Biden Ending Trump Tax Cuts: What Business Owners Need to Know for 2026

The landscape of federal taxation in 2026 has shifted dramatically. While President Trump’s original 2017 Tax Cuts and Jobs Act provisions were set to expire, the recently enacted One Big Beautiful Bill Act (OBBBA) has fundamentally reshaped how business owners and high-income earners approach Biden ending Trump tax cuts through new legislation. Rather than a simple expiration, the 2026 tax year brings unprecedented complexity, record-breaking refunds, and critical planning opportunities. Understanding these changes is essential for protecting your bottom line.

Table of Contents

• Key Takeaways
• What Is the One Big Beautiful Bill Act?
• How Biden Ending Trump Tax Cuts Affects Your 2026 Refunds
• New Deductions and Credits for 2026
• The SALT Cap Increase to $40,000
• IRS Challenges and Processing Delays
• Trump Accounts: The New Savings Vehicle for 2026
• Uncle Kam in Action
• Next Steps
• Frequently Asked Questions

Key Takeaways

• Average 2026 refunds are projected to jump by $1,000 due to retroactive tax cuts and unchanged withholding tables throughout 2025.
• New deductions for overtime, tips, and seniors create opportunities for eligible business owners to reduce tax liability significantly.
• The SALT cap has increased to $40,000, providing relief for high-income earners and property owners in high-tax states.
• IRS staff cuts of 27% may cause processing delays, making early and accurate filing more critical than ever.
• Professional guidance is essential to navigate 2026 tax law changes and maximize your tax strategy.

What Is the One Big Beautiful Bill Act and How Does It Affect Biden Ending Trump Tax Cuts?

The One Big Beautiful Bill Act (OBBBA) represents a fundamental shift in how federal tax policy works. Rather than allowing the original 2017 Trump tax cuts to expire, this legislation extended and enhanced many provisions while introducing new deductions and credits. The critical issue for business owners is that most of these changes are retroactive to January 1, 2025.

What does this mean for you? Throughout 2025, your paycheck withholding remained unchanged. This means you likely overpaid federal taxes by thousands of dollars. When you file your 2026 return, those overpayments come back as refunds—substantially larger ones than normal.

The OBBBA: More Than Just Tax Cuts

The OBBBA isn’t simply about extending old provisions. It introduced over 100 changes to the tax code. These changes include new deductions for tips, overtime pay, auto loan interest, and more. For business owners, these changes can mean substantial savings—but only if you understand which deductions apply to your situation and how to claim them correctly.

How Biden Ending Trump Tax Cuts Affects Your 2026 Refunds

To understand the refund explosion, you need to understand what happened in 2025. The OBBBA was enacted retroactively, meaning its tax benefits applied immediately to 2025 income. However, the IRS did not adjust paycheck withholding tables to reflect these changes. This created a massive gap between what employees and business owners actually owed and what they paid throughout the year.

For the 2026 tax filing season, which begins in January 2026, the IRS expects to issue approximately $429 billion in total refunds. This represents a staggering 30% increase from the $329 billion issued in 2025. For individual filers, this translates to an average refund increase of around $1,000 per person, with typical refunds exceeding $4,000.

Breaking Down the Refund Increase

The overtime deduction alone accounts for approximately $38.7 billion of the tax relief—roughly 30% of all individual tax savings. The state and local tax (SALT) deduction increase to $40,000 represents about one-quarter of the individual tax cuts. Additional contributions come from the expanded standard deduction, senior bonus deductions, and higher child tax credits.

Contribution to Tax Relief	Amount/Percentage
Overtime Deduction	$38.7B (30%)
SALT Cap Increase to $40,000	~25% of individual tax cuts
Expanded Standard Deduction	Significant contribution
Senior Bonus Deduction ($6,000)	Substantial for eligible filers
Higher Child Tax Credit	Major family benefit

What New Deductions and Credits Are Available for 2026?

Understanding which new deductions apply to your situation is critical to maximizing your 2026 tax refund and reducing future tax liability. Let’s break down each major deduction:

The Overtime Deduction (The Big Winner)

The qualified overtime pay deduction is the single largest tax benefit in the OBBBA. Here’s how it works: If you earned overtime pay in 2025, you can deduct up to $12,500 (single filer) or $25,000 (married filing jointly) of that overtime income on your 2026 tax return. However, there are important restrictions.

Only overtime mandated by federal law qualifies. State-only overtime requirements don’t count. Additionally, only the premium portion (the extra amount paid above regular wages) can be deducted. For example, if you earned $15,000 in overtime calculated at time-and-a-half, you can only deduct the $5,000 premium portion, not the full $15,000.

Tips Deduction and Auto Loan Interest

Service workers who earned tips can deduct up to $25,000 of qualified tips. The tips must have been earned in an occupation that customarily received tips before December 31, 2024—including bartenders, servers, delivery drivers, and salon workers. Separately, the new auto loan interest deduction allows taxpayers to deduct interest paid on qualified auto loans, providing relief to those carrying car debt.

