One Big Beautiful Bill Act: New Tax Deductions for Workers & Seniors

No Tax on Tips

 

Who qualifies?
Employees and self-employed people in tip-based jobs (like servers, bartenders, valets, etc.).

What's the benefit?
You can deduct up to $25,000 per year in tips you received and reported on your tax return.

Key points:

• Applies only to cash or credit card tips (not service charges).

• You must report your tips using W-2, 1099, or Form 4137.

• You can claim this even if you don’t itemize deductions.

• High earners (over $150,000 or $300,000 for joint filers) may see the deduction reduced or phased out.

• Not eligible if you or your employer are in certain high-income service industries (like law, medicine, consulting).

💡 The IRS will publish a full list of tip-eligible occupations by October 2, 2025.

 

No Tax on Overtime

​

Who qualifies?
Employees who earn overtime pay (the extra half-rate above your regular wage — typically the “.5” in “time-and-a-half”).

 

What's the benefit?
You can deduct up to $12,500 per year (or $25,000 for joint filers) of your overtime earnings.

 

Key points:

• Applies only to overtime that’s legally required (under federal law).

• You must report your overtime pay using W-2, 1099, or similar forms.

• Available to both itemizers and non-itemizers.

• Phases out for incomes above $150,000 (or $300,000 for joint filers).

• Must include your Social Security Number and file jointly if married.

​

No Tax on Car Loan Interest

​

Who qualifies?
Anyone who buys a new personal-use vehicle with a loan (not a lease) starting in 2025.

​

What’s the benefit?
Deduct up to $10,000 per year in interest paid on your auto loan.

​

Key points:

• Only new vehicles qualify (you must be the first owner).

• Vehicle must be for personal use — not business or commercial.

• Loan must be secured by the vehicle and started after Dec 31, 2024.

• Available to both itemizers and non-itemizers.

• Deduction phases out at $100,000 income (or $200,000 for joint filers).

• Vehicle must be assembled in the USA and weigh less than 14,000 pounds.

• You must include the VIN (Vehicle Identification Number) on your tax return.

​

Extra Deduction for Seniors (65+)

​

Who qualifies?
Anyone who is age 65 or older by the end of the year.

​

What’s the benefit?
An extra $6,000 tax deduction on top of the regular standard deduction.

​

Key points:

• That’s $12,000 extra if both spouses are 65+ and file jointly.

• Phases out for incomes over $75,000 (or $150,000 for joint filers).

• Available whether or not you itemize deductions.

• Must include your Social Security Number, and file jointly if married.

​

What to Expect from the IRS

​

• New reporting requirements will be phased in for employers, lenders, and others.

• The IRS will provide transition relief for 2025 to help taxpayers and businesses adjust.

• Detailed guidance and forms will be released before the end of the year.

Still Have Questions?

We’re here to help! Reach out if you think you qualify or want help planning your deductions.

​

​​

​

 

 

One Big, Beautiful Bill Act client letter

​

Dear Clients:

​

The One Big, Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, and with it comes many new tax provisions that may directly affect you. There are many tax provisions contained in OBBBA beyond the ones we have highlighted here.

​

Extension of expiring tax provisions

​

The center point of OBBBA is a permanent extension of most of the provisions of the Tax Cuts and Jobs Act of 2017 that apply to individual taxpayers and were scheduled to expire at the end of 2025. These provisions include, among many others:

​

• Lower income tax brackets with the top rate at 37% instead of 39.6%;

• The higher standard deduction, with an additional $6,000 deduction for taxpayers age 65 and over ($12,000 for married taxpayers who are both age 65 and older);

• The $750,000 mortgage interest limitation, with a renewed deduction for mortgage insurance premiums;

• The elimination of 2% miscellaneous itemized deductions, which includes investment advisor fees, tax preparation fees, and unreimbursed employee business expenses (except that qualified educators will be allowed to deduct many of their unreimbursed expenses);

• The increased Child Tax Credit, with modifications that make the credit more attractive;

• Permanent extension of the §199A 20% qualified business income deduction for business owners, with minor modifications; and

• The increased unified estate and gift tax exclusion, with a bump up to $15 million on January 1, 2026.

​

State and local tax deductions

​

The itemized deduction for state and local taxes (SALT) is temporarily increased from $10,000 to $40,000 for five years. The increased deduction is reduced for higher earners. Taxpayers who are owners of passthrough business entities and make a passthrough entity elective tax election can still use the election to maximize their SALT deductions.

​

Itemized deductions and alternative minimum taxes

​

There are new limits on itemized deductions. The alternative minimum tax is reinstated, which will require planning going forward to minimize future tax increases.

​

Charitable contribution deductions

​

Charitable contributions are subject to three new OBBBA provisions:

1. Non-itemizers can claim a $1,000 charitable deduction ($2,000 for married taxpayers filing jointly);

2. Charitable contribution itemized deductions are now subject to a one half of one percent of AGI floor, providing another limitation to claiming the deduction; and

3. Taxpayers who make charitable contributions to certain scholarship granting organizations that fund scholarships for K-12 students can choose to claim either an itemized deduction or a new tax credit of up to $1,700.

​

Brand new deductions

​

Three brand new deductions for individual taxpayers are available starting in 2025. These deductions may be known better by what they’ve been called in the news: No tax on tips, no tax on overtime, and no tax on qualified car loan interest. For each of these items, new income tax deductions are available for taxpayers who receive certain tip income, are paid overtime by their employers, and who incur interest on the purchase of a new vehicle assembled in the United States. Each of these provisions contains multiple limitations that we should discuss if any of these potentially apply to you.

​

Disaster relief

​

Taxpayers impacted by federally declared disasters in 2025 may qualify for additional tax relief.

​

Energy credits going away

​

OBBBA repeals many energy credits, including all three clean vehicle credits for vehicles acquired after September 30, 2025. Additionally, both of the energy credits available to homeowners who make certain energy efficient improvements or install solar property, home batteries, and heat pumps, among other items are no longer available after December 31, 2025.

​

Business provisions

​

In addition to the tax provisions applicable for individual taxpayers, OBBBA contains many business provisions, including:

• Permanent 100% bonus depreciation rate for assets acquired after January 19, 2025;

• An increased §179 expensing limitation for assets placed in service after December 31, 2024;

• Immediate expensing of research expenses with a special election to immediately deduct previously amortized research expenses; and

• An easing of the business interest limitation rules.

​

Please contact us if you would like to discuss any of these provisions in detail or would like to discuss planning opportunities arising from these changes.

​

Sincerely,

​

Gardner's Tax Service