Could the One Big Beautiful Bill Boost Your Tax Refund?
The One Big Beautiful Bill Act (OBBBA) could change how tax refunds are calculated for some households, including families with children and workers with multiple income sources. Depending on your income, filing status, and credit eligibility, the bill may increase, decrease, or keep your refund the same as previous years.
Understanding the OBBBA can help set expectations for tax season and financially plan for everyday expenses, rebuild savings, or support longer-term goals like learning how to earn passive income.
What is the One Big Beautiful Bill Act (OBBBA)?
The OBBBA is a proposed tax policy that updates certain credits, income thresholds, and filing rules. Rather than changing tax rates across the board, the bill focuses on:
- Adjusting how select tax credits and deductions work, like possibilities of the following:
- An increase in the Child Tax Credit (CTC)
- Refundable adoption credits
- $1,000 savings accounts for children born between Jan. 1, 2025 and Dec. 31, 2028
- Tighter restrictions on the Earned Income Tax Credit (EITC)
- A raise in the maximum deduction cap for the State and Local Tax (SALT) Deduction
- The termination of Clean Vehicle Credits
- Increased senior deductions
- Tax deductions on tips and overtime
- Auto loan interest deductions
- Updated income limits tied to refunds
- Clarifying rules for different types of earners
If you earn passive income, it isn’t directly targeted by the OBBBA. But adjustments to deductions and credit limits may affect how it influences your total tax owed or refund.
The idea of the OBBBA is to better reflect how people currently earn and manage their money. It should help all filers navigate their taxes more smoothly and accurately.
Who could see a bigger refund (and who might not)
Tax refunds depend on several moving parts, including income, filing status, withholding, and credit eligibility. Because of that, not everyone may benefit from the OBBBA in the same way.
- Families with children: Households with qualifying children could see changes if child-related credits are expanded or adjusted. Families may get $2,200 per child.
- Households with mixed income resources: Self-employment thresholds may increase, reducing the need for added paperwork.
- First-time filers or newly independent workers: Young adults filing on their own for the first time may see higher standard deductions and no taxes on overtime. Payment app thresholds are expected to increase, affecting independent workers.
- Senior citizens: Individuals who are 65 years old or older could potentially claim deductions up to $6,000.
For some workers, these new refund laws can help provide some breathing room to stabilize finances or plan ahead.
‼️ Note: The OBBBA doesn’t affect everyone equally. Some filers may see little change, while others could see a smaller or larger refund depending on their situation.
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Key parts of the OBBBA that could affect your refund
Expanded or adjusted tax credits
Tax credits directly reduce the amount of tax you owe, which could affect your refund. Refundable credits can increase your refund even if you don’t owe much tax. Non-refundable credits could reduce your tax bill but won’t increase your refund beyond what you paid.
Proposed changes may affect credits such as the Child Tax Credit or the Earned Income Tax Credit. For eligible households, adjustments to income limits or credit amounts could result in a larger refund.
Changes that may help side gig workers
The OBBBA includes updates that could make it easier for people with side gigs, freelance work, or contract income to navigate taxes and refunds. These changes may include:
- Thresholds for 1099-K and 1099-MISC/NEC forms are expected to increase. A 1099-K may not be issued if you made less than $20,000 or the number of transactions is below 200, and the threshold for 1099-MISC/NEC forms may increase to $2,000.
- Tip deductions are expected.
- Qualified Business Income (QBI) deductions may allow independent contractors to deduct up to 20%.
- Clarifications on gig income and rules on potential deductions to prevent overpayment on taxes.
Standard deduction or filing changes
Filing status plays a major role in how much tax you owe and how large your refund may be, because it determines which standard deduction and credits apply. Under the OBBBA, adjustments to deductions and thresholds may affect filers differently depending on how they file:
- Single filers may benefit if standard deduction amounts increase, which can lower taxable income.
- Families may see the biggest impact when filing status works alongside credits tied to dependents, such as the Child Tax Credit.
- Married couples could benefit from higher joint deduction thresholds, though the impact depends on whether one or both spouses earn income.
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Common misunderstandings about tax refunds
Tax refunds are the result of how much tax you paid during the year compared to how much you owed. They don’t always tell the full story about your taxes and are often misunderstood.
Many people may assume “a bigger refund means I paid less in taxes.” But a larger refund often means more money was withheld from your paycheck during the year than was needed, not that you owed less tax overall.
There also seems to be some confusion between withholding and tax credits. Withholding determines how much tax you pay upfront, while credits reduce what you actually owe and can increase a refund if they’re refundable. The opposite applies if there wasn’t enough money withheld, leading to you paying more when filing.
You should also be aware that refunds change from year to year for many reasons. Income changes, filing status updates, credit eligibility, and new tax laws can all affect refund amounts, even if your job stays the same.
‼️ Note: The OBBBA is still evolving and isn't in full effect yet, so things could change. Visit IRS.gov for the latest updates.
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Notice: Information provided in this article is for informational purposes only. Consult your attorney or financial advisor about your financial circumstances.