How is Trump’s Big Beautiful Bill changing US taxes and healthcare in 2026?

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Residents in the United States are set to experience significant changes to the country’s tax code, healthcare system and government benefits at the start of 2026.

That’s because, on Thursday, certain provisions of President Donald Trump’s signature tax and spending package are scheduled to take effect.

What is the One Big Beautiful Bill Act?

Even before Trump took office for a second term in January 2025, he floated the idea of creating one sweeping bill that would capture many aspects of his platform.

“Members of Congress are getting to work on one powerful Bill that will bring our Country back, and make it greater than ever before,” he wrote on January 5.

That idea became the foundation for the OBBBA, which Trump signed into law on July 4, the Independence Day holiday.

It contains hundreds of provisions, ranging from policies that incentivise fossil fuel production to the permanent adoption of Trump’s 2017 tax cuts.

Representative Melanie Stansbury rallies outside the Capitol

What changes are coming to the price of healthcare?

Prices are set to increase for US citizens who get their 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 the ACA healthcare subsidies put in place as part of the 2021 American Rescue Plan Act, under then-President Joe Biden. Those subsidies expire on December 31.

“The healthcare issue is a big one because people typically have their health insurance premium deducted from their account on the first, second, or third of the month,” said Daniel Hornung, the former deputy director of the National Economic Council during the Biden administration.

“So, in the next few days, we’re likely to see people in many cases have their health insurance premiums double.”

Why hasn’t Congress extended the healthcare subsidies?

Congress has been in gridlock over the issue of whether to extend the ACA subsidies.

Democrats refused to pass budget legislation in September until Congress acted to extend the healthcare subsidies. But Republican leaders said they would only vote on the subsidies after the budget legislation was signed.

That impasse led to a 43-day government shutdown, the longest in US history.

The gridlock ended when a handful of Democrats broke ranks with their party members to pass the budget legislation, on the understanding that there would be a December vote to extend the subsidies.

But rival proposals from Democrats and Republicans to address the subsidies both failed earlier this month.

The expiration takes effect on New Year’s Day, but Congress does not return from recess until January 5.

How many people will be affected by the subsidies’ expiration?

Approximately 2.2 million Americans are projected to lose healthcare coverage because of the increased cost, according to analysis from the Congressional Budget Office.

Hornung, the former Biden administration official, said that many more stand to be affected by healthcare premium increases.

“We’re talking about roughly 20 million or so Americans who are on the ACA exchanges, either the national exchanges or the state exchanges, so that’s a major issue,” Hornung said.

A food bank in Texas, with a picture of a Campbell soup can on the wall

What are the new work requirements for federal food assistance?

Under the One Big Beautiful Bill Act, there are new work requirements to qualify for Supplemental Nutrition Assistance Programme (SNAP) benefits, which help low-income households afford groceries.

Able-bodied adults between the ages of 18 and 64 must now work or participate in school or a training programme for at least 80 hours per month to remain eligible.

The policy applies to new applicants and renewals, beginning on January 1.

For current SNAP recipients, implementation timing varies by state. Some states have already notified existing beneficiaries of the pending changes, while others will begin enforcement later. In New York, for example, the new rules are not expected to take effect until March 2026.

Critics have told Al Jazeera that the new rules may place an additional burden on service-industry workers, many of whom have irregular schedules that make it difficult to guarantee 80 hours every month.

How will inheritances be affected?

Among the changes is an expanded estate tax exemption. Under the new policy, individuals inheriting an estate worth less than $15m are exempt from the federal estate tax. For couples, that threshold is $30m.

Prior to the 2017 law, the cap for untaxed estate inheritances was about $5.5m ($7.2m in 2025, adjusted for inflation) for individuals and $11m ($14m when adjusted for inflation) for couples.

Critics point out that the higher thresholds allow significant generational wealth transfers without taxation. As a result of the new provision, fewer than 1 percent of taxpayers ever face the estate tax.

How will deductions change during the US tax season?

January 1 will make several provisions of the 2017 Tax Cuts and Jobs Act — tax cuts enacted during Trump’s first term — permanent. Many of these provisions benefit higher-income households.

One of the 2017 provisions that has been extended permits 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 pay less in federal taxes if they can show they are paying a certain amount in income, sales and property taxes on the state and local levels.

But that reduction is capped at a certain amount. Upon passage of the One Big Beautiful Bill Act, the SALT deduction cap rose from $10,000 to $40,000.

That cap will increase by 1 percent to $40,400 for the 2026 tax year, with additional 1 percent increases through 2029.

Opponents say those cap increases will disproportionately benefit residents in high-tax states, such as New York and California.

For 2026, the OBBBA will also prompt a jump in the standard deductions for taxpayers.

The standard deduction will increase by $350 for single filers, $700 for joint filers, and $525 for heads of households over the 2025 rates.

For those over the age of 65, the deduction will also increase modestly by $50 for both joint and single filers, compared with last year.

Donald Trump rallies in front of a sign that reads, "No Tax on Tips."

Are there any benefits for childcare?

During his 2024 re-election bid, Trump made reducing childcare costs a central campaign pitch.

“Childcare is childcare,” Trump told the Economic Club of New York in 2024. “It’s something you have to have in this country. You have to have it.”

The One Big Beautiful Bill Act is set to increase the child tax credit marginally.

In 2026, parents can receive tax credits for up to 50 percent of their eligible childcare expenses.

Qualifying expenses, however, are capped at $3,000 for one child and $6,000 for two or more. That is up from a maximum of $2,200 per child in 2025.

What about Trump’s campaign promise, ‘No tax on tips or overtime’?

Some tax code changes are already in place, including the collection of no federal income tax on tips and no federal tax on overtime, both of which are retroactive for income earned after January 1, 2025.

Income earned in 2026 and beyond will not be taxed, and taxes paid on eligible 2025 income will be refunded through annual tax returns.

Workers can deduct up to $25,000 in cash tips, including those paid via credit and debit transactions.

While this will provide relief to some tipped workers, it will not provide significant relief to many on the lower end of the income scale, especially for those who work in food service.

Roughly two-thirds of workers in the sector do not make enough money annually to meet the threshold needed to file federal income taxes, which is $15,750 in 2026. The new law would ultimately not benefit them.

The no-tax-on-overtime policy, meanwhile, allows workers to deduct up to $12,500 in overtime income per year.

“Policies like ‘no tax on tips’ or ‘no tax on overtime’ do not address the core problem facing millions of workers across the country, which is that wages are simply too low to begin with,” said Saru Jayaraman, the founder of One Fair Wage, a nonprofit advocacy organisation.

“A policy that keeps base wages low and unstable while offering tax relief many workers will never see does not solve the affordability crisis.”

These tax exemptions are also not permanent and are scheduled to expire in 2028, Trump’s final year in office, unless extended by Congress.

The no-tax-on-tips provision applies only to federal income tax. State and local taxes still apply.

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