Frequently Asked Questions
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How does the One Big Beautiful Bill Act affect my life?
The One Big Beautiful Bill Act brings significant changes to federal taxes, deductions, and credits that may impact how much you owe or how much you can save. The law was signed on July 4, 2025, as Public Law 119-21, and many provisions take effect beginning in tax year 2025, with expanded benefits in 2026.
This legislation is designed to adjust for inflation, provide relief to working individuals and seniors, and introduce new deductions related to tips, overtime, and personal vehicle loans.
Below is a simplified breakdown of what may apply to you.
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Individual Tax Changes
Standard Deduction Increases
Tax Year 2026
• $32,200 — Married Filing Jointly
• $16,100 — Single or Married Filing Separately
• $24,150 — Head of Household
Tax Year 2025
• $31,500 — Married Filing Jointly
• $15,750 — Single or Married Filing Separately
• $23,625 — Head of Household
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Marginal Tax Rates (Tax Year 2026)
• 37% — Income over $640,600 (Single) / $768,700 (MFJ)
• 35% — Income over $256,225 (Single) / $512,450 (MFJ)
• 32% — Income over $201,775 (Single) / $403,550 (MFJ)
• 24% — Income over $105,700 (Single) / $211,400 (MFJ)
• 22% — Income over $50,400 (Single) / $100,800 (MFJ)
• 12% — Income over $12,400 (Single) / $24,800 (MFJ)
• 10% — Income up to $12,400 (Single) / $24,800 (MFJ)
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Alternative Minimum Tax (AMT) Exemptions – 2026
• $90,100 — Single filers (phases out at $500,000)
• $140,200 — Married Filing Jointly (phases out at $1,000,000)
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Estate Tax Exclusion – 2026
• $15,000,000 exclusion, increased from $13,990,000 for 2025
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Adoption Credit – 2026
• Maximum credit: $17,670
• Up to $5,120 refundable
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New & Expanded Deductions
Additional Deduction for Seniors (Age 65+)
Effective 2025–2028
• Extra $6,000 deduction per eligible individual
• $12,000 for married couples if both spouses qualify
• Applies whether you itemize or not
• Phases out at:
• $75,000 MAGI (single)
• $150,000 MAGI (joint)
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No Tax on Tips (2025–2028)
• Deduction for qualified tips received in tipped occupations
• Maximum deduction: $25,000 annually
• Applies to both employees and eligible self-employed individuals
• Phases out at:
• $150,000 MAGI (single)
• $300,000 MAGI (joint)
Note: Certain service businesses and their employees may not qualify.
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No Tax on Overtime (2025–2028)
• Deduction for the overtime premium portion of pay
• Maximum deduction:
• $12,500 (single)
• $25,000 (married filing jointly)
• Phases out at the same income levels as the tip deduction
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No Tax on Car Loan Interest (2025–2028)
• Deduct up to $10,000 in interest annually
• Applies to personal-use vehicle loans only (not leases)
• Vehicle must:
• Weigh under 14,000 lbs
• Be finally assembled in the U.S.
• VIN must be reported on the tax return
• Phases out at:
• $100,000 MAGI (single)
• $200,000 MAGI (joint)
What’s this extra $1000 added to income tax this year? I heard on the news that an extra $1000 could be added
Yes, for the 2026 tax filing season (covering the 2025 tax year), many Americans can expect an average of $1,000 more in their tax refunds due to new tax legislation known as the “One Big Beautiful Bill” (OBBBA), signed into law in July 2025.
This increase is not an added tax, but rather a result of lower overall tax liability and expanded tax breaks, combined with the fact that withholding tables were not adjusted to reflect these changes during 2025.
Why Refunds are Larger in 2026
• The “One Big Beautiful Bill” (OBBBA):Signed on July 4, 2025, this legislation enacted several tax cuts, including an increased standard deduction, a larger child tax credit, and new deductions for tips, overtime, and car loan interest.
• Withholding Mismatch: Because the IRS did not update withholding tables immediately, many workers paid more in taxes throughout 2025 than they actually owed, resulting in a larger refund when they file in 2026.
• Key Deductions/Credits:
◦ Child Tax Credit: Increased to $2,200 per child.
◦ Standard Deduction: Increased for 2025 ($31,500 for married filing jointly).
◦ SALT Deduction: The State and Local Tax deduction cap was increased to $40,000.
◦ New Deductions: Up to $25,000 in tips, $12,500 in overtime, and $10,000 in car loan interest can be deducted.
• “Trump Accounts”: A $1,000 pilot program contribution is available for eligible children born between January 1, 2025, and December 31, 2028, which can be claimed by filing Form 4547.
Key Takeaways
• Tax Relief, Not Tax Increase: The changes generally lower the tax burden, resulting in more money back, not more money owed.
• Timing: The filing season opened on January 26, 2026.
• Variable Impact: While many may see a $1,000 increase, the actual amount depends on income, filing status, and which new deductions apply to your situation (with middle-income households with children expected to benefit most).
For more information, visit the official IRS website (irs.gov) (https://www.irs.gov/) and check for updates regarding the 2026 tax filing season.
Family & Dependent Questions
Can both parents claim a child on their tax returns?
Under IRS rules, a child can only be claimed as a dependent on one return per tax year, but separated or divorced parents can legally share tax benefits in specific ways.
Common Options:
1. Form 8332 (Release of Claim)
• Custodial parent signs Form 8332
• Noncustodial parent claims the Child Tax Credit
• Parents often alternate years
2. Multiple Children
• One parent claims one child, the other claims another
3. Splitting Benefits
• Custodial parent claims:
• Head of Household
• Earned Income Credit (EIC)
• Noncustodial parent claims:
• Child Tax Credit using Form 8332
Important IRS Rules:
• With 50/50 custody, the higher AGI parent is treated as custodial unless Form 8332 applies
• If both parents claim the same child, the first accepted return wins
• EIC cannot be transferred
Still Have Questions?
Tax laws change often, and every situation is different.
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