Tax Credit
The credit is now $2,200 per qualifying child under age 17, and it is indexed for inflation. For 2026, the refundable portion is limited to $1,700 per child.
A higher SALT deduction cap
The limit on the state and local tax deduction rose from $10,000 to $40,000 for 2025 and $40,400 for 2026 ($20,200 if married filing separately). It phases down for higher earners and is scheduled to return to $10,000 after 2029. For homeowners in high-tax states such as California, the higher cap can make itemizing worth comparing against the standard deduction.
New deductions on Schedule 1-A
Four new temporary deductions are claimed on Schedule 1-A (Form 1040). They are deductions, not credits, so they reduce taxable income rather than tax directly. You can claim them whether you take the standard deduction or itemize, and all of them run for tax years 2025 through 2028.
- Qualified tips: up to $25,000 for tips received in occupations that customarily receive tips, as long as the tips are reported.
- Overtime: the premium portion of overtime pay required by the Fair Labor Standards Act (the amount above your regular rate), up to $12,500, or $25,000 for joint filers.
- Age 65 and older: an additional $6,000 deduction per eligible person (for 2025, born before January 2, 1961).
- Car loan interest: up to $10,000 of interest on a loan for a new, U.S.-assembled vehicle. Read the full guide to the car loan interest deduction.
The tips, overtime and senior deductions require a valid Social Security number, and married taxpayers must file jointly to claim them. They reduce federal income tax only. Payroll taxes still apply, and many states do not follow the federal deductions.
What changed for business owners
- Section 199A deduction: the qualified business income deduction for pass-through businesses was made permanent.
- Bonus depreciation: 100% expensing is restored for qualifying property acquired after January 19, 2025, and the Section 179 expensing limit was also increased.
- Form 1099-K: the reporting threshold returned to $20,000 and more than 200 transactions, instead of dropping to $600.
- Forms 1099-NEC and 1099-MISC: the threshold rises from $600 to $2,000 for payments made in 2026, so the first forms affected are those filed in early 2027. Payments made in 2025 still use the $600 threshold. The threshold is indexed for inflation starting in 2027.
Which tax year these changes apply to
Most individual provisions began with tax year 2025, so they appear on the returns filed in 2026. Inflation-adjusted amounts for tax year 2026, such as the $16,100 single standard deduction and the $40,400 SALT cap, will be used on returns filed in 2027. The new Schedule 1-A deductions are available for tax years 2025 through 2028, and the 1099-NEC and 1099-MISC change starts with payments made in 2026.
Frequently asked questions about the One Big Beautiful Bill Act
What is the One Big Beautiful Bill Act?
A federal law (Public Law 119-21) signed on July 4, 2025. It made many individual tax provisions permanent, raised the standard deduction and the Child Tax Credit, increased the SALT deduction cap, and created new deductions for tips, overtime, car loan interest and seniors.
What is the standard deduction for 2026?
$16,100 for single filers and married individuals filing separately, $24,150 for heads of household, and $32,200 for married couples filing jointly.
How much is the Child Tax Credit?
$2,200 per qualifying child under age 17, and the amount is indexed for inflation in future years.
What is the SALT deduction cap?
The cap on the state and local tax deduction is $40,000 for 2025 and $40,400 for 2026 ($20,200 if married filing separately). It is reduced for higher earners, starting at modified adjusted gross income above $500,000 in 2025 and $505,000 in 2026, and it is scheduled to return to $10,000 after 2029.
Are tips and overtime now tax-free?
Not entirely. The new deductions reduce federal income tax only, not Social Security or Medicare tax. The tips deduction is capped at $25,000 and the overtime deduction at $12,500 ($25,000 for joint filers), and both phase out above $150,000 of modified adjusted gross income ($300,000 for joint filers).
Do I need to itemize to claim the new deductions?
No. The deductions for tips, overtime, seniors and car loan interest can be claimed whether you take the standard deduction or itemize.
How do I claim the new deductions on my tax return?
On Schedule 1-A (Form 1040), Additional Deductions. The total from Schedule 1-A carries to Form 1040.
Did the 1099 reporting thresholds change?
Yes. The Form 1099-K threshold returned to $20,000 and more than 200 transactions. The Form 1099-NEC and 1099-MISC threshold rose from $600 to $2,000 for payments made in 2026, and it is indexed for inflation starting in 2027.
Related tax law updates
- New car loan interest deduction: who qualifies and how to claim it
- Key tax deadlines for individuals and businesses
- Our tax preparation and planning services
This article is general information, current as of November 2026, and is not tax advice for your specific situation. Not all of these provisions will apply to every client, and we will flag the ones that matter for your return.
Sources
- One Big Beautiful Bill Act, Pub. L. 119-21 (signed July 4, 2025)
- Rev. Proc. 2025-32: inflation adjustments for 2026 (KPMG summary)
- IRS: Schedule 1-A and Form 1040 instructions for the new deductions