Ever wondered what a tax-free life would look like? For some Americans, it’s becoming closer to reality. 

New tax legislation known as President Donald Trump’s ‘One Big Beautiful Bill Act’ might enable millions to avoid paying federal income tax when they submit their returns in 2026 for the 2025 tax year.

According to preliminary figures from the Tax Policy Center, the proportion of households not paying income tax will increase from 40 percent to 42 percent.

People who will benefit the most from the new tax law include parents, overtime workers, tip-makers, seniors aged 65 and up, and adoptive families.

Tipped workers will be able to deduct up to $25,000 in tips from taxable income, and overtime workers can deduct up to $12,500 of overtime pay. 

Seniors will be allowed to deduct an extra $6,000 on top of their standard deduction. 

Parents can claim a child tax credit — $2,200 per child — with refundable options, and the adoption tax for families is now refundable. 

These deductions are in addition to the standard deduction, child tax credit, and earned income credit, allowing many working or middle-class individuals to eliminate their income tax burden without needing intricate tax strategies.

New tax laws under President Donald Trump’s ‘One Big Beautiful Bill Act’ could allow millions of Americans to pay $0 in federal income tax

Fort Lauderdale economist Michael Szanto

Experts say that, because the new tax breaks mostly go to lower and middle-income taxpayers, they will not blow a huge hole in the budget.

This is because these groups already pay a relatively small share of total federal income tax revenue, especially compared to cuts for high earners or corporations. 

‘These deductions won’t affect government deficit so much,’ Fort Lauderdale economist Michael Szanto told the Daily Mail. 

The top 10 percent of income earners in the US already pay the vast majority of federal income taxes, Szanto explained, so unless they receive significant tax cuts, overall federal revenue will not drop much.

‘Payroll taxes on the other hand disproportionately affect lower income families,’ Szanto explained.

‘Those who receive large amounts of their income through tips and overtime can be helped by this new package,’ he continued. 

‘Everyone should work carefully to study to maximize the credits and deductions applicable to their respective situation.’

Karla Dennis, tax expert, Enrolled Agent, and CEO of tax strategy firm, KDA, Inc., added: ‘Everyday hardworking Americans will see the biggest benefit.’

‘The way to maximize this new law is to be intentional with planning. Families should use retirement accounts, health savings accounts, and dependent care accounts to reduce taxable income,’ Dennis said.

‘Workers should be sure to claim every credit they qualify for, especially child and education related credits. Seniors can lean on the larger standard deduction and lower tax rates on investment income. 

She added: ‘The people who track their finances and use these tools during the year will be the ones who truly win… Everyday Americans can now benefit in a very simple way while wealthier households will need to focus on layered planning.’

The Wall Street Journal presented multiple different scenarios in which someone could pay $0 in federal income tax.

For example, a married couple that makes $100,000 (including overtime pay) with two kids under 13 could use child tax credits, standard deduction, and maybe overtime/tip deductions to reduce tax to $0.  

A single waitress with one child could use tips deduction, earned income tax credit, standard deduction, and child credit to eliminate her tax bill.

Or a retired couple with multiple income sources could use standard deduction, senior deduction, charitable deduction, and tax-exempt portions of Social Security to reduce income tax to zero.

Notably, even if someone pays nothing in federal income tax, they may still pay payroll taxes, state income tax, sales tax, and property tax. 

In many cases, these taxes are larger than any eliminated federal income tax.