Certain federal tax benefits that would have expired in 2026 have now been extended indefinitely by the passage of the One Big Beautiful Bill Act (OBBBA). The OBBBA has also created several new tax deductions.

Enhanced Standard Deductions and Lifetime Exclusion

First off, the OBBBA extends and enhances the larger standard deductions first introduced in 2018. As a result, many people will continue to be able to minimize their federal tax liability without the time and effort required to itemize deductions. Meanwhile, the lifetime gift and estate tax exemption will continue to grow, ensuring that 99% of U.S. estates will not be affected by federal estate taxes.

Charitable Contribution and SALT Deductions

Completely new provisions in the OBBBA include the creation of a new above-the-line deduction for cash charitable contributions beginning in 2026. Eligible people who do not itemize deductions may deduct up to $1,000 (or $2,000 for joint filers) of monetary donations to IRS-approved charities. However, those who claim larger, itemized deductions for charitable giving may face new limits on their deduction amounts. On the plus side, many people who itemize will benefit from a higher limit on the deduction for state and local taxes (SALT).

Extension of QBI Deduction

In addition, the OBBBA extends the deduction for qualified business income (QBI). People who may be eligible for this deduction include many gig workers and other self-employed people, along with shareholders in S corporations and real estate investment trusts (REITs). If you qualify, you may be able to deduct up to 20% of your REIT returns and income from business activities. You do not need to itemize deductions in order to claim this tax benefit.

The OBBBA also increases the value of the QBI deduction for certain people. For example, eligible people with income from active participation in a business may claim a minimum QBI deduction of $400, even if that figure exceeds the usual 20% threshold. Those whose income stems from ventures designated by the IRS as “specified service trades or businesses” may also get larger QBI deductions due to higher income limits.

“No Tax on Tips” and “No Tax on Overtime”

Finally, the OBBBA created the new “no tax on tips” and “no tax on overtime” above-the-line deductions for tax years 2025 through 2028. Eligible people may deduct qualifying tips shown on a year-end tax document like a W-2 form from their gross income, effectively shielding those tips from federal income tax.

• Maximum annual deduction is $25,000; for self-employed, deduction may not exceed individual’s net income (without regard to this deduction) from the trade or business in which the tips were earned.

• Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).

Similarly, recipients of qualifying overtime pay may claim a deduction for a portion of that pay, typically equal to the amount by which their overtime wages exceed their usual pay rate. Again, you may claim these deductions even if you do not itemize deductions on your tax return.

• Maximum annual deduction is $12,500 ($25,000 for joint filers).

• Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).