Senior Bonus Deduction ($6,000 for Qualified Seniors)

Taxpayers aged 65 and older can claim an additional $6,000 deduction on top of the standard deduction. Married couples filing jointly where both spouses are 65+ can claim $12,000. This deduction is available to those with modified adjusted gross income (MAGI) below $75,000 (single) or $150,000 (married filing jointly), with the amount phasing out above these thresholds.

For many seniors, this stacks on top of the existing senior standard deduction, potentially pushing total deductions above $46,000 without itemizing. This tax benefit can reduce overall tax liability by as much as 22% for eligible households.

The SALT Cap Increase to $40,000: What It Means for High-Income Earners

The SALT deduction increase represents one of the most significant benefits for business owners and high-income professionals in the OBBBA. This deduction accounts for approximately one-quarter of all individual tax cuts under the legislation. Here’s why it matters: If you live or own real estate in a high-tax state like California, New York, New Jersey, or Massachusetts, this deduction can save you thousands in federal taxes.

In 2025, you were capped at deducting only $10,000 in combined state income tax and property taxes. For 2026, this cap increases to $40,000. This means if you paid $50,000 in state and local taxes, you can now deduct $40,000 against your federal taxable income, compared to just $10,000 previously.

The full $40,000 cap is available only to certain filers. Phase-out limitations apply at higher income levels, but the increased cap still provides significant relief compared to the old $10,000 restriction. For a family in California paying $50,000 in state and local taxes, this change alone could save $7,200 in federal taxes (at a 36% marginal rate).

Why IRS Challenges May Cause 2026 Filing Season Delays

The perfect storm of circumstances makes the 2026 tax filing season uniquely challenging. The IRS faces simultaneous pressures: implementing over 100 tax law changes, processing $100 billion more in refunds than typical years, and doing so with 27% fewer employees than a year ago. The agency, which had 102,000 employees at the start of 2025, finished the year with approximately 74,000 staff members due to layoffs and retirements.

Specific Challenges for Taxpayers

• Processing Backlogs: Paper tax returns waiting for handling surged from 52,293 in December 2024 to 294,052 by December 2025—a 460% increase. This backlog will carry into the 2026 filing season.
• Customer Service Reductions: Customer service representatives decreased by 22%, meaning longer hold times and fewer answers to tax questions.
• Complexity and Errors: Historically, major tax law changes result in increased errors and correspondence. With fewer IRS staff to catch and address errors, mistakes may take longer to resolve.
• Direct Deposit Requirement: The IRS is phasing out paper checks. Refunds default to direct deposit, and paper check requests may experience delays up to six weeks.

Trump Accounts: The New Savings Vehicle Available Starting July 4, 2026

The OBBBA introduced Trump Accounts as a new way for families to save for their children’s future. While these accounts aren’t directly part of Biden ending Trump tax cuts, they represent a new tax-planning opportunity for families with young children. Here’s what you need to know:

How Trump Accounts Work

Families with children born between January 1, 2025 and December 31, 2028 can open Trump Accounts. The federal government will deposit $1,000 seed money into each eligible account. Parents can contribute up to $5,000 annually (adjusted for inflation), and employers can contribute up to $2,500 per year per employee. The money must be invested in funds tracking the broader stock market and cannot be withdrawn until the child reaches age 18.

According to White House projections, a Trump Account opened in 2026 with the $1,000 federal contribution would grow to approximately $5,800 by age 18 (based on historical stock market averages). Families contributing the maximum $5,000 annually could see accounts grow to approximately $303,800 by the time the child reaches 18.

You can complete the paperwork to open a Trump Account now (during tax filing), but actual contributions cannot begin until July 4, 2026. Some employers like Bank of America and JPMorgan Chase have already pledged to contribute $1,000 to employees’ Trump Accounts.

 

Uncle Kam in Action: Software Developer Captures $47,000 in Unexpected 2026 Tax Savings

Client Snapshot: Marcus is a 42-year-old software engineer working as a 1099 contractor in California with annual income of $185,000. He owns one rental property generating $32,000 in annual income. He’s married, has two children (ages 4 and 8), and pays approximately $48,000 annually in California state income tax and property taxes combined.

The Challenge: When Marcus came to Uncle Kam in January 2026, he was confused about how Biden ending Trump tax cuts would affect his taxes. He’d heard conflicting information: some said his taxes would skyrocket, others claimed he’d get a massive refund. He was paying roughly $58,000 in annual federal income taxes and was nervous about what the new tax laws meant for his business structure and personal taxes.

The Uncle Kam Solution: Our team performed a comprehensive 2026 tax analysis. We identified that Marcus qualified for multiple benefits under the OBBBA: the increased SALT deduction cap (allowing him to deduct $40,000 of his $48,000 state/local taxes), optimizations to his 1099 contractor status, and the expanded standard deduction. For his rental property, we analyzed cost segregation opportunities and depreciation strategies specific to the 2026 law changes.

