The 2026 tax filing season is looming large, and millions of Americans are poised to encounter a transformed financial setting, the direct result of the sweeping One Big Beautiful Bill Act (OBBBA) signed into law last year by President Donald Trump.
The legislation, a flagship of the former administration’s economic platform, promises major tax cuts for many but introduces a maze of new rules, deductions, and sunsetting credits that experts warn will create both winners and a steep learning curve.
IRS Confusion Expected as New Tax Season Brings “Parallel” System
“The sheer scale of changes is unprecedented for a single filing season,” says a veteran CPA with over thirty years of experience, who requested anonymity. “We’re not talking about adjusted numbers here. We’re dealing with entirely new forms, nuanced qualifications, and strategic decisions that families have never had to make before. The early birds who start organizing now will have a tremendous advantage.”
The core of the OBBBA’s immediate impact lies in its creation of a parallel deduction system. Alongside the standard deduction, which has been notably increased, the law introduces “Schedule 1-A: Special Income Adjustments.” This new schedule is where taxpayers can potentially exclude certain types of income from taxation altogether, a radical departure from traditional deductions that merely reduce taxable income.
Your Tips Are Tax-Free Now, But There’s a Catch
“For the first time, waitstaff, bartenders, and hospitality workers can see a direct tax benefit on their return for reported tips,” the CPA explains. “The provision states, ‘Up to $25,000 of tips reported by an employer on Form W-2 may be deducted.’ This is a game-changer for service industry workers, but it’s crucial that the tips are documented on the W-2. Cash under the table doesn’t count.”
Similarly, the law carves out a niche for blue-collar and hourly workers. “The overtime pay deduction is targeted and politically symbolic,” notes an economic policy analyst at a non-partisan think tank. “It explicitly rewards what the bill’s framers called ‘the backbone of American labor.’ The text allows a deduction of ‘up to $12,500, or $25,000 if married filing jointly, of wages paid for overtime work.’ However, the phase-out thresholds are aggressive, so higher-income earners won’t benefit.”
SALT Cap Relief Is Finally Here, Yet Not for Everyone
Another headline-grabbing change is the temporary elevation of the State and Local Tax (SALT) deduction cap to $40,000 for the 2025-2029 tax years. This is a major relief for homeowners in high-tax states, but comes with its own complexity. “It’s a phased benefit,” the analyst cautions.
“The higher cap itself phases out for individual incomes above $500,000. Taxpayers need to run the numbers carefully to see if itemizing with this new SALT cap finally makes sense for them again, compared to the much higher standard deduction.”
Yet, for every new benefit, there is a subtraction. The OBBBA aggressively sunsetted a suite of green energy credits. “The situation for electric vehicles and home efficiency is entirely different now,” the CPA states flatly.
“A client asked me about claiming a credit for a new EV they ordered in December 2025. I had to tell them that unless the vehicle was physically placed in service before the specified date in the law, the credit of up to $7,500 is gone. The same goes for most residential energy credits. This will be a nasty surprise for many.”
The “Trump Account” for Kids: Genius or Gimmick?
The most forward-looking, and perhaps perplexing, innovation is the so-called “Trump Account.” This is a new retirement savings vehicle exclusively for minors. “It’s a Roth-style account for a child under 18, where contributions grow tax-free,” the analyst says.
“The marketing calls it a ‘generational wealth builder,’ but the practical hurdle is immense. The account must be funded from the child’s own ‘earned income,’ which severely limits who can use it. It’s a powerful tool for a child actor or a very successful teen influencer, but not for the average family.”
