Trump’s Tax Cuts: What Will Be Different When You File Taxes In 2026?
President Donald Trump signed the One Big Beautiful Bill Act into law last July, making permanent many provisions of the 2017 Tax Cuts and Jobs Act while introducing several new and expanded deductions.
Although many of the changes take effect in 2026, taxpayers will already notice meaningful differences when filing their 2025 tax returns.
“People may be pleasantly surprised to see their tax burden go down this year,” says Jeff Kelson, partner and co-leader of the national tax office at Eisner Advisory Group.
Here’s what taxpayers should know this filing season.
New Schedule 1-A For Expanded Deductions
The IRS has introduced Schedule 1-A to report several new deductions created under the tax law, including:
- Tip Income Exclusion: Single taxpayers earning up to $150,000 and married couples earning up to $300,000 can deduct up to $25,000 in qualifying tips. Tips must be voluntarily paid by customers.
- Overtime Pay Exclusion: Singles may deduct up to $12,500 in overtime pay; married couples up to $25,000, subject to the same income limits.
- Car Loan Interest Deduction: Up to $10,000 in interest may be deducted for qualified vehicles assembled in the U.S. Income limits are $100,000 for singles and $200,000 for married couples.
- Enhanced Senior Deduction: Taxpayers age 65 and older can claim an extra $6,000 deduction if income is below $75,000 for singles or $150,000 for married couples. Despite political claims, Social Security benefits are still taxed the same way.
Taxpayers who exceed income limits may still qualify for partial deductions, and certain occupations may be excluded from some benefits.
SALT Deduction Increased To $40,000
The cap on state and local tax (SALT) deductions rises from $10,000 to $40,000 for the 2025 tax year. This change may encourage more taxpayers—especially homeowners in high-tax states—to itemize deductions instead of taking the standard deduction.
Trump Accounts For Children Born In 2025
Children born in 2025 are eligible for a Trump account if at least one parent has a Social Security number. The federal government will deposit $1,000 into the account, with families able to contribute more. Funds are locked until the child turns 18. Parents can elect to open an account by filing Form 4547 with their tax return. While details are still being finalized, future tax returns are expected to include a simple checkbox instead of a separate form.
100% Bonus Depreciation For Businesses
Businesses can now choose to deduct the full cost of qualifying purchases in the first year rather than spreading deductions over time. While this change is beneficial, it comes with added complexity and eligibility rules.
Higher Standard Deductions Are Now Permanent
For the 2025 tax year, standard deductions increase to:
- Single filers: $15,000
- Heads of household: $22,500
- Married filing jointly and surviving spouses: $30,000
These higher deductions—and the lower tax brackets introduced in 2017—were previously set to expire at the end of 2025 but are now permanent.
Larger Refunds Are Possible—But Not Guaranteed
Tax experts expect many taxpayers to receive larger refunds this year, partly because withholding tables were not updated to reflect the new law. As a result, some workers may have overpaid taxes during the year. However, experts caution against assuming an unusually large refund, noting that results will vary by taxpayer.
State Tax Returns May Change Retroactively
Federal changes may not translate directly to state taxes. Some states automatically adopt federal updates, while others selectively decouple from provisions such as tip exclusions or bonus depreciation. Because many states finalized their legislative sessions before the law passed, adjustments may occur during—or even after—tax season, and some changes could be retroactive. Taxpayers expecting significant state refunds may benefit from filing later in the season.
Source: U.S. News & World Report
