The One Big Beautiful Bill Act has been law for less than six months, yet it has already initiated significant transformations within the tax code. As millions of American consumers prepare to file their tax returns in early 2026, they will soon discover whether these changes have truly improved their financial situations.
President Donald Trump’s second-term tax legislation has extended pivotal provisions from the 2017 Tax Cuts and Jobs Act that were set to expire at the close of 2025. This includes more favorable tax brackets and a considerably elevated standard deduction. While many of the new policies benefit a wide range of taxpayers — for example, the standard deduction is set to rise by $750 to $16,100 for single filers in 2026 — several notable changes specifically advantage particular demographics, such as tipped workers and Americans aged 65 and older.
“Numerous new deductions have been introduced or enhanced, but there’s also increased complexity surrounding the qualifications for these deductions and the planning required to take advantage of them,” explains Brian Schultz, leader of the Plante Moran Wealth Management tax practice. “While there are more opportunities available, taxpayers must pay closer attention to their tax situations than in prior years.”
What are the key differences in tax regulations for 2025 and 2026? Here’s what you need to understand:
Explore New Tax Deductions for Tipped and Overtime Workers
The recent tax legislation introduced significant new deductions for tipped workers and overtime workers, both key points in Trump’s 2024 campaign. The “no tax on tips” and “no tax on overtime” deductions are applicable from 2025 through 2028, allowing millions of taxpayers to reap the benefits.
With the tip deduction in place, many dedicated waitstaff, bartenders, and baristas can save thousands of dollars on their taxes. This policy aims to eliminate the inconsistencies in how reported and unreported cash tips are taxed, ensuring fairness in the tax system.
Workers earning tips can now deduct up to $25,000 of tip income from their taxable income, with eligibility criteria recently becoming more accommodating. On November 21, the IRS announced that for the upcoming filing season, it would take a lenient stance regarding what qualifies as tipped income.
Preliminary guidance has identified 68 job categories eligible for the deduction. Yet, due to confusion surrounding the new regulations and definitions, the IRS has introduced a transition period to provide temporary relief for tipped workers, particularly those engaged in a “specified service trade or business,” such as healthcare or legal fields.
The “no tax on tips” deduction begins to phase out if an individual’s modified adjusted gross income exceeds $150,000, which applies similarly to the new overtime pay deduction, set to expire after 2028.
The overtime deduction presents a new tax benefit for non-exempt hourly employees covered by the Fair Labor Standards Act who work more than 40 hours a week. Eligible employees can deduct up to $12,500 under this new provision.
It’s crucial to note that this deduction is only applicable to the additional pay beyond the employee’s regular hourly rate, as explained by Andy Phillips, head of The Tax Institute at H&R Block. For instance, if a worker typically earns $20 per hour and receives an overtime rate of $30, they may only deduct the additional $10 per hour earned during overtime.
“This is not widely understood,” Phillips adds.
Understanding the $6,000 Senior Bonus: Who is Eligible?
Millions of taxpayers aged 65 and older stand to gain from the new “senior bonus” deduction, which offers $6,000 for individuals and $12,000 for married couples. Federal officials have characterized this provision as a realization of Trump’s campaign promise to eliminate taxes on Social Security benefits, which currently affects recipients whose income exceeds $25,000 for individuals.
In a letter to Congress dated November 20, Social Security Commissioner Frank Bisignano referred to the new benefit as a “tax deduction that removes federal income taxes on Social Security for nearly all beneficiaries.”
However, tax professionals caution that this framing may lead to misunderstandings since the senior bonus tax relief does not directly involve the Social Security program. Rather, it functions as an additional deduction for taxpayers aged 65 and over, phasing out when their modified adjusted gross income surpasses $75,000.
“Many individuals might still assume they won’t owe taxes on any of their Social Security benefits, but that isn’t entirely accurate,” Phillips clarifies.
Notably, Social Security beneficiaries under 65 do not qualify for the senior bonus. Additionally, individuals aged 65 and older who have not yet begun receiving benefits can still claim the deduction, further illustrating that the deduction is not inherently linked to Social Security, he explains.
Key Changes to 1099-K Rules for 2025 and 2026
Taxpayers who receive payments through apps or online marketplaces must typically report these transactions using 1099-K forms when their earnings surpass a specific threshold.
As of late last year, there was anticipation that the IRS would lower that threshold to $600 in 2026, down from $5,000 in 2024, igniting concern among sellers who feared increased scrutiny from the IRS regarding their sales. However, the One Big Beautiful Bill Act has eliminated that plan.
The new tax law maintains the previous cutoff of $20,000 and 200 transactions as the standard for 2025 and beyond. This means that most individuals who engage in casual sales on platforms like eBay and Ticketmaster will be exempt from dealing with this form, which has previously caused considerable confusion.
Nonetheless, these sellers remain responsible for reporting and paying taxes on their earnings.
“This change does not alter the obligation to declare income, but it does lessen the administrative burden associated with the paperwork for these payments,” Schultz notes.
What Additional Tax Regulations are Changing in 2025?
Smaller groups of taxpayers will gain from other, more specialized provisions of the One Big Beautiful Bill Act.
For example, taxpayers who itemize and claim the state and local tax (SALT) deduction can now deduct up to $40,000 from their income, a notable increase from the previous cap of $10,000. This adjustment will make itemizing a more appealing option for high-income earners and those residing in high-tax areas.
Families should also pay attention to the child tax credit, which has been raised to $2,200 per child for 2025, up from the previous $2,000. Additionally, parents of children born in 2025 — and parents expecting children born between 2026 and January 1, 2029 — will have the opportunity to establish “Trump Accounts” for their children. The government will contribute an initial $1,000 into these tax-advantaged accounts, with additional contributions of up to $5,000 permitted, accessible when the child reaches adulthood.
Car owners can look forward to the IRS implementing a “no tax on car loan interest” policy, thanks to a new car loan interest deduction targeted at middle-income households. This deduction phases out for individuals earning over $100,000, which restricts access to the benefit. Research indicates that new car buyers typically possess six-figure incomes.
Lastly, starting in 2026, taxpayers will be eligible for a new deduction of up to $1,000 for qualifying charitable gifts. This is categorized as an above-the-line deduction, meaning taxpayers do not need to itemize their deductions to claim it.
The regulations are also evolving for itemizers who donate to nonprofit organizations.
Discover More Valuable Insights from Money:
7 Best Tax Relief Companies of December 2025
Here Are the Federal Income Tax Brackets for This Year
Tax Changes 2025: What’s New With Taxes and the IRS This Year?
