The One Big Beautiful Bill Act (OBBBA) was signed into law July 4th 2025 and generally apply to the 2025 through 2028 tax years. There were several new provisions in the bill, and they will be discussed briefly below.
If you want to learn more about any of the provisions below, you can click the title to link to additional articles, or you can check the references at the bottom of the page.
No Tax on Overtime
Up to $12,500 deduction per individual for “half” portion of time-and-a half overtime compensation.
Max Annual Deduction: $12,500 ($25,000 for joint filers)
Effective Dates: 2025 – 2028
Phase Out: Modified Adjusted Gross Income over $100,000 ($200,000 married filing joint)
“Effective for 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay – such as the “half” portion of “time-and-a-half” compensation – that is required by the Fair Labor Standards Act (FLSA) and that is reported on a Form W-2, Form 1099, or other specified statement furnished to the individual.” (3)
No tax on Tips
Up to $25,000 deduction for tip income.
Max Annual Deduction: $25,000
Effective Dates: 2025 – 2028
Phase Out: Modified Adjusted Gross Income over $150,000 ($300,000 married filing joint)
“Effective for 2025 through 2028, employees and self-employed individuals may deduct qualified tips received in occupations that are listed by the IRS as customarily and regularly receiving tips on or before December 31, 2024, and that are reported on a Form W-2, Form 1099, or other specified statement furnished to the individual or reported directly by the individual on Form 4137.” (3)
Up to $10,000 annual deduction for interest paid on a personal vehicle loan.
Max Annual Deduction: $10,000
Effective Dates: 2025 – 2028
Phase Out: Modified Adjusted Gross Income over $100,000 ($200,000 married filing joint)
“Effective for 2025 through 2028, 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.)” (3)
Deduction for Seniors
Additional $6,000 annual deduction per individual age 65 and older.
Max Annual Deduction: $6,000
Effective Dates: 2025 – 2028
Phase Out: Modified Adjusted Gross Income over $75,000 ($150,000 married filing joint)
“Effective for 2025 through 2028, individuals who are age 65 and older may claim an additional deduction of $6,000. This new deduction is in addition to the current additional standard deduction for seniors under existing law.” (3)
Trump Accounts
Tax advantaged accounts for minors intended to grow funds for future college, housing, and other expenses in adulthood.
Start Date: July 5th 2026
Annual Contribution Limit: $5,000
Federal Government will make one-time $1,000 contribution for each eligible child’s account (born between Jan. 1, 2025, and Dec. 31, 2028).
Parents and others can contribute a combined total of $5,000 per year to each child’s account.
Employers can contribute $2,500 per year without counting as taxable income for employees, this does count towards the $5,000 limit (5).
When child turns 18 they have access to the funds and they work similar to tradition IRAs.
Fore more information visit https://trumpaccounts.gov/
References:
- https://www.congress.gov/bill/119th-congress/house-bill/1/text
- https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions
- https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors
- https://www.irs.gov/trumpaccounts
- https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-trump-accounts-established-under-the-working-families-tax-cuts-notice-announces-upcoming-regulations
- https://trumpaccounts.gov/
I think 2 of the above mentioned changes will possibly affect my household in a positive way:
1) No tax on car interest loan as we will be purchasing & partially financing a new vehicle in 2026
2) Deduction for Seniors – additional $6,000 deduction for individuals 65 & older
Both of these seem to be a positive tax deduction for the “average medium to low income Joe”.