U.S. residents will experience significant changes to the country’s tax laws, health care system, and government benefits beginning in 2026.
That’s because certain provisions of President Donald Trump’s flagship tax and spending policies are scheduled to go into effect on Thursday.
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The bill, known as the One Big Beautiful Bill Act (OBBBA), was signed into law in July amid bipartisan opposition.
Fiscal conservatives fear it will further increase the nation’s budget deficit, while critics on the left have warned that the changes the policy heralds will leave millions of Americans without health insurance or food assistance.
Notably, OBBBA passed without extending coronavirus-era health benefits, which are set to expire Thursday.
Democrats have warned that without these subsidies, health insurance premiums purchased under the Affordable Care Act (ACA) would skyrocket.
What changes should Americans expect in 2026, and how will they be affected?Start the new year with a new agenda.
What is the “One Big Beautiful Bill Act”?
Even before Trump was sworn into office for a second term in January 2025, he floated the idea of creating a comprehensive bill that would capture many aspects of his platform.
“Lawmakers are working on strong legislation to take our country back and make it greater than ever,” he wrote on January 5.
This idea became the basis for OBBBA, which President Trump signed into law on July 4, the Fourth of July holiday.
It includes hundreds of provisions, ranging from policies to encourage fossil fuel production to making President Trump’s 2017 tax cuts permanent.
What changes will occur in medical prices?
Prices will increase for Americans who buy health insurance through the Affordable Care Act’s Marketplace, an online exchange that helps connect households and small businesses with insurance plans.
The One Big Beautiful Bill Act did not extend ACA health care subsidies introduced as part of the American Rescue Plan Act of 2021 under then-President Joe Biden. These grants expire on December 31st.
“Health care is a big issue because people typically have their health insurance premiums taken out of their accounts on the first, second, third of the month,” said Daniel Hornung, deputy director of the National Economic Council in the Biden administration.
“So in the coming days, your health insurance premiums could double in many cases.”
Why won’t Congress extend health care subsidies?
Congress is deadlocked on the question of whether to extend ACA subsidies.
Democrats refused to pass a budget bill in September until Congress took action to extend health care subsidies. But Republican leaders said they would vote on the aid only after the budget bill is signed.
The impasse led to a 43-day government shutdown, the longest in U.S. history.
The stalemate ended when a handful of Democrats broke with their own party members and passed the budget bill, with the understanding that a vote on extending the aid would be held in December.
But competing Democratic and Republican proposals to address the subsidy issue both failed earlier this month.
The expiration will take effect on New Year’s Day, but Congress will not return from recess until Jan. 5.
How many people will be affected by the expiration of the subsidy?
Roughly 2.2 million Americans are projected to lose health insurance due to rising health care costs, according to an analysis by the Congressional Budget Office.
Hornung, a former Biden administration official, said more people could be affected by the health insurance premium hike.
“This is a big issue because we’re talking about the roughly 20 million or so Americans who participate in the ACA exchanges (either the national exchanges or the state exchanges),” Hornung said.
What are the new work requirements for federal food assistance?
Under the One Big Beautiful Bill Act, new work requirements are in place for eligibility for Supplemental Nutrition Assistance Program (SNAP) benefits, which help low-income families put food on the table.
To remain eligible, able-bodied adults between the ages of 18 and 64 must currently work at least 80 hours a month or attend school or a training program.
This policy applies to new and renewing applicants starting January 1st.
For current SNAP recipients, implementation timing varies by state. Some states have already notified existing beneficiaries of the pending changes, while others plan to begin implementing them later. In New York, for example, the new rules are not expected to take effect until March 2026.
Critics told Al Jazeera that the new rules could place additional burdens on workers in the service industry. Many of them have irregular schedules, making it difficult to guarantee 80 hours of work each month.
What impact will it have on inheritance?
The changes include expanding inheritance tax exemptions. Under the new policy, individuals who inherit estates of less than $15 million will be exempt from federal estate tax. For couples, that threshold is $30 million.
Prior to the 2017 law, the cap on tax-free inheritance was approximately $5.5 million for individuals (adjusted for inflation, $7.2 million in 2025) and approximately $11 million for married couples ($14 million, adjusted for inflation).
Critics say a high threshold would allow large intergenerational wealth transfers without taxation. Less than 1% of taxpayers will face inheritance tax as a result of the new provisions.
How do deductions change during U.S. tax season?
On January 1, several provisions of the Tax Cuts and Jobs Act of 2017, a tax cut enacted during the Trump administration’s first term, will become permanent. Many of these provisions benefit high-income households.
One provision extended in 2017 allows certain businesses to deduct 20 percent of their qualifying income from federal taxes.
There are also changes to the deduction limits for state and local taxes (SALT).
Typically, the federal government allows taxpayers to reduce their federal tax payments if they can prove that they pay a certain amount of income, sales, and property taxes at the state and local level.
However, there is a certain upper limit to the amount of reduction. With the passage of the One Big Beautiful Bill Act, the SALT deduction limit increased from $10,000 to $40,000.
This cap increases by 1% to $40,400 for tax year 2026 and increases by another 1% through 2029.
Opponents say such a cap increase would unfairly benefit residents of high-tax states such as New York and California.
OBBBA will also encourage taxpayers to increase their standard deduction for 2026.
The standard deduction increases by $350 for single filers, $700 for joint filers, and $525 for heads of households compared to the 2025 tax rate.
The deduction for those 65 and older will also increase slightly by $50 compared to last year for both joint and single filers.
Are there any benefits to childcare?
In his bid for re-election in 2024, Trump has made reducing child care costs a central focus of his campaign.
“Childcare is childcare,” President Trump said at the New York Economic Club in 2024. “Child care is essential in this country. We absolutely must have it.”
The One Big Beautiful Bill Act would slightly increase the child tax credit.
In 2026, parents will be able to receive a tax credit of up to 50 percent of eligible child care expenses.
However, eligible expenses are limited to $3,000 for one child and $6,000 for two or more children. This is up from a maximum of $2,200 per child in 2025.
What about President Trump’s campaign promise, “No taxes on tips or overtime pay”?
Several tax law changes have already taken effect, including no federal income tax on tips and no federal tax on overtime, both of which will be retroactive to income earned after January 1, 2025.
Income earned after 2026 will not be taxed, and taxes paid on qualified 2025 income will be refunded through your annual tax return.
Workers can deduct up to $25,000 in cash tips, including tips paid on credit or debit transactions.
While this will provide some relief to some tipped workers, it will not provide much relief to many lower-income workers, especially those in the restaurant industry.
About two-thirds of workers in the industry don’t earn enough annually to meet the threshold required to file a federal income tax return ($15,750 in 2026). The new law will ultimately not benefit them.
Meanwhile, the overtime tax exemption policy allows workers to deduct up to $12,500 of overtime income per year.
“Policies like ‘no tax on tips’ and ‘no tax on overtime’ don’t address the core problem facing millions of workers across the country: wages that are too low to begin with,” said Saru Jayaraman, founder of the nonprofit advocacy group One Fair Wage.
“Policies that keep the base wage low and unstable while providing tax breaks that many workers will never see will not solve the affordability crisis.”
These tax exemptions are also not permanent and are scheduled to expire in 2028, the final year of President Trump’s term, unless extended by Congress.
The tip tax exemption applies only to federal income taxes. State and local taxes still apply.
