As you may have heard, Congress passed a tax bill in 2025 called the One Big Beautiful Bill Act (OBBBA). Like many large tax packages, it comes with a lot of changes.

True to form, some initial confusion about who is affected and when certain provisions actually kick in.

Below is a summary of some of the most common sections of the bill that may impact a majority of taxpayers. Important note: not all states conform to these provisions; California is one example. What does that mean? Your tips won’t be taxed at a federal level but can normally be taxed in your state. Please ask or check if your state does.

ONE BIG BEAUTIFUL BILL ACT: What does it mean for you?

NO TAX ON TIPS

  • Eligibility: Service Industry Employees, who are considered traditionally tipped employees

  • Up to $25,000 Deduction

  • Income Phase-Out: Deduction can only be claimed if your income is below these thresholds:

    $150,000 - Single / $300,000 for married jointly (MFJ)

  • Last paystub of 2025 for each job must be provided

  • When Does It Start? Retroactively TY 2025 - TY 2028

SALT CAP EXPANSION

  • Eligibility: Taxpayers Who Itemize Deductions

  • Previously, taxpayers could only itemize up to $10,000 of state and local tax, incl. property tax

  • $40,000 - New threshold to deduct state and local tax

  • When Does It Start? Retroactively TY 2025 - TY 2029

NO TAX ON OVERTIME

  • Eligibility: Overtime Pay Only - per hour above your base pay, not weekly

  • Example: You earn $20/hour and work 45 hours, including 5 hours of overtime. You are taxed on $900 (45 hours × $20/hour), but only the $50 premium pay ($10 extra/hour × 5 hours) qualifies for the deduction

  • Up to $12,000 Deduction - Single / $24,000 for MFJ

  • Income Phase-Out: $150,000 - Single / $300,000 - MFJ

  • Indep. contractors and business owners who own at least 5% of their business are excluded

  • Last paystub of 2025 for each job must be provided

  • When Does It Start? Retroactively TY 2025 - TY 2028

CHILD TAX CREDIT

  • Increases the child tax credit from $2,000 to $2,200 per child under age 17

  • Children over 16 and adult dependents remain eligible for a $500 credit, as before

  • When Does It Start? Retroactively TY 2025 - forever!

BUSINESS REVISIONS

  • 100% BONUS DEPRECIATION

    • Reinstates 100% bonus depreciation for non–real property assets

    • When Does It Start? Retroactively TY 2025 - 2028

  • QUALIFIED BUSINESS INCOME DEDUCTION (QBI)

    • A tax deduction from 2017 that adds an additional deduction for business owners. The bill made this permanent.

CHARITABLE DONATIONS

  • For Taxpayers who DO NOT itemize:

    • Deductions: Allows individuals to deduct up to $1,000 (single) or $2,000 (MFJ) in charitable donations each year above the line

    • Non-cash donations like clothes or furniture do not count

  • For Taxpayers who DO itemize:

    • For cash and non-cash donations, donations must exceed an income threshold of 0.5% to affect liability.

SENIOR DEDUCTION

  • Eligibility: Taxpayers 65+

  • Up to $7,000 Deduction - Single / $12,000 - MFJ

  • Income Phase-Out: $75,000 - Single / $150,000 for MFJ

  • Added to Standard or Itemized Deduction

  • Important Note: This was campaigned as “No Tax on Social Security” - this is what that actually is, and can provide potential tax savings with the added deduction

  • When Does It Start? Retroactively TY 2025 - TY 2028

NEW CAR LOAN INTEREST DEDUCTION

  • Individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria

  • Lease payments do not qualify

  • Must be a new vehicle (cannot be used car)

  • A qualified vehicle is a car, minivan, van, SUV, pick-up truck or motorcycle, with a gross vehicle weight rating of less than 14,000 pounds

  • Personal use only; business vehicles not qualified

  • Up to $10,000 deduction

  • Income Phase-Out: $100K / $200K

  • When Does It Start? Retroactively TY 2025 - 2028

  • Other Requirements:

    • Vehicle must be purchased in 2025

    • Final assembly in USA

    • Must provide VIN

    • 1098-VLI Tax Form Required