One Big Beautiful Bill — Signed 2025 · Active 2025–2028
2026 Tax Changes — Every New Deduction Explained
The One Big Beautiful Bill introduced four major federal tax changes effective 2025–2028. Here is exactly what changed, who qualifies, how much you save, and how to calculate your paycheck with the new rules.
No Tax on Overtime
Save up to $2,750–$4,625/year
W-2 employees can deduct up to $12,500 of overtime pay annually from federal taxable income.
Max deduction$12,500/year
Who qualifiesW-2 FLSA employees
1099 workersNot eligible
Affects FICA?No
Valid throughTax year 2028
Calculate Overtime Savings →No Tax on Tips
Save up to $5,500/year
Tipped workers in qualifying occupations can deduct up to $25,000 of tip income from federal taxable income.
Max deduction$25,000/year
Who qualifiesTipped occupations
Income limitUnder $160,000
Affects FICA?No
Valid throughTax year 2028
Calculate Tip Savings →Senior $6,000 Deduction
Save up to $1,320/year
Taxpayers age 65+ receive an additional $6,000 above-the-line deduction on top of the standard deduction.
Extra deduction$6,000/year
Age requirement65 or older
Income phaseoutAbove $75,000
On top ofStandard deduction
Valid throughTax year 2028
Calculate Senior Savings →Trump Account
$38,000+ projected at age 18
Government-seeded savings account for children under 8. $1,000 federal seed plus up to $2,500/year employer contributions.
Gov seed$1,000 one-time
Max employer/yr$2,500/year
Child age limitUnder 8 at opening
Tax treatmentTax-advantaged
AccessAt age 18
Calculate Trump Account →Real Savings Scenarios by Job
Factory Worker
Regular salary$52,000
Annual overtime$9,800
OT deduction$9,800
Federal bracket22%
Annual savings$2,156
Restaurant Server
Base wages$28,000
Annual tips$22,000
Tip deduction$22,000
Federal bracket12%
Annual savings$2,640
Retired Worker 65+
Income$58,000
Age67
Extra deduction$6,000
Federal bracket22%
Annual savings$1,320
Who Qualifies — Quick Reference
| Deduction | W-2 Employee | 1099 Contractor | Max Amount | Affects FICA |
|---|---|---|---|---|
| No Tax on Overtime | Yes | No | $12,500/yr | No |
| No Tax on Tips | Yes (tipped) | Yes (tipped) | $25,000/yr | No |
| Senior Deduction | Yes (65+) | Yes (65+) | $6,000/yr | No |
| Trump Account | Yes | Yes | $2,500/yr + seed | N/A |
2026 Tax Changes — FAQs
What are the new tax changes for 2026?
Four changes from the One Big Beautiful Bill: no tax on overtime (up to $12,500), no tax on tips (up to $25,000), $6,000 senior deduction (age 65+), and Trump Accounts for children. All reduce federal taxable income for tax years 2025–2028.
Does the no-tax-on-overtime apply to 1099 workers?
No. Only W-2 employees earning FLSA overtime qualify. Self-employed workers and 1099 contractors are not eligible for the overtime deduction.
How much can I save with the overtime deduction?
At 22% bracket: $12,500 max deduction × 22% = $2,750 saved. At 24%: $3,000. At 12%: $1,500. FICA taxes are not reduced.
Who qualifies for the $6,000 senior deduction?
Taxpayers age 65+ with AGI below $75,000 (single) or $150,000 (MFJ) get the full $6,000. It phases out above these thresholds.
Are these changes permanent?
No — currently authorized through tax year 2028. Congress must extend them. The Trump Account program has a longer authorization window.