On July 4, 2025, President Donald Trump signed into law the One Big Beautiful Bill Act (OBBBA)—a sweeping piece of legislation that touches nearly every corner of American life.
From healthcare to border security to government assistance, it’s all in there. But what most of us care about are the tax changes—and the OBBBA delivers plenty of those.
Let’s break down the highlights of the new law and how they may affect your wallet in the years ahead.
Extensions of the Tax Cuts and Jobs Act (TCJA)
First, the OBBBA extends many of the popular provisions from the Tax Cuts and Jobs Act (TCJA) that were set to expire this year. That means:
- Individual and corporate tax rates stay where they are.
- The qualified business income (QBI) deduction lives on.
- The higher standard deduction remains.
- The elimination of personal exemptions and limits on things like moving expenses and unreimbursed employee expenses stick around.
So if you’ve grown used to filing your taxes under the TCJA rules, you’ll see more of the same.
New Tax Breaks in the OBBBA
Here’s where things get interesting.
1. No Federal Income Tax on Tips or Overtime (Starting 2026)
If you earn tips or overtime, you’ll soon catch a break:
- Up to $25,000 in tip income can be deducted from taxable income.
- Up to $12,500 in overtime pay can also be deducted.
⚠️ Important: This applies to federal income taxes only. You’ll still owe Social Security, Medicare, and possibly state taxes on that money.
There will be income phaseouts (above $150,000 AGI) and limits on which tipped occupations qualify, with more guidance coming later in 2025.
2. Bigger Standard Deduction for Seniors (2025–2028)
Seniors get an extra $6,000 deduction on top of the existing standard deduction increase for age 65+.
Example:
- A single filer age 67 could see a $23,000 total standard deduction in 2025.
- A married couple filing jointly, both 65+, could see $45,200.
This starts phasing out for higher-income seniors ($75,000 single / $150,000 married).
3. End of Clean Vehicle & Energy Credits (Late 2025)
If you’ve been eyeing an EV or solar panels, act fast. The OBBBA eliminates these credits:
- EV credit ends Sept. 30, 2025.
- Residential energy credits end Dec. 31, 2025.
4. Increased Child Tax Credit (2026)
Starting in 2026, the Child Tax Credit increases to $2,200, with $1,000 refundable if you have earned income. Phaseouts remain the same.
5. Vehicle Loan Interest Deduction (2025–2028)
Buy a new vehicle assembled in the U.S.? You can deduct up to $10,000 in loan interest as an adjustment to income (no itemizing required). Income limits apply.
6. Higher SALT Deduction Limit (2025–2029)
The state and local tax (SALT) deduction cap rises to $40,000 per return (or $20,000 for married filing separately), with annual increases through 2029. Applies mostly to higher earners (AGI > $500,000).
7. Other Miscellaneous Provisions
- $1,000 charitable deduction available even if you don’t itemize.
- Bonus depreciation permanently set at 100% for property placed in service after Jan. 19, 2025.
Small Business Owners
The OBBBA offers significant tax benefits for small businesses by making key deductions permanent and creating new opportunities. Here are the key provisions for owners:
- Permanent QBI Deduction: The 20% Qualified Business Income (QBI) deduction is now permanent. This allows owners of sole proprietorships, partnerships, and S-corporations to maintain this powerful deduction, providing certainty for long-term tax planning.
- Permanent 100% Bonus Depreciation: Bonus depreciation is permanently set at 100% for qualifying property. This allows you to deduct the full cost of new equipment or computers in the year of purchase, providing a major incentive for capital investment.
- Employee Tax Breaks as a Hiring Tool: You can use new employee tax deductions as a competitive advantage. Potential hires will find it attractive that the first $25,000 of their tips or $12,500 of their overtime is now free from federal income tax. This perk can help you attract and retain talent. (Note: Your business is still responsible for payroll taxes on these amounts.)
- Vehicle Deduction Clarification: Business vehicle deductions remain unchanged. The new $10,000 vehicle interest deduction is for personal loans only.
👉 Over to you: Which of these provisions do you think will make the biggest difference for your taxes? Drop your thoughts in the comments.