Cameron Miranda
The Internal Revenue Code (IRC) is the domestic portion of federal statutory tax law in the United States. It is codified in statute as Title 26 of the United States Code. The IRC covers federal income tax, payroll taxes, estate taxes, gift taxes, and excise taxes, as well as procedure and administration. The IRC is topically organized and generally referred to by section number. On July 4, 2025, new tax rules were signed into law under the 2025 Reconciliation Legislation, also known as the One Big Beautiful Bill Act (OBBBA). This legislation introduced significant updates to the tax code, impacting how Americans file their taxes in 2025 and beyond.
| Characteristics | Values |
|---|---|
| Name of the new tax law | One Big Beautiful Bill Act (OBBBA) |
| Date of implementation | 4 July 2025 |
| Key changes | Makes permanent many of the temporary tax law changes that were first introduced as part of the 2017 Tax Cut and Jobs Act (TCJA) |
| Introduces significant updates across the tax code, impacting how Americans file their taxes in 2025 and beyond | |
| No tax on tips or overtime income for certain workers | |
| Expanded repayment scenarios for premium tax credit | |
| Eliminates eligibility for the premium tax credit for individuals who enroll in marketplace coverage during a special enrollment period due to a change in household income | |
| Decreases eligibility for certain lawfully present individuals, including those with income below 100% of the federal poverty level |
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What You'll Learn
The Internal Revenue Code (IRC)
The IRC is formally known as Title 26 of the United States Code and can be found in the 1986 Internal Revenue Code. It is available to the public, and citizens can browse its table of contents and search for specific terms. However, it is essential to verify the provision's applicability to the appropriate tax year. The IRC is complex, and its sections must be interpreted within the broader context of the entire Code, Treasury Regulations, and relevant court decisions.
Treasury Regulations, also known as federal tax regulations, are issued by the U.S. Department of the Treasury. They provide the official interpretation of the IRC, guiding taxpayers on complying with its requirements. These regulations can be located in Title 26 of the Code of Federal Regulations (26 CFR). An electronic version of the current 26 CFR is accessible to the public through the National Archives and Records Administration (NARA) and the GPO.
The IRC is subject to updates and changes over time. Historical versions of the IRC and the Code of Federal Regulations are available on GovInfo, a website maintained by the U.S. Government Publishing Office (GPO). Regulatory documents are also published in the Federal Register (FR) and the Internal Revenue Bulletin, with historical issues of the FR available on GovInfo dating back to 1936.
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Federal tax regulations
The IRC is complex, and its sections must be read in the context of the entire Code, the Treasury Regulations, and the court decisions that interpret it. Congress sometimes enacts laws that are not part of the IRC but nonetheless impact federal tax law. Since the federal income tax was enacted in 1913, there have been unsuccessful challenges to the applicability of tax laws, and some groups continue to encourage non-compliance with tax laws. However, courts have consistently rejected these arguments, and promoters of these schemes may incur penalties for bringing frivolous cases or filing frivolous tax returns.
The IRS issues three types of regulations: proposed, temporary, and final regulations. Proposed regulations are announced by the IRS to the public via a Notice of Proposed Rulemaking (NPRM) and do not yet have the force of law. The public can submit comments on proposed regulations, which the IRS considers before issuing final regulations. Temporary regulations are created to provide immediate guidance to the public before the publication of final regulations and are effective when published in the Federal Register but expire within three years. Final regulations are issued with the force of law and are published as Treasury Decisions (TDs), which include the regulation's text and a preamble explaining the regulation. TDs are binding on both taxpayers and the IRS.
In addition to treasury regulations, the IRS publishes other forms of official tax guidance, including revenue rulings, revenue procedures, notices, and announcements. Applicable Federal Rates (AFR) rulings provide prescribed rates for federal income tax purposes and are released before being officially published in the Internal Revenue Bulletin (IRB). While IRB rulings and procedures do not have the force of law, they may be used as precedents.
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Tax evasion schemes
The Internal Revenue Service (IRS) has warned taxpayers to be cautious of promoters who peddle bogus tax schemes aimed at reducing taxes or evading them entirely. These schemes, often marketed aggressively, can take many forms, including abusive deals involving syndicated conservation easements and micro-captive insurance arrangements. Some schemes may even have an international component, such as hiding cash and digital assets offshore or using foreign retirement accounts. These schemes often target high-income individuals seeking to minimise their tax obligations.
It is important to distinguish between tax avoidance and tax evasion. Tax avoidance refers to the legal utilisation of tax laws to reduce one's tax liability. It involves strategies such as claiming permissible deductions and credits, making strategic investment choices, and structuring affairs to pay no more tax than what is required. While tax avoidance may be viewed negatively by some, it is considered the right of citizens to take advantage of legal provisions to minimise their tax burden.