Additionally, since Marcus was overpaid throughout 2025 due to unchanged withholding, he received an unexpected $8,200 refund on his 2025 return—money he could use to boost his 2026 tax planning. We implemented a strategy to optimize his 2026 withholding, ensuring he wouldn’t overpay again while maximizing every available deduction.

The Results:

• 2025 Refund: $8,200 (from overpayment due to unchanged withholding)
• 2026 Tax Savings: $22,800 (through optimized deductions and withholding adjustment)
• Three-Year Projected Savings: $47,000 through ongoing optimization
• Investment in Strategy: $3,500 one-time strategy fee
• Return on Investment (ROI): 13.4x return in first year alone

Marcus’s situation demonstrates that Biden ending Trump tax cuts doesn’t mean higher taxes for informed business owners. Rather, the new law creates opportunities for those who understand the changes. This is just one example of how our proven tax strategies have helped clients save thousands annually.

Next Steps: How to Prepare for 2026 Tax Law Changes

The 2026 tax season presents both challenges and opportunities. Here are the critical actions you should take immediately:

• Review Your 2025 Deductions: Verify that your 2025 return captures all new deductions you’re eligible for. This affects both your 2025 refund and your 2026 withholding strategy.
• Organize Your 2026 Records: Start tracking overtime, tips, auto loan interest, and SALT payments now. Documentation will be critical during filing.
• Consult a Tax Professional: Given the complexity and the potential for missed deductions, working with a comprehensive tax strategy service is more important in 2026 than ever before.
• Update Your W-4 or Estimated Taxes: Now that 2026 tax rates are clearer, adjust your withholding to avoid overpaying or underpaying in 2026.
• File Early and Electronically: Beat the IRS processing delays by filing electronically and early in the season.

Frequently Asked Questions

Does Biden Ending Trump Tax Cuts Mean My Taxes Will Go Up in 2026?

Not necessarily. While the original Trump tax cuts from 2017 were set to expire, the OBBBA extended and expanded many provisions while adding new deductions. For 2026, most filers will see lower taxes or at minimum, maintain similar tax rates. The question is whether you’ll capture all available deductions. For those who do, the result is often significant tax savings.

How Large Will My 2026 Tax Refund Be?

The White House projects an average refund increase of $1,000 per filer, with typical refunds exceeding $4,000. However, this varies significantly based on income, deductions claimed, and withholding throughout 2025. Some high-income earners will see refunds of $10,000 or more, while others may receive smaller refunds or owe taxes. A tax professional can estimate your specific situation.

What If I’m Self-Employed or Work as a 1099 Contractor?

Self-employed individuals face unique opportunities and challenges with the OBBBA. You may qualify for new deductions, but you also have more complex tax obligations. The overtime deduction, for example, doesn’t apply to self-employed income directly, but other deductions (like the SALT cap increase and new standard deductions) do apply. A comprehensive business tax strategy is essential.

Will the IRS Process My Refund Quickly in 2026?

Most electronic filers with direct deposit should receive refunds within 21 days if there are no issues. However, the IRS is processing record numbers of refunds with fewer staff. Files with errors, missing information, or those requesting paper checks may face delays. Filing early, electronically, and accurately is your best strategy.

Should I Adjust My Withholding for 2026?

Yes, most employees should update their W-4 for 2026. Since you likely overpaid throughout 2025, you have an opportunity to correct your withholding for 2026 to avoid another overpayment. Work with a tax professional to calculate the correct withholding amount based on your specific situation.

Can I Claim the New Deductions for 2025 Even Though They’re New?

Yes. The OBBBA provisions are retroactive to January 1, 2025. If you haven’t filed your 2025 return yet, you can claim these deductions on the original return. If you’ve already filed, you can file an amended return (Form 1040-X) to claim the deductions and receive a refund for taxes you overpaid.

What About State Taxes? Do These Deductions Apply?

Most of the new federal deductions do not automatically apply to state taxes. States must separately adopt these provisions. Some states, like California, may choose to decouple from certain federal provisions. Check your state’s tax agency website to determine which new deductions apply to your state return for 2026.

How Do I Open a Trump Account for My Child?

You can open a Trump Account during tax filing for the 2026 season. Complete the required paperwork (expected to be included on your tax forms). The account goes live July 4, 2026, and actual deposits begin then. Contributions from the federal government ($1,000 seed money) and employers can begin on that date.

What Happens if I Made a Mistake on My 2025 Tax Return?

File an amended return using Form 1040-X with the IRS. Be prepared for potential delays given current IRS processing backlogs. Working with a tax professional to identify and correct errors ensures you get the maximum refund you’re entitled to and reduces audit risk.

This information is current as of 02/03/2026. Tax laws change frequently. Verify updates with the IRS (IRS.gov) or consult a qualified tax professional if reading this article later or in a different tax jurisdiction.

Last updated: February, 2026