OBBB Impact Calculator
See how the One Big Beautiful Bill changes your estimated 2026 federal tax vs. a hypothetical TCJA-sunset baseline. Savings attributed provision by provision.
The One Big Beautiful Bill Act (Public Law 119-21, signed July 4, 2025) made the 2017 TCJA tax rates permanent (OBBB §70101), raised the standard deduction, expanded the SALT cap to $40,400 for most filers (OBBB §70120), and created above-line deductions for qualified tips (OBBB §70201, up to $25,000) and overtime premium pay (OBBB §70202, up to $12,500 Single / $25,000 MFJ). These deductions apply to tax years 2025 through 2028.
Common misconception: overtime is NOT fully tax-free under OBBB. Only the FLSA premium portion (the extra 0.5× on a 1.5× rate) is deductible — not the full overtime paycheck. Tips are only excludable in IRS-designated customarily-tipped occupations, and FICA payroll tax (Social Security 6.2% + Medicare 1.45%) is unchanged for both.
Worked example: single server, $48,000 base + $18,000 tips, 2026. Prior-law federal tax ≈ $5,938. Under OBBB, tip deduction = $18,000 → taxable = $48,000 − $16,100 std ded = $31,900 → OBBB tax ≈ $3,668. Savings: $2,270 (per IRS Rev. Proc. 2025-32 + OBBB §70201).
What OBBB actually changed (and what it didn’t)
A widespread misreading of the OBBB is that overtime and tips are now “tax-free.” That is incorrect. OBBB §§70201–70202 created above-line federal income tax deductions — capped, phase-out-tested, and sunset after 2028. The deductions reduce income subject to federal income tax; they do not eliminate FICA payroll taxes (Social Security 6.2% + Medicare 1.45%), which remain unchanged on all wages including tips and overtime (per IRC §3101, unaffected by OBBB).
For overtime specifically, only the premium portion qualifies — the extra 50% added on a 1.5× rate. For a total $9,000 overtime check at 1.5×, the deductible premium is $3,000 (one-third), not $9,000. This distinction is from OBBB §70202 and IRS Notice 2025-69.
How to use this calculator
- Enter your filing status and W-2 wages.
- Add SALT paid and mortgage interest to see deduction impact (OBBB §70120 raised SALT cap to $40,400).
- Use Show OBBB deductions for tips (OBBB §70201), overtime (§70202), auto loan interest (§70203), and dependents.
- Review the side-by-side result: OBBB 2026 tax vs. hypothetical baseline and savings by provision.
Formula and assumptions
OBBB impact = baseline_2026_tax_if_TCJA_sunset - current_law_2026_tax
Baseline uses: lower std deduction (~$8,300 Single), personal exemption ~$5,300,
top rate 39.6%, SALT cap $10K, CTC $1,000, no QBI, no tip/OT/auto/senior deductions
OBBB current law uses Rev. Proc. 2025-32 + OBBB §§70101–70502- Baseline
- Hypothetical TCJA-sunset — never actually in effect
- OBBB standard deduction
- $16,100 Single / $32,200 MFJ (Rev. Proc. 2025-32 §3.01)
- SALT cap
- $40,400 (OBBB §70120, 2026)
- CTC
- $2,200 per child under 17 (OBBB §70301)
- QBI
- Simplified 20% of net business income (IRC §199A per OBBB §70105)
- Attribution
- Marginal provision-by-provision; sum may not equal total
Worked example
Single filer, $80,000 wages, $5,000 SALT, $8,000 mortgage interest
Year-by-year savings: server with $48k base + $18k tips
The OBBB tip deduction applies to tax years 2025–2028 only (OBBB §70201(d)). After 2028, absent Congressional extension, prior-law treatment resumes and savings return to $0. The table below uses the full $18,000 tip deduction (below phase-out threshold of $150,000 MAGI Single) with modest annual CPI-U bracket adjustments per IRC §1(f).
| Year | Prior-law tax | Under OBBB | Annual savings |
|---|---|---|---|
| 2025 | $5,800 | $3,575 | $2,225 |
| 2026 | $5,938 | $3,668 | $2,270 |
| 2027 | $6,080 | $3,762 | $2,318 |
| 2028 | $6,225 | $3,858 | $2,367 |
2026 row matches the worked example above. 2025 uses prior-year brackets (IRS Rev. Proc. 2024-61). 2027–2028 project modest annual CPI-U adjustments (~2%). After 2028, the OBBB provisions sunset and savings return to $0 unless Congress extends them (OBBB §70201(d)).
Limitations
- The baseline is a hypothetical scenario — no taxpayer ever actually files under TCJA-sunset rules.
- Attribution items are marginal estimates and will not sum exactly to total savings.
- Business-side OBBB provisions (bonus depreciation, R&D expensing, GILTI/FDII) are not modeled.
- State tax conformity varies; many states do not conform to all OBBB provisions.
- OBBB deductions do not reduce FICA (Social Security 6.2% + Medicare 1.45%) — payroll tax is unchanged.
- Educational estimate only — not professional tax advice.
Frequently asked questions
The One Big Beautiful Bill made TCJA permanent, expanded SALT to $40,400, created deductions for tips/overtime/auto-loan interest, and raised the CTC to $2,200. For most middle-income filers this means lower 2026 federal taxes vs. a TCJA-sunset baseline — though the baseline is hypothetical.
Recent updates
- May 2026Added year-by-year savings table (2025–2028) and misconception-correcting OBBB overview.
- Jul 2025Calculator launched to reflect OBBB (Public Law 119-21, signed July 4, 2025) tip and overtime deductions.
- May 2025Pre-publication modeling added using bill text and JCT revenue estimates.