It’s been a wild ride since July 4, 2025. That was the day the One, Big, Beautiful Bill (OBBB) was signed into law, and honestly, the tax world hasn't been the same since. If you've been wondering when does trump’s new tax bill take effect, the short answer is: it’s already happening, but the biggest changes are hitting your 2026 filings.
Most people are still catching up.
Basically, the OBBB didn't just tweak a few numbers; it fundamentally reshaped the landscape for everyone from waiters to CEOs. The law, officially known as Public Law 119-21, was designed to prevent the "tax cliff" that was supposed to happen when the 2017 Tax Cuts and Jobs Act (TCJA) expired. Instead of letting rates jump back up, this new bill made the lower individual rates permanent.
But here is the kicker.
While many provisions officially began for the 2025 tax year, the IRS has been rolling out specific guidance throughout early 2026. This means that for the returns you’re filing right now (for 2025), you’re seeing the first wave. However, the 2026 tax year—the one we are in currently—is where the full weight of the inflation adjustments and the "Trump Accounts" really kicks in.
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The Immediate Impact: What Changed for Tax Year 2025
If you are sitting down to do your taxes this spring, you're already living in the OBBB era. The law was retroactive in some ways and immediate in others.
For the 2025 tax year (the returns you file in early 2026), the standard deduction already saw a massive jump. For married couples filing jointly, it hit $31,500. For single filers, it was $15,750. This was a deliberate move to simplify things for most families so they wouldn't have to bother with itemizing.
Then there are the "No Tax on Tips" and "No Tax on Overtime" rules. These are huge. If you’re a bartender or a construction worker hitting 50 hours a week, these provisions are currently active. For the 2025 through 2028 tax years, you can deduct up to $25,000 in tips and up to $12,500 in overtime pay (or $25,000 for married couples).
Wait, there’s a catch.
The overtime deduction only applies to the "extra" money. If you make $20 an hour and your overtime rate is $30, you can only deduct that extra $10. It’s a bit confusing, and even H&R Block’s experts like Andy Phillips have noted that people are getting this wrong.
Looking Ahead: The 2026 Tax Year Shift
Now we get to the heart of the matter. For the tax year beginning January 1, 2026, the numbers shift again because of inflation indexing and specific OBBB triggers.
The 2026 tax brackets have been adjusted by about 2.7% to 2.8% to keep up with the cost of living. Here is how the standard deduction looks for the 2026 tax year (which you'll file in early 2027):
- Married Filing Jointly: $32,200
- Single / Married Filing Separately: $16,100
- Head of Household: $24,150
If you are 65 or older, you get an extra "Senior Bonus" deduction of **$6,000** ($12,000 for couples). Social Security Commissioner Frank Bisignano has mentioned this basically wipes out federal income tax on Social Security for most seniors. It’s a pretty big deal.
The Birth of "Trump Accounts"
Perhaps the most discussed part of the bill is the creation of "Trump Accounts" for children. These cannot be funded before July 4, 2026.
The government is putting in a one-time $1,000 contribution for each eligible child. Parents and employers can then add up to $5,000 a year. These funds have to stay in U.S. stock index funds, like those tracking the S&P 500. It's sort of like a 529 plan but with different rules on how the money can eventually be used.
Business Taxes and Bonus Depreciation
For the business owners out there, the OBBB brought back a favorite: 100% Bonus Depreciation.
This was retroactively applied to equipment and machinery placed in service after January 19, 2025. It’s set to stay at 100% through 2029. This is a massive win for companies looking to expand or upgrade their tech.
Also, the Qualified Business Income (QBI) deduction—the 20% deduction for pass-throughs—didn't just get extended; it became permanent. The phase-in ranges were even boosted to $75,000 for individuals and $150,000 for joint filers.
What’s Going Away?
It's not all tax breaks. To pay for some of this, the bill killed off a few popular incentives.
Most "Green Energy" credits are on the chopping block. The Energy Efficient Home Improvement Credit (25C) and the Residential Clean Energy Credit (25D) are not allowed for any property or expenditures made after December 31, 2025. If you were planning on putting in solar panels or a new energy-efficient heat pump, you technically missed the boat for the OBBB era credits, though some transition rules may apply depending on when the contract was signed.
Also, the EV tax credit is effectively dead for vehicles purchased after September 30, 2025.
The SALT Cap Surprise
For years, people in high-tax states like New York or California complained about the $10,000 cap on State and Local Tax (SALT) deductions.
The OBBB heard you... kinda.
The cap was raised to $40,000 for the 2025 tax year. For 2026, it goes up to $40,400. It will continue to climb by 1% annually through 2029. But don't get too comfortable—it's scheduled to snap back to $10,000 in 2030 unless another bill changes it.
Why the 2026 Date Matters
The reason everyone asks about 2026 is that it's the first year where the "permanent" nature of the TCJA provisions actually feels real. Before the OBBB, we were all staring at a massive tax hike on January 1, 2026. That hike is gone.
Actionable Steps for Tax Season
Since we're already in the middle of these changes, you shouldn't wait to adjust your strategy.
- Review Your Withholding: With the new standard deductions and the tips/overtime rules, you might be overpaying the IRS every month. Use the IRS Tax Withholding Estimator to see if you can take home more in your paycheck.
- Track Your Overtime: If you're eligible for the "No Tax on Overtime" deduction, keep impeccable records. You'll need to separate your "base pay" from the "extra half" of time-and-a-half to claim it correctly on Schedule 1-A.
- Max Out the Senior Bonus: If you or a spouse is over 65, make sure you're claiming that $6,000 (or $12,000) deduction. It’s layered on top of the standard deduction, meaning a married couple over 65 could shield over $45,000 of income from taxes in 2026.
- Plan for July 4th: If you have kids, get ready for the Trump Account rollout. The $1,000 "seed money" from the government is a rare opportunity for tax-free growth.
- Check Your HSA Eligibility: Starting January 1, 2026, Bronze and Catastrophic health plans are officially HSA-compatible. This opens up a huge tax-advantaged savings vehicle for people who were previously locked out.
The OBBB is a massive piece of legislation, and the IRS is still pushing out Revenue Procedures—like 2025-32—to clarify the finer points. Stay on top of your filing status, especially if you have a side hustle or work in a tipped industry, because the savings are there if you know where to look.