6 ‘Big Beautiful Bill’ Tax Changes That Will Benefit the Middle Class

The “One Big Beautiful Bill Act” (OBBBA) may live up to its name for many middle-class taxpayers. The tax package introduces fresh deductions and credits designed to help working households, families and small-business owners keep more of their incomes.

According to Mark Luscombe, JD, CPA and principal analyst at Wolters Kluwer in the division of tax and accounting, here’s what middle-class taxpayers need to know.

The OBBBA includes several provisions aimed at helping middle-income households retain more of what they earn. From an expanded child tax credit to new deductions for overtime, tips and seniors, the biggest winners are taxpayers earning under roughly $400,000.

Luscombe noted that “preserving and slightly increasing the standard deduction will benefit any middle-class taxpayers who do not itemize their deductions.”

The expanded child tax credit — now $2,200 — will help taxpayers with modified adjusted gross income (MAGI) of $200,000 or less ($400,000 for joint filers). Reduced benefits will phase out at $243,001 ($443,001 for joint returns), already effective this year.

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Several provisions target people with hourly or service-based jobs, including groups often overlooked by previous tax laws.

Luscombe explained that the new tips deduction will benefit workers earning qualifying tips who have a MAGI under $150,000 ($300,000 for joint filers), with the phase-out starting in 2025. Likewise, a new overtime deduction will help those with qualified overtime income and a MAGI under $150,000 ($300,000 for joint filers) beginning the same year.

The bill introduces a senior-specific deduction and offers relief for homeowners in high-tax areas.

According to Luscombe, “the new $6,000 senior deduction could benefit seniors with a modified gross income of under $75,000 ($150,000 for joint filers), with a reduced deduction during a phase-out for modified adjusted gross incomes up to $175,000 ($250,000 for joint filers), effective for 2025.”

He added that raising the state and local tax (SALT) deduction limit from $10,000 to $40,000 will help taxpayers who pay higher local taxes and itemize deductions, as long as their MAGI is under $500,000.

Middle-income families will also see expanded tax savings tied to education and dependent care.

Luscombe said that taxpayers with dependent care expenses “may benefit from enhancements to the child and dependent care credit, employer dependent care assistance and the employer-provided child-care credit, effective in 2026.”

The law also expands qualifying expenses for 529 plans, introduces a $1,700 credit for scholarship-granting organizations and creates a new itemized deduction for qualified educator expenses.

For middle-class business owners and self-employed taxpayers, several extended provisions could significantly reduce taxable income.

Luscombe highlighted that the Section 179 expensing limit was increased to $2.5 million and the 20% qualified business income deduction for pass-through entities was made permanent. “One hundred percent bonus depreciation was reinstated for property placed in service after Jan. 19, 2025,” he said, adding that small businesses can also “retroactively restore research and experimental expenses back to 2022.”

Not every provision will last. Some clean-energy and vehicle deductions have already expired.

“Deductions for clean vehicles expire for vehicles placed in service after Sept. 30, 2025,” Luscombe said. “Deductions for energy-efficient home improvements expire for home improvements placed in service after Dec. 31, 2025.”

Most of these benefits are retroactive, taking effect in 2025. Taxpayers claiming the standard deduction may want to postpone charitable contributions to 2026 to take advantage of the new charitable deduction for non-itemizers. Luscombe also advised working with a tax professional “to take maximum advantage of changes effective for 2025.”

For middle-class households, the One Big Beautiful Bill offers meaningful tax relief for those who plan ahead and make the most of every deduction before they disappear.

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This article originally appeared on GOBankingRates.com: I’m an Accountant: 6 ‘Big Beautiful Bill’ Tax Changes That Will Benefit the Middle Class