Reference · 2025–2026

The One Big Beautiful Bill Act: Every 2025 Tax Change That Affects Your Return

K. Reynolds, CPA · Updated June 2026 · Source: Public Law 119-21, IRS guidance

Signed into law on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) is the biggest tax change in years. It does two things at once: it makes most of the 2017 tax cuts permanent, and it adds a set of brand-new temporary deductions you'll see for the first time on a 2025 return. Here's the complete rundown, with calculators for the parts that take some math.

Four new deductions (2025–2028)

These are the headline changes. All four are above-the-line — meaning you can claim them whether you take the standard deduction or itemize — and all are claimed on the new IRS Schedule 1-A.

DeductionMaximumPhase-out begins (MAGI)Calculate
No tax on tips$25,000 of qualified tips$150,000 / $300,000 jointTips →
No tax on overtime$12,500 single / $25,000 joint$150,000 / $300,000 jointOvertime →
Senior deduction (65+)$6,000 per person$75,000 / $150,000 jointSenior →
Car loan interest$10,000 of interest$100,000 / $200,000 jointCar loan →

No tax on tips

Workers in customarily-tipped occupations — wait staff, bartenders, salon workers, personal trainers, gig drivers — can deduct up to $25,000 of qualified tips. It reduces income tax only; you still owe Social Security and Medicare on your tips, and tips earned in a specified service business (law, health, performing arts) don't qualify. Estimate your tips deduction →

No tax on overtime

You can deduct the overtime premium — the extra "half" of time-and-a-half required by the FLSA — up to $12,500 (single) or $25,000 (joint). Only the premium qualifies, not your full overtime pay. Estimate your overtime deduction →

The $6,000 senior deduction

Taxpayers age 65 or older get an extra $6,000 deduction per qualifying person, on top of the regular and age-65 standard deductions. It phases out above $75,000 of MAGI ($150,000 joint). Despite the headlines, it does not make Social Security tax-free — it lowers taxable income, which can reduce the tax on benefits indirectly. Read the full senior-deduction guide →

Car loan interest

Interest on a qualifying new car loan is deductible up to $10,000 a year — but the gates are strict: the vehicle must have U.S. final assembly, be for personal use, weigh under 14,000 lbs, and the loan must be a first lien taken out after December 31, 2024. The phase-out is steep ($200 per $1,000 over $100,000 / $200,000). Check eligibility and estimate →

See your whole 2025 picture

Project your federal tax with the new brackets, standard deduction, and credits factored in.

Federal Tax Estimator →

Bigger credits and deductions

Three provisions you already knew got more generous:

1099 reporting changes

If you sell online or freelance, two thresholds moved in your favor:

What OBBBA made permanent

Most of the 2017 TCJA provisions were set to expire at the end of 2025. OBBBA locked them in:

Trump Accounts

OBBBA also created Trump Accounts — a new tax-deferred, IRA-style account for children. The federal government deposits a one-time $1,000 for each eligible U.S.-citizen child born from 2025 through 2028. Families can add up to $5,000 a year in nondeductible contributions, and employers can contribute up to $2,500 a year tax-free. Earnings grow tax-deferred and withdrawals generally can't begin until age 18.

When and how to claim it all

The new deductions and bigger credits show up on the 2025 return you file in 2026. The four new deductions go on Schedule 1-A; for 2025, the IRS issued Notice 2025-69 (tips and overtime) and Notice 2025-57 (car loan interest) allowing reasonable methods where 2025 forms don't separately report the amounts. Many filers will see larger refunds as a result.

For tax professionals: figures reflect Public Law 119-21 and IRS guidance current to mid-2026; several provisions (car loan interest, Trump Accounts) are governed by proposed regulations that may change. Confirm amounts on the filed Schedule 1-A and the latest IRS instructions.