According to a recent Wall Street Journal report, upcoming tax legislation is projected to enable millions of additional Americans to eliminate their federal income tax liability.

Specific groups—including tipped workers, senior citizens, and employees receiving overtime pay—stand to benefit significantly. These taxpayers will gain access to new tax breaks that supplement existing deductions and credits, without requiring complex tax strategies.

Below are realistic scenarios demonstrating potential paths to zero tax liability, using examples of:

• A married couple earning $100,000 with two children
• A single waitress with one child
• A retired couple with multiple income streams

Many provisions apply retroactively to January 1, meaning most taxpayers will realize these benefits when filing their 2025 tax returns in early 2026. Taxpayers anticipating lower tax obligations may choose to adjust their withholding amounts now to access savings sooner.

For the 2026 tax year (filed in 2027), expanded deductions for charitable contributions and dependent care expenses could further facilitate reaching zero tax liability. The Tax Policy Center preliminarily estimates that the percentage of households paying no federal income tax will increase from 40% to 42%.

Important note: Taxpayers who eliminate federal income tax liability remain subject to federal payroll taxes (Social Security and Medicare) as well as state and local income, sales, and property taxes. These combined obligations often exceed the eliminated federal income tax burden.

Those who reduce their tax bill to zero aren’t necessarily the biggest winners from the law. The legislation extended expiring tax cuts across all income levels and introduced a $40,000 federal deduction for state and local taxes. In dollar terms—and as a share of after-tax income—some of the largest benefits flow to higher-income households, many of whom are unlikely to ever hit zero.     

Example 1 – married couple earning $100,000 with two children

The first example cited in the Journal involves a married couple with two children under age 13 earning $100,000 annually, which includes overtime compensation. They make pretax payroll deductions for retirement savings, healthcare, and childcare expenses.

Under the new tax provisions, they can deduct $10,000 through the overtime pay deduction, which allows taxpayers to exclude the premium portion of overtime earnings (the “half” in time-and-a-half pay) when calculating taxable income. Additionally, the couple benefits from the expanded child tax credit, which increases the maximum benefit from $2,000 to $2,200 per child.    

Example 2 – a single waitress with one child     

The second example involves a single waitress with a 14-year-old child who earns $58,500 annually, including $12,000 in tips.

Under the new tip income deduction, she can exclude the full $12,000 in tips when calculating her taxable income, though she remains subject to payroll taxes on her entire $58,500 in earnings. She contributes $930 to an IRA for retirement savings.

As a head of household filer, her standard deduction increased by $1,125 under the new tax law. Additionally, her IRA contribution qualifies her for the saver’s credit—an existing tax benefit that functions as a partial government match for retirement savings made by low- and moderate-income workers. This credit can reduce her income tax liability to zero, though it does not generate a refund beyond eliminating tax owed.   

Example 3 – Married senior couple with several sources of income

The third example features a married couple, both age 66, with nearly $100,000 in combined income from multiple sources: a pension, Social Security benefits, part-time employment, and investment returns.

Under the new law, each spouse receives a $6,000 deduction for individuals age 65 and older, which comes in addition to the standard deduction and the existing $1,600 per-person senior deduction already available to older couples.

The couple also pays zero federal income tax on $50,000 in long-term capital gains and qualified dividends, thanks to the preferential 0% tax rate for investment income available to taxpayers in lower tax brackets.

Conclusion

Its funny one of the comments on this article said “I don’t see how anyone who is not a full-time tax professional could possibly develop a command of tax laws and how they can benefit oneself.” now we understand how the tax laws can be confusing if you have any questions about tax strategies feel free to reach out to Huckabee CPA for a complimentry consultation.