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In early 2026, U.S. residents will experience significant changes to the country’s tax laws, healthcare system, and government benefits.
That’s because some provisions of the tax and spending plan signed by President Donald Trump are set to take effect Thursday.
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The package, known as the One Big Beauty Act (OBBBA), was signed into law in July amid bipartisan opposition.
Fiscal conservatives worry it will increase the country’s deficit, while critics on the left warn that the changes it heralds will leave millions of U.S. citizens without health insurance or food assistance.
Notably, passage of the OBBBA bill does not extend the COVID-era health care subsidies that are set to expire Thursday.
Democrats warn that without these subsidies, health insurance premiums purchased under the Affordable Care Act (ACA) will soar.
What changes can Americans expect as we enter 2026? How will these changes be affected? At the beginning of the new year, we interpreted the new policies.
What is the Big Beauty Act?
Even before Trump is re-elected in January 2025, he has floated the idea of a comprehensive bill that would cover many aspects of his platform.
On January 5, he wrote: “Members of Congress are working on a powerful bill that will revive our country and make it stronger than ever.”
This idea became the basis for OBBBA, which Trump signed into law on the July 4th Independence Day holiday.
It contains hundreds of provisions, ranging from policies to incentivize fossil fuel production to making Trump’s 2017 tax cuts permanent.
What will happen to health care prices?
Prices will rise for U.S. citizens who get health insurance through the Affordable Care Act’s Marketplace, an online marketplace that helps connect families and small businesses with insurance plans.
The Big Beauty Act does not extend the Affordable Care Act (ACA) health subsidies that were implemented as part of the American Rescue Plan Act of 2021 under then-President Joe Biden. These subsidies will expire on December 31.
“Health care is a big issue because people typically have their health insurance premiums taken out of their accounts on the first, second or third month of the month,” said Daniel Hornung, former deputy director of the National Economic Council during the Biden administration.
“So we’re likely to see a doubling of people’s health insurance premiums in many cases over the next few days.”
Why didn’t Congress extend Medicare subsidies?
Congress has been deadlocked over whether to extend Affordable Care Act subsidies.
Democrats have refused to pass budget legislation in September until Congress acts to extend health subsidies. But Republican leaders say they will only vote on the subsidies after the budget legislation is signed.
This deadlock resulted in Government shutdown for 43 daysthe longest in U.S. history.
The impasse ended when a handful of Democrats broke with their party members and passed budget legislation knowing they would be voting in December to extend the subsidies.
But Democrats and Republicans have put forward competing proposals to address the subsidy issue All failed earlier this month.
The deadline takes effect on New Year’s Day, but Congress won’t recess until Jan. 5.
How many people will be affected when the subsidy expires?
About 2.2 million Americans are expected to lose health insurance due to increased costs, according to a Congressional Budget Office analysis.
Hornung, a former Biden administration official, said higher health care premiums will affect more people.
“We’re talking about about 20 million or so Americans on an ACA exchange, whether it’s a national exchange or a state exchange, so that’s a significant issue,” Hornung said.
What are the new work requirements for federal food assistance?
There are new work requirements to qualify under the Big Beauty Act Supplemental Nutrition Assistance Program (SNAP) benefits to help low-income families afford groceries.
Able-bodied adults between the ages of 18 and 64 must now work or attend school or training programs for at least 80 hours per month to remain eligible.
The policy applies to new applicants and renewals effective January 1.
For current SNAP recipients, implementation times vary by state. Some states have already notified existing beneficiaries of the upcoming changes, while others will 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 The new regulations may place additional burdens on workers in the service industry, many of whom have irregular work and rest schedules and find it difficult to guarantee 80 hours of work per month.
How will the legacy be affected?
One of the changes is the expansion of inheritance tax exemptions. Under the new policy, individuals who inherit an estate worth less than $15 million are exempt from federal estate taxes. For couples, the threshold is $30 million.
Prior to the 2017 law, the tax-free inheritance limit was approximately $5.5 million for individuals ($7.2 million in 2025, adjusted for inflation) and $11 million for couples ($14 million, adjusted for inflation).
Critics point out that the higher threshold allows for large intergenerational wealth transfers without taxation. As a result of the new rules, less than 1% of taxpayers will be subject to inheritance tax.
How will deductions change during U.S. tax season?
On January 1, many provisions of the Tax Cuts and Jobs Act of 2017, enacted during Trump’s first term, will become permanent. Many of these provisions benefit higher-income households.
A rule extended in 2017 allows certain businesses to deduct 20% of their qualified income from federal taxes.
The deduction limits for state and local taxes (SALT) also changed.
Typically, the federal government allows taxpayers to pay less in federal taxes if they can prove they pay a certain amount of income, sales and property taxes at the state and local levels.
But there are limits to this reduction. With the passage of the Big Beauty Act, the SALT deduction cap increased from $10,000 to $40,000.
The cap will increase by 1% to $40,400 for tax year 2026 and by another 1% in 2029.
Opponents say increases in those caps would disproportionately benefit residents of high-tax states like New York and California.
OBBBA will also result in a significant increase in the standard deduction for taxpayers in 2026.
Compared with 2025 standards, the standard deduction will increase by $350 for single filers, $700 for joint filers, and $525 for heads of household.
For those over 65, the deduction for joint and separate filers will also increase slightly by $50 from last year.
Are there any benefits in terms of parenting?
During his 2024 re-election campaign, Trump has made lowering the cost of child care a centerpiece of his campaign.
“Child care is child care,” Trump told the Economic Club of New York in 2024. “This is something this country has to have. You have to have it.”
The Big Beautiful Act would slightly increase the child tax credit.
Through 2026, parents can receive a tax credit of up to 50% of qualified child care expenses.
However, qualified expenses are capped at $3,000 for one child and $6,000 for two or more children. That’s up from the 2025 maximum of $2,200 per child.
How about Trump’s campaign promise of “no taxes on tips or overtime”?
Several tax law changes are already in place, including no federal income tax on tips and no federal tax on overtime, both of which are retroactive to income earned after January 1, 2025.
There will be no tax on income earned in 2026 and later, and taxes paid on qualifying income in 2025 will be refunded on your annual tax return.
Employees can deduct up to $25,000 in cash tips, including tips paid through credit and debit card transactions.
While this would provide relief to some tipped workers, it would not provide significant relief to many people with lower incomes, especially those with people working in food service.
About two-thirds of workers in the industry don’t make enough money each year to meet the threshold required to file federal income taxes ($15,750 in 2026). The new law will ultimately not benefit them.
Meanwhile, the overtime exemption allows workers to deduct up to $12,500 of overtime earnings annually.
“Policies like ‘no tax on tips’ or ‘no tax on overtime’ do not address the core problem faced by millions of workers across the country: wages are too low,” said Saru Jayaraman, founder of One Fair Wage, a nonprofit advocacy group.
“Policies that keep base wages 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 expected to expire in 2028, the final year of the Trump administration, unless extended by Congress.
The tip exemption applies only to federal income taxes. State and local taxes still apply.
