Middle-class tax cuts in 2026 come from one law: the One Big Beautiful Bill Act, signed in 2025. It made the lower Tax Cuts and Jobs Act rates permanent, raised the standard deduction to $32,200 for joint filers, bumped the Child Tax Credit to $2,200, quadrupled the state and local tax deduction cap, and added four brand-new deductions for tipped workers, overtime hours, auto loan interest, and seniors. Some pieces are permanent. Others expire after 2028. Here’s what actually applies to you.
Lower Rates and a Bigger Standard Deduction
The seven-bracket structure from the Tax Cuts and Jobs Act is now permanent law, indexed to inflation each year.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Rates run from 10% to 37%, and only the dollars inside each range are taxed at that range’s rate. A single filer with $100,000 in taxable income pays 10% on the first $12,400, 12% on the chunk up to $50,400, and 22% only on the portion above that. People routinely overestimate their tax burden by ignoring how this works.
The middle-income bands for 2026:
- 12% bracket runs to $50,400 single, $100,800 joint
- 22% bracket runs to $105,700 single, $211,400 joint
- 24% bracket runs to $201,775 single, $403,550 joint
The standard deduction is the bigger story for most filers. For 2026, it’s $32,200 for married couples filing jointly, $16,100 for single filers, and $24,150 for heads of household.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 That’s a block of income taxed at zero before the brackets touch anything. The One Big Beautiful Bill Act made this level permanent and keeps it adjusting for inflation. Roughly nine out of ten filers take it rather than itemizing. The tradeoff is that personal exemptions, which used to let you deduct a set amount per family member, remain permanently eliminated.
A Bigger Child Tax Credit
The Child Tax Credit is $2,200 per qualifying child under 17 for 2026, up from the $2,000 that had been in place since 2018. This amount is now permanent and will index to inflation going forward.2Congress.gov. The Child Tax Credit – How It Works and Who Receives It A credit cuts your tax bill dollar for dollar, not just your taxable income, so a family with two kids sees up to $4,400 shaved directly off what they owe.
Up to $1,700 of the credit is refundable, meaning families who owe less than that still get the balance paid to them.2Congress.gov. The Child Tax Credit – How It Works and Who Receives It The credit begins phasing out at $200,000 in modified adjusted gross income for single filers and $400,000 for joint filers, shrinking by $50 for every $1,000 above those lines.3Internal Revenue Service. Understanding the Credit for Other Dependents One rule worth flagging: starting in 2025, at least one parent or guardian on the return must have a Social Security number, in addition to the child.
No Tax on Tips and Overtime
Two new above-the-line deductions apply whether you itemize or take the standard deduction.
Tipped workers can deduct up to $25,000 per year in qualified tip income. That covers cash tips, charged tips, and money received through tip-sharing arrangements. The deduction phases out for taxpayers with modified AGI above $150,000, or $300,000 for joint filers.4Internal Revenue Service. How to Take Advantage of No Tax on Tips and Overtime
For overtime, the deductible piece is the premium above your regular rate. If you’re paid time-and-a-half, the “half” portion is what you can deduct. The maximum is $12,500 per year, or $25,000 on a joint return, with the same $150,000/$300,000 income phase-out.4Internal Revenue Service. How to Take Advantage of No Tax on Tips and Overtime You need to qualify for overtime under the Fair Labor Standards Act, and the pay has to appear on a W-2 or 1099.
Both deductions expire after 2028.
Auto Loan Interest and a New Senior Deduction
If you buy a new vehicle assembled in the United States, you can deduct up to $10,000 per year in auto loan interest. The car has to be for personal use, purchased new (used vehicles don’t qualify), and financed with a loan originated after December 31, 2024. You’ll need to put the vehicle identification number on your return. The deduction phases out at $100,000 in modified AGI, or $200,000 joint.5Internal Revenue Service. One Big Beautiful Bill Act – Tax Deductions for Working Americans and Seniors
Taxpayers age 65 and older get an additional $6,000 deduction on top of the existing senior bump to the standard deduction. If both spouses are 65 or older, the combined extra is $12,000. This one phases out much earlier, at $75,000 in modified AGI or $150,000 joint, and married couples have to file jointly to claim it.5Internal Revenue Service. One Big Beautiful Bill Act – Tax Deductions for Working Americans and Seniors
Both deductions are available regardless of whether you itemize. Both expire after 2028.
The SALT Cap Went from $10,000 to $40,400
The state and local tax deduction cap jumped to $40,400 for 2026, up from the $10,000 limit that had held since 2018. If you itemize, that’s the combined amount of state and local income, sales, and property taxes you can deduct.
The higher cap phases down for taxpayers with AGI above $505,000, reducing by 30% of the excess income, though it never drops back below $10,000. The $40,400 figure is scheduled to revert to $10,000 in 2030.
Whether this actually helps depends on the math. Your total itemized deductions have to beat the $32,200 joint standard deduction to be worth claiming. For families in states with moderate taxes, the standard deduction still wins. If you own a home in a high-tax state and pay significant property taxes, the higher cap can save thousands.
Credits Worth Checking
Several credits sit outside the main One Big Beautiful Bill Act changes but can meaningfully cut what you owe.
The Earned Income Tax Credit is the largest federal credit for lower- and middle-income workers, and it’s fully refundable. For 2026, the maximums are $8,231 with three or more qualifying children, $4,427 with one child, and $664 with no children.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 The credit rises with earnings to a plateau and then phases out; the specific thresholds by filing status appear in the IRS’s EITC tables.6Internal Revenue Service. Earned Income and Earned Income Tax Credit Tables
The child and dependent care credit covers up to 50% of qualifying care costs starting in 2026, up from a previous 35% maximum. Eligible expenses remain capped at $3,000 for one dependent and $6,000 for two or more, making the maximum credit $1,500 or $3,000.
Two education credits are worth knowing about. The American Opportunity Tax Credit provides up to $2,500 per student for the first four years of college, with up to $1,000 refundable. The Lifetime Learning Credit is worth up to $2,000 per return for any post-secondary or job-skill courses. Both phase out as modified AGI approaches $90,000 single or $180,000 joint, and you can claim only one per student per year.7Internal Revenue Service. Education Credits – AOTC and LLC
The Saver’s Credit rewards retirement contributions from lower- and middle-income households. It applies to the first $2,000 in contributions ($4,000 joint) at rates of 50%, 20%, or 10% depending on AGI. Joint filers up to $48,500 get the full 50%; the credit disappears above $80,500 joint or $40,250 single. Tax software doesn’t always flag it, but for anyone already contributing to a 401(k) or IRA, it’s worth up to $1,000 per person.
What’s Permanent, What Expires
The cuts most people rely on year to year are locked in. The seven tax brackets, the higher standard deduction, the $2,200 Child Tax Credit, the elimination of personal exemptions, and the higher alternative minimum tax exemption ($90,100 single, $140,200 joint for 2026) are all permanent under the One Big Beautiful Bill Act.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 The higher AMT exemption in particular keeps most middle-income earners well clear of the AMT.
Four of the newest deductions are on the clock, expiring after 2028:
- Tips deduction, up to $25,000
- Overtime deduction, up to $12,500 ($25,000 joint)
- Auto loan interest deduction, up to $10,000
- Senior deduction, $6,000 per qualifying taxpayer
The SALT cap runs on its own schedule, sitting at $40,400 in 2026 and reverting to $10,000 in 2030. If Congress doesn’t extend any of these temporary provisions, they lapse on their own. The permanent pieces stay put with no further action needed.