NEWS
When President Trump signed the One Big Beautiful Bill Act into law on July 4, 2025, the sweeping legislation introduced major federal tax changes while extending core elements of the Tax Cuts and Jobs Act. As taxpayers prepare for the 2026 filing season, confusion has grown around tax brackets, tax deductions, and tax credits embedded in the revised tax code under Public Law 119-21.
The One Big Beautiful Bill Act arrived amid strong political messaging about tax cuts and economic relief. In the months since enactment, claims circulating online have overstated or misunderstood what the law actually delivers. Many of those claims fail to distinguish between permanent tax code changes and temporary provisions with income limits tied to modified adjusted gross income.
The Internal Revenue Service has acknowledged that the complexity of the matter necessitates a careful review of its official guidance, including publications that explain how the One Big Beautiful Bill Act applies to different types of income. Tax professionals say confusion is widespread among workers with mixed income reported on Form W-2 and Form 1099.
One of the most consequential aspects of the One Big Beautiful Bill Act is its decision to preserve the existing tax brackets introduced under the Tax Cuts and Jobs Act. Without the new law, those brackets were scheduled to expire, triggering higher rates for many households.
The standard deduction amount also remains elevated and is adjusted for inflation. For most filers, this reduces taxable income and simplifies the filing process. Still, it also limits the usefulness of certain itemized tax deductions, including the SALT deduction for state and local taxes. The Alternative Minimum Tax remains unchanged, primarily affecting individuals, and continues to apply mainly to higher-income taxpayers with complex tax returns.
One of the most widely misunderstood provisions of the One Big Beautiful Bill Act involves deductions for tipped income and overtime compensation. While the law allows eligible workers to deduct specific amounts, these deductions are capped and subject to phase-outs based on modified adjusted gross income.
The Fair Labor Standards Act still governs what qualifies as overtime pay, and payroll taxes tied to a Social Security Number continue to apply. Income reported on Form W-2 or Form 1099 must still be fully disclosed, even when a portion qualifies as a deduction. The law does not eliminate income taxes on tips or overtime, despite claims to the contrary.
The One Big Beautiful Bill Act maintains the Child Tax Credit and adjusts it for inflation, providing stability for families who plan their finances around tax credits. Income thresholds still apply, but the permanence of the credit removes the uncertainty that existed under earlier temporary provisions.
Other family-related benefits, including specific education-related tax rules connected to student loan programs, remain unchanged. The Biden-Harris administration had previously proposed alternative structures for family tax relief, but those proposals were not adopted in the final legislation approved by Congress.
The SALT deduction remains a focal point of debate under the new tax law. The One Big Beautiful Bill Act temporarily increases the deduction cap, offering relief for taxpayers in high-tax states, before the cap reverts to its prior level.
Income limits restrict access to the expanded SALT deduction, meaning higher-earning households may see limited benefits. Analysts note that this temporary structure complicates long-term tax planning, particularly for homeowners and retirees managing retirement accounts and other taxable income sources.
For businesses, the One Big Beautiful Bill Act restores full bonus depreciation and expands Section 179 expensing, allowing companies to deduct qualifying investments more quickly. These provisions align with long-standing goals of encouraging domestic investment and supporting small businesses.
Pass-through businesses continue to benefit from the Section 199A deduction, while the Small Business Investment Act framework remains unchanged. Tax professionals say these provisions require careful client communication, especially for businesses using professional software platforms.
Another narrowly tailored provision allows a limited deduction for interest expense on qualifying auto loans. The rule applies only to new vehicles with final assembly in the United States and requires documentation tied to the Vehicle Identification Number and the vehicle information label.
The deduction does not apply universally and excludes many used or imported vehicles. Compliance may require verification through manufacturer data or a VIN decoder website; taxpayers must retain these records in case of an Internal Revenue Service inquiry. Claims of “No Tax on Car Loan Interest” often overlook these restrictions.
The One Big Beautiful Bill Act preserves several energy-related tax credits, including the Residential Clean Energy Credit and electric vehicle credits, although the eligibility rules remain stringent. These credits interact with broader federal tax changes and may be affected by interest rates and financing structures tied to qualifying improvements.
While the law does not significantly expand these credits, it maintains incentives aimed at energy efficiency and domestic manufacturing, consistent with earlier legislative goals.
According to analysis from the Congressional Budget Office and the Joint Committee on Taxation, the One Big Beautiful Bill Act is expected to reduce federal revenues over the next decade, contributing to ongoing debates over federal deficits and macroeconomic effects.
Tax professionals caution that while the law delivers meaningful tax cuts for many households and businesses, it also increases complexity. Tools such as a tax reform calculator may help filers estimate outcomes. Still, expert guidance remains critical for higher-income or multi-source earners.
As the 2026 filing season approaches, taxpayers are encouraged to review withholding, understand how deductions interact with their income, and stay current with Internal Revenue Service guidance. Changes affecting overtime, tips, and auto loan interest deductions may require adjustments before returns are filed.
The One Big Beautiful Bill Act reshaped the tax code but did not simplify it entirely. Misunderstanding its provisions could result in missed tax credits or unexpected liabilities, underscoring the importance of accurate reporting and informed planning.
By William Mc Lee, Editor-in-Chief & Tax Expert—Get Tax Relief Now
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