What You Need to Know About The New Tax Bill

My focus in this analysis will be specifically how this impacts public employees. There are certainly additional provisions that I will not cover here.
Here's what you need to know about the One Big Beautiful Bill as a public employee in Washington:
What is the One Big Beautiful Bill Act?
The One Big Beautiful Bill Act is simply a massive tax and spending law that "reduces taxes, reduces or increases spending for various federal programs, increases the statutory debt limit, and otherwise addresses agencies and programs throughout the federal government"¹.
Think of it as one giant piece of legislation that includes hundreds of different tax changes and spending decisions all rolled into one package. For public safety workers and government employees, there are several key tax changes that could put significant money back in your pocket.
The tax changes that may affect you directly
Your current tax rates are now permanent - The bill makes permanent the individual tax rates you've been using: 10%, 12%, 22%, 24%, 32%, 35%, and 37%¹. These were going to expire at the end of 2025, but now they're here to stay.
Standard deduction gets bigger - The bill permanently keeps the doubled standard deduction and adds even more to it through 2028¹.
What this means: the standard deduction will be $15,750 for a single filer, $23,625 for a head of household, and $31,500 for married individuals filing jointly this year.
Child tax credit increases - The bill bumps up the child tax credit to $2,200 per child¹. That's $200 more per child than the current $2,000 credit.
No tax on overtime pay - This is huge for public safety workers. The bill provides an above the line deduction of up to $12,500 for overtime compensation ($25,000 for married couples filing jointly)². The deduction phases out for workers making over $150,000 ($300,000 for couples).
How?
Only the "premium" portion of overtime qualifies for the deduction. This means if you make $20 per hour and work 50 hours, getting paid $30 per hour for the 10 overtime hours, only the extra $10 per hour (the premium above your regular rate) qualifies for the deduction.
State and Local Tax deduction limitation (SALT cap) - The SALT cap increases to $40,000 for those filing jointly. This exists until you cross $500,000 of income then it starts to phase out.
HSAs - HSAs will be available for more plans now.
Dependent Care FSA - The $5,000 limit will be increased. Starting in 2026, you will be able to contribute  $7,500 if married filing jointly.
Charitable Deductions - In the bill, there is a new $2,000 above the line charitable deduction for those who are married filing jointly ($1,000 single).
In addition  there is a new 0.5% AGI floor on itemized deductions for charity.
Car Loan Interest Deduction - You can now deduct up to $10,000 of interest paid, even if you do not itemize. But this starts to phase out at $200,000 (MFJ) and fully phases out at $250,000 (MFJ). The car must be assembled in America.
Estate and gift tax benefits - The bill increases the estate tax exemption to $15 million per person¹.
For most public safety workers and government employees, this won't directly impact you, but it's good to know if you're doing well financially or have family planning considerations.
Individual trust accounts - This bill created a new tax advantaged account for those under 18. It can be used for education, small business investments, or a first home purchase once the account beneficiary reaches certain ages.
You can contribute up to $5,000 and it comes with a $1,000 contribution from the government for children born between 12/31/24 and 1/1/29.
Senior bonus deduction - For those 65 and older, the bill provides an additional $6,000 deduction per year through 2028. This phases out for higher income taxpayers.
529 Plans – Increases distribution limit from $10,000 to $20,000 and expands qualified distributions to allow for expenses related to attendance at elementary or secondary school to be paid for from a 529.
What you should do now
Check your tax withholdings - With these permanent tax changes, you might want to review your federal tax withholdings to make sure you're not overpaying or underpaying throughout the year.
Calculate your property tax benefits - If you're a homeowner, figure out whether the increased property tax deduction could benefit you. This is especially important if your property taxes are over $10,000 per year.
Plan for family benefits - If you have children, factor in the increased child tax credit when planning your family budget. An extra $200 per child per year is still meaningful for your budget.
Update your retirement planning - Factor in the potential Social Security tax changes when updating your retirement income projections. This could be a meaningful boost to your retirement security.
Sources:

1. U.S. Congress, "Summary of H.R.1 - 119th Congress (2025-2026): One Big Beautiful Bill Act", Congress.gov, 2025.
2. Journal of Accountancy, "Tax provisions in the One Big Beautiful Bill Act", July 2025.
3. Congressional Budget Office, "Estimated Budgetary Effects of H.R. 1, the One Big Beautiful Bill Act", June 2025.

-Seth Deal