On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBB), a sweeping tax package that cements many existing tax cuts and adds new deductions and incentives. While some parts target specific groups—like seniors, small business owners, and wage earners—other provisions impact nearly everyone.
Outlined below are some of the more relevant changes that may have an impact on your taxes:
1. Permanent Extension of the 2017 Tax Cuts
What changed:
The lower income tax brackets and reduced top rate (37%) from the 2017 Tax Cuts and Jobs Act are now permanent. The larger standard deduction and the expanded child tax credit also stay in place indefinitely.
Why it matters:
These provisions were originally set to expire at the end of 2025. Without this law, many taxpayers would have seen their tax bills increase in 2026.
Example:
For 2025, the standard deduction is $31,500 for married couples filing jointly and $15,750 for single filers.
Tip:
If you were worried about an automatic tax hike in 2026, that concern is now off the table. You can plan long-term with these rates in mind.
2. New Deductions Available from 2025–2028
These deductions apply in addition to the standard or itemized deductions and are meant to give targeted tax relief.
3. Extra Deduction for Seniors (65+)
What changed:
An additional $6,000 deduction for single seniors and $12,000 for married seniors.
Why it matters:
This is on top of the existing senior standard deduction and can also be claimed if you itemize. The benefit begins to phase out at incomes above $75,000 (single) or $150,000 (joint).
Example:
A married couple, both age 67, with taxable income of $120,000 could reduce their taxable income by $12,000 under this rule.
4. Overtime Income Deduction
What changed:
The “half” portion of overtime pay (the extra beyond regular wages) is deductible, up to $12,500 for singles and $25,000 for joint filers.
Why it matters:
Overtime earnings can push workers into higher tax brackets. This deduction helps neutralize that impact. However, this deduction only applies to federal income tax. Overtime pay is still subject to Social Security and Medicare (FICA) taxes, as well as any applicable state and local taxes.
Example:
If your base hourly rate is $20 and overtime pays $30/hour, the $10 “extra” per hour portion would qualify for this deduction.
5. Car Loan Interest Deduction
What changed:
You can now deduct interest on loans for personal-use vehicles, up to $10,000 per person per year. Phase-out starts at $100,000 income (single) or $200,000 (joint).
Why it matters:
Interest on personal cars hasn’t been deductible for decades; this brings back a break for car buyers.
Tip:
If you’re planning to buy a vehicle, timing it while this deduction is in effect could save you thousands.
6. Deductions for Tips
What changed:
Retroactive to the start of 2025, no tax on tips provides an above-the-line deduction up to $25,000 for tipped workers. The deduction phases out for taxpayers with income exceeding $150,000 ($300,000 in the case of a joint return).
Why it matters:
This deduction will lower your taxable income, and you do not have to itemize to claim the deduction.
Example:
A restaurant server making $12,000 in tips won’t owe federal income tax on that tip income.
7. Higher SALT Deduction Cap (State & Local Taxes)
What changed:
The cap on deducting property tax, and state and local taxes (SALT) has risen from $10,000 to $40,000 for households earning under $500,000. This higher cap applies from 2025–2029, then phases back down.
Why it matters:
If you live in a high-tax state like New York, California, or New Jersey, this dramatically increases how much you can deduct if you itemize.
Example:
A married couple paying $35,000 in combined state income and property taxes can now deduct the full amount, not just $10,000.
8. Small Business & Self-Employed Benefits
What changed:
-
- Qualified Business Income (QBI) deduction increased from 20% to 23%.
- 100% bonus depreciation restored for business investments, including research and development costs.
Why it matters:
This reduces taxable business income and encourages reinvestment in your business.
Example:
If your sole proprietorship earns $100,000 in qualified business income, you could deduct $23,000 instead of $20,000, plus deduct the cost of qualifying equipment in the year purchased.
9. “Trump Accounts” for Children
What changed:
Open an account and receive $1,000 government investment into a tax-deferred account for every newborn, plus the ability to contribute up to $5,000/year until age 18.
Why it matters:
Funds grow tax-deferred and can be used for education, buying a first home, or retirement.
Example:
If you contribute $5,000/year for 18 years at a 6% return, the account could grow to over $160,000 by adulthood.