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Your Tax Returns
Taxes 2025-2026: One Big Beautiful Bill and
Your Tax Returns
Article Summary
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- The One Big Beautiful Bill (OBBB) makes many of the 2017 Tax Cut and Jobs Act (TCJA) tax law changes permanent while adding some temporary and permanent changes to the tax code.
- Some changes are in effect for your 2025 taxes (which you’ll file in 2026), however, most of the changes won’t take effect until 2026 and later.
- The One Big Beautiful Bill keeps many of the TCJA tax items, including the larger Standard Deduction, elimination of personal and dependent exemptions, lower tax brackets, and elimination of, or limits on, certain itemized deductions.
- The One Big Beautiful Bill temporarily adds changes for certain filers including no tax on tip or overtime income.
OVERVIEW
In early July 2025, Congress passed the legislation known as the “One Big Beautiful Bill.” The new legislation is as much about old tax laws as it is about new ones. The One Big Beautiful Bill makes permanent many of the temporary tax law changes that were first introduced as part of the Tax Cut and Jobs Act (TCJA) back in 2017. Below, we break down the highlights of the impact on your 2025 tax return and on your returns moving forward.
TABLE OF CONTENTS
- Background
- One Big Beautiful Bill New Tax Law Changes for your 2025 tax return
- Other changes for 2025
The One Big Beautiful Bill passed that includes permanently extending tax cuts from the Tax Cuts and Jobs Act, including increasing the cap on the amount of state and local or sales tax and property tax (SALT) that you can deduct, makes cuts to energy credits passed under the Inflation Reduction Act, makes changes to taxes on tips and overtime for certain workers, reforms Medicaid, increases the Debt ceiling, and reforms Pell Grants and student loans. Updates to this article are in process. Check our One Big Beautiful Bill article for more information.
Key Takeaways
- The One Big Beautiful Bill (OBBB) makes many of the 2017 Tax Cut and Jobs Act (TCJA) tax law changes permanent while adding some temporary and permanent changes to the tax code.
- Some changes are in effect for your 2025 taxes (which you’ll file in 2026), however, most of the changes won’t take effect until 2026 and later.
- The One Big Beautiful Bill keeps many of the TCJA tax items, including the larger Standard Deduction, elimination of personal and dependent exemptions, lower tax brackets, and elimination of, or limits on, certain itemized deductions.
- The One Big Beautiful Bill temporarily adds changes for certain filers including no tax on tip or overtime income.
Background
The Tax Cut and Jobs Act (TCJA) passed in 2017 included significant changes to the tax code. However, because of the way it was passed through Congress, its provisions were temporary and set to expire at the end of 2025. With its expiration, the tax laws were set to revert to those from 2017. The One Big Beautiful Bill (OBBB) of 2025 includes legislation to stop most of the tax laws from automatically going back to what they were in 2017, while making some additional changes.
One Big Beautiful Bill New Tax Law Changes for your 2025 tax return
Most of the changes in the One Big Beautiful Bill take effect on January 1, 2026, but some are retroactive and could impact your 2025 tax returns that you file in 2026. Many of the changes have certain requirements such as adjusted gross income limits, and some are temporary, only lasting for a few years. Changes that might affect the most common 2025 tax returns include:
- no tax on tips
- no tax on overtime
- increased Child Tax Credit
- additional senior deduction
- partially refundable adoption credit
- increased state and local tax (SALT) itemized deduction
- deduction for interest payments on certain vehicles
- Trump savings accounts for children
- end of the Electric Vehicle Credit as of September 30, 2025
- increase in the standard deduction
Additional items included in the bill mostly having an impact on businesses include:
- restoration of 100% bonus depreciation
- restoration of expensing of certain R&D costs
- business interest deductions moving back to the EBITBA standard
- 100% expensing for certain manufacturing structures (temporary)
- increased Section 179 limits
- 1099-K issuance threshold increase
Other changes for 2025
While the One Big Beautiful Bill has many tax changes, other important updates remain for your tax return from the TCJA that were not impacted by the One Big Beautiful Bill. Some of these include:
Inflation adjustments to deductions and brackets
Income tax brackets, eligibility for certain tax deductions and credits, and the Standard Deduction will all adjust to reflect inflation.
