Tax Planning

Maximizing Benefits Under the One, Big, Beautiful Bill: Key Planning Moves

With sweeping changes from the U.S. One, Big, Beautiful Bill now in effect, taxpayers can reshape their income and deductions strategically—especially around tips, overtime, retirement contributions, and filing status.

By NomadicTax Research Team • 5-8 min read • February 22, 2026

## Overview of the One, Big, Beautiful Bill (OBBB) The One, Big, Beautiful Bill, enacted July 4, 2025 as Public Law 119-21, brings major changes impacting many individual taxpayers and small business owners. Important modifications include new deductions, expanded exclusions, and increased thresholds spanning standard deduction, estate tax, AMT, and more. ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill/?utm_source=openai)) ## Planning Moves Under New Deduction Rules **1. Claiming No-Tax on Tips & Overtime** - Employees and self-employed individuals can deduct *qualified tips* and *qualified overtime compensation* if reported properly. Maximum annual deduction for overtime: $12,500 (single) / $25,000 (joint); tips up to $25,000. Income phase-outs apply. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai)) - **Actionable step:** Keep detailed records and ensure your tips/overtime are reported on W-2/Form 1099. If self-employed, include them on appropriate schedules. Be aware of the phase-out thresholds to anticipate reduced benefits. **2. Leveraging Foreign Earned Income Exclusion & Standard Deduction Increases** - The Foreign Earned Income Exclusion has risen to **$132,900** for 2026. Use this if you travel or live abroad. ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill/?utm_source=openai)) - Standard deduction for 2026 jumps to $32,200 (married filing jointly), $16,100 (single/separate), and $24,150 (head of household). These increases reduce taxable income upfront. ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill/?utm_source=openai)) **3. Estate, Gift & AMT Planning** - The basic exclusion estate tax amount for 2026 is now **$15,000,000**. For high-net-worth individuals, this opens a window for gifting and charitable giving strategies. ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill/?utm_source=openai)) - Alternative Minimum Tax (AMT) exemption amounts also increased. Review your investments and capital gains to ensure proper alignment. ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill/?utm_source=openai)) ## Practical Examples - **Example 1 (Overtime deduction):** Jane, married filing jointly, earns $90,000/year and makes $5,000 in overtime. Since her MAGI is well below phase-out limits, she can deduct the full overtime amount if reported correctly on Form W-2. - **Example 2 (Foreign exclusion):** Carlos, working in Spain, earns €120,000 (approx $130,000). He can exclude up to $132,900 under FEIE if he meets either the bona fide residence or physical presence test. - **Example 3 (Estate planning window):** A parent planning to gift assets; the increase from ~$14M to $15M in exclusion gives additional room this year without incurring estate tax. ## Risks & Compliance - False reporting of tips/overtime carries penalty risks. Employers and payors must issue correct statements. - Phase-outs reduce deductions gradually; those near limits must project AGI carefully. - New regulations under OBBS require updated forms and detailed record-keeping. Expect guidance changes and possible IRS audits focused where amounts are significant. ## Summary To maximize benefit from the One, Big, Beautiful Bill: - Document and report tips/overtime accurately - Utilize increased standard deductions and exclusions abroad - Leverage estate tax changes and gift strategies Planning early in the year helps avoid surprises at filing time.