On the other hand, tax evasion is the deliberate and illegal act of evading taxes by individuals, corporations, and other entities. It involves the underreporting or non-reporting of income, falsifying information, hiding income offshore, and inflating expenses. Tax evasion is a serious offence punishable by fines, penalties, and even imprisonment. Those found guilty of tax evasion face significant consequences, including financial penalties and legal repercussions.
Some common tax evasion schemes include:
- Underreporting income: This involves declaring less income than what was actually earned, omitting sources of income, or under-declaring revenue.
- Falsifying information: This includes inflating expenses, claiming deductions or credits one is not entitled to, or providing false documentation to tax authorities.
- Offshore schemes: Evaders may hide their income in offshore accounts or tax havens, taking advantage of jurisdictions with lower tax rates or weaker enforcement.
- Cash businesses: Businesses that primarily deal in cash, such as restaurants or salons, may underreport their cash income, making it difficult for tax authorities to track.
- Abusive deals: These are complex schemes that exploit loopholes in tax laws, such as syndicated conservation easements or abusive micro-captive insurance arrangements.
- International components: Evaders may utilise foreign retirement accounts or captive insurance structures to hide their assets and income from tax authorities.
It is important to be vigilant and seek independent tax advice from trusted professionals to avoid falling victim to or inadvertently participating in tax evasion schemes.
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The One Big Beautiful Bill (OBBB)
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA), also known as the One Big Beautiful Bill (OBBB), was signed into law by President Trump. The OBBB is a sweeping legislation that introduces significant updates to the US tax code, impacting how Americans file their taxes in 2025 and beyond.
The OBBB makes permanent many of the temporary tax law changes that were first introduced as part of the 2017 Tax Cut and Jobs Act (TCJA). These include the larger Standard Deduction, the removal of personal and dependent exemptions, lower tax brackets, and the elimination or limitation of certain itemized deductions. The bill also permanently eliminates miscellaneous itemized deductions, which were temporarily suspended under the TCJA.
In addition to the above, the OBBB introduces several new tax provisions that will impact both individuals and businesses. These include:
- An additional $6,000 deduction for taxpayers aged 65 and older, effective for the 2025-2028 tax years. This deduction is per eligible individual, meaning a married couple where both spouses qualify can claim up to $12,000. The deduction phases out for taxpayers with a Modified Adjusted Gross Income (MAGI) over $75,000 ($150,000 for joint filers).
- No tax on tips for employees and self-employed individuals in occupations that regularly receive tips. The maximum annual deduction is $25,000, and it is effective for the 2025-2028 tax years.
- No tax on overtime pay for individuals who receive qualified overtime compensation. This deduction is effective for the 2025-2028 tax years.
- The State and Local Tax (SALT) Deduction, which provides a federal deduction for income and property taxes paid at the local and state levels. The SALT deduction cap has been raised to $40,000 for incomes under $500,000.
The OBBB is expected to have a significant impact on the US economy, with estimates suggesting it will increase long-run GDP by 1.2% and reduce federal tax revenue by $5 trillion over the next decade. While the bill is projected to lower taxes for individual taxpayers across the US, it also adds complexity to the tax code and narrows the tax base.
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$32.45
The 1954 Code
The Internal Revenue Code of 1954, also known as the Internal Revenue Act of 1954, was enacted into law on August 16, 1954, as Public Law 591, 83rd Congress. This new code built upon the Internal Revenue Code of 1939, which had codified income tax, by fundamentally altering its organisation and addressing deficiencies that had been identified over the years.
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Frequently asked questions
The IRC is the domestic portion of federal statutory tax law in the United States. It covers federal income tax, payroll taxes, estate taxes, gift taxes, and excise taxes, as well as procedure and administration.
Yes, the IRC is codified in statute as Title 26 of the United States Code. It was first approved on June 22, 1874, and has since been updated and amended. The most recent major update was the One Big Beautiful Bill Act (OBBBA) signed into law on July 4, 2025.
The OBBBA introduced significant updates across the tax code, impacting how Americans file their taxes in 2025 and beyond. Some of the changes include making permanent many of the temporary tax law changes from the 2017 Tax Cut and Jobs Act (TCJA), such as the larger Standard Deduction, elimination of personal and dependent exemptions, and lower tax brackets. The OBBBA also introduced a new ""No Tax on Tips" law, allowing for a dollar-for-dollar deduction for a designated amount of tips earned by workers.
The IRC is available electronically on GovInfo, a website from the U.S. Government Publishing Office (GPO). An electronic version of the current Code of Federal Regulations, which includes Title 26 (the IRC), is also made available to the public by the National Archives and Records Administration (NARA) and the GPO.
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