Tax brackets will also be adjusted for inflation with each bracket increasing its range of income. For example, the top end of the 10% tax bracket for a single filer will increase from $11,600 for 2024 to $11,925 for 2025. The 37% rate starts at $609,350 for a single filer in 2024 but doesn’t start until $626,350 for 2025.
TurboTax Tip:
It’s important to plan ahead for these changes by considering contributions to retirement plans or health savings accounts to take advantage of potential tax savings.
Deductions and credits phaseout adjustments
In line with the adjustments for inflation, many tax deductions and tax credits will have their phaseouts adjusted to account for these changes. Some phaseout changes to note are:
- Earned Income Tax Credit – The maximum credit for filing jointly as a married couple and claiming three or more qualifying dependents amounts to $8,046 in 2025, with the credit completely phased out at $68,675 of adjusted gross income (AGI). If you are a Single filer with no dependents, you can receive a maximum credit of $649 with your phaseout beginning at $19,104 of AGI.
- The Alternative Minimum Tax – Higher exemptions and income phaseouts will occur in 2025. See below for more details.
- IRA contributions – Contribution amounts remain the same in 2025, but phaseout levels for taking deductions for these contributions increase as follows:
- For active participants in employer retirement plans, phaseout for making individual retirement account (IRA) contributions will occur at AGIs between $79,000 and $89,000 for Single and Head of Household filers, $126,000 and $146,000 for joint returns.
- For those Married Filing Jointly, with IRAs who do not actively participate in another plan, but their spouse does, phaseout will now range from $236,000 to $246,000.
- For those filing as Married Filing Separately, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 to $10,000.
- Phaseouts do not apply if neither the taxpayer nor the spouse has a workplace retirement plan.
What’s new with the Alternative Minimum Tax (AMT) adjustments
Because the AMT’s exemptions did not automatically update for inflation, an increasing number of middle-income taxpayers got hit with the AMT until a permanent, annual update got put in place starting in 2013. Now, the AMT exemption amount automatically adjusts with inflation, allowing many taxpayers to avoid the tax.
In 2025, these amounts will change to $88,100 with phase out beginning at $626,350 ($137,000 for married couples filing jointly with a phase out beginning at $1,252,700).
Planning Ahead: How to Prepare for 2025–2026 Taxes
With these tax changes in 2025, you can take advantage by planning now. Don’t let opportunities like contributing more toward your retirement plan or participating in a health savings account pass you by. Contributing to these accounts can save you money for needs you have down the road and lower your tax bill today, no matter what 2026 brings.
One Big Beautiful Bill Tax Law Changes for your 2026 (and on) tax returns
As the TCJA changes were set to expire at the beginning of 2026, the 2025 One Big Beautiful Bill makes many of these once-temporary changes permanent. Much of what takes affect beginning in 2026 is in essence a permanent continuation of the Tax Cut & Jobs Act of 2017.
While there are a handful of changes that are retroactive into 2025, the majority of the changes in the One Big Beautiful Bill take effect on January 1, 2026. Similar to some 2025 changes, many of those that begin in 2026 have certain requirements such as adjusted gross income limits and not all are permanent with some only lasting a few years.
In addition to the tax-year 2025 retroactive changes above, 2026 and on tax changes include many permanent changes including:
- elimination of personal and dependent exemptions
- increased standard deductions
- current tax brackets
- increased Child Tax Credit
- $750,000 deductible personal mortgage limit
- limitation on personal casualty losses, miscellaneous itemized deductions, and moving expense deduction for most taxpayers
- increased AMT exemption
- increase of estate tax exemption
- deduction for qualified business income at 20%
Unless otherwise noted, all of the retroactive business-related identified items above that begin in 2025 carry into 2026 and on.
