Every filing season brings small adjustments — updated brackets, a slightly higher standard deduction. 2026 is different. The One Big Beautiful Bill Act (OBBBA), signed into law in 2025, is the first major rewrite of individual tax rules in years, and 2026 is the first full tax year under its provisions. Below is what actually changed, what it means for a typical filer, and what this calculator does and does not yet model.
The Biggest Change: A Much Larger Standard Deduction
The standard deduction jumps to $16,100 for Single and Married Filing Separately, $32,200 for Married Filing Jointly, and $24,150 for Head of Household. Because roughly nine out of ten filers take the standard deduction rather than itemizing, this single change automatically lowers taxable income — and therefore tax owed — for the large majority of households, with no extra paperwork required.
A Bigger, More Generous Child Tax Credit
The Child Tax Credit rises from $2,000 to $2,200 per qualifying child under 17, and up to $1,700 of that amount is refundable through the Additional Child Tax Credit — meaning a family can receive it even if they owe no federal income tax. The income phase-outs are unchanged: the credit begins shrinking above $200,000 for single filers and $400,000 for joint filers, falling by $50 for every $1,000 of income above the threshold. See our dedicated Child Tax Credit article for a full walkthrough with worked examples.
Five Brand-New Deductions
OBBBA also introduces several deductions that did not exist before 2026:
- Senior deduction: taxpayers age 65 and older can claim an additional $6,000 deduction on top of the standard deduction, subject to income limits. This is separate from — and stacks with — the existing extra standard deduction for filers 65+.
- Tips deduction: up to $25,000 of qualified tip income reported by workers in traditionally tipped occupations may be deducted from taxable income.
- Overtime deduction: up to $12,500 of qualified overtime pay (the premium portion required by the Fair Labor Standards Act) may be deducted.
- Car-loan interest deduction: up to $10,000 of interest paid on a loan used to buy a new vehicle, provided that vehicle underwent final assembly in the United States.
- SALT relief: the cap on the state and local tax deduction — the total of state income or sales tax plus property tax an itemizer can deduct — rises from $10,000 to $40,400 for 2026 (it was $40,000 for 2025; OBBBA indexes it upward through 2029), a four-fold increase that makes itemizing worthwhile again for many households in high-tax states.
Who Benefits Most
The larger standard deduction helps almost every filer a little. The bigger, more targeted wins go to specific groups: families with children (larger, more refundable CTC), workers who earn tips or regular overtime, retirees age 65+, buyers financing a US-assembled vehicle, and homeowners in high-tax states who were capped at $10,000 of SALT deductions for years and can now deduct up to $40,400.
What Stayed the Same
It's worth noting what OBBBA did not touch: the seven tax brackets (10% through 37%) keep their existing structure and are still adjusted annually for inflation; the Social Security wage base continues its normal annual increase (to $184,500 for 2026); and the long-term capital gains rate structure (0%/15%/20%) is unchanged. If a headline claims a sweeping bracket overhaul, treat it skeptically — the changes are real but more targeted than a full rewrite of the rate schedule.
What This Calculator Covers
This calculator fully models the 2026 tax brackets, standard deduction, Child Tax Credit, FICA (Social Security and Medicare), self-employment tax, and long-term capital gains. It does not yet model the new tips, overtime, senior, or car-loan interest deductions, so if you qualify for one or more of those provisions, your actual tax bill will likely be lower than the estimate shown here. Check the How It Works tab for the full calculation pipeline and its current limitations.
⚠️ The new OBBBA provisions carry eligibility rules, income phase-outs, and documentation requirements the IRS is still clarifying through guidance and regulations. Before claiming the tips, overtime, senior, or car-loan interest deductions on your actual return, consult a qualified tax professional or review the latest IRS publications for your situation.
Filing-Season Action Items
- Run your numbers through the calculator using the new standard deduction amounts to get a realistic baseline estimate.
- If you're in a high-tax state and itemize, re-check whether the new $40,400 SALT cap changes the standard-vs-itemized decision — see our dedicated comparison article.
- If you earn tips, overtime, or are 65+, keep clean records now; the new deductions will require substantiation when you file.
- If you're financing a vehicle in 2026, confirm final assembly location before assuming the car-loan interest deduction applies.
What Would Have Happened Without OBBBA
Several 2017 Tax Cuts and Jobs Act provisions were scheduled to expire after 2025, which would have pushed brackets, the standard deduction, and the Child Tax Credit back toward older, less generous levels starting in 2026. OBBBA's core function was to make most of those TCJA provisions permanent and layer the new deductions on top — so the changes above are better understood as "avoiding a scheduled rollback, plus new benefits" rather than a one-time surprise giveaway.
Worked Example: The Tips Deduction
A server reports $18,000 in tip income for 2026 on top of $22,000 in regular wages. Because $18,000 is under the $25,000 cap, the full amount is deductible directly on Form 1040 — no itemizing required. Taxable income drops by $18,000 before the standard deduction is even applied, on top of whatever the standard deduction already covers. The deduction phases out at higher income levels, so a server with side income pushing them well above typical tipped-occupation earnings should confirm the current-year phase-out with a preparer.
Frequently Asked Questions
- Do I need to itemize to claim the new deductions? No. The senior, tips, overtime, and car-loan interest deductions are all "above-the-line" or standalone — they reduce income directly and stack on top of the standard deduction, unlike SALT and mortgage interest, which still require itemizing on Schedule A.
- Will my W-2 already reflect these deductions? No. Your employer withholds and reports gross wages as usual; you claim the tips, overtime, senior, or car-loan interest deductions when you file, not through adjusted paycheck withholding.
- Is the higher $40,400 SALT cap permanent? It's current law for 2026, but Congress has changed SALT treatment before and could again — treat any multi-year tax plan built around it as subject to revision.