Tax law is always evolving, and staying informed is crucial to making confident decisions. The recently signed One Big Beautiful Bill Act (OBBBA) brings significant updates that will impact many individuals and families in the coming years.
While the OBBBA makes many of the expiring provisions from the Tax Cuts and Jobs Act permanent or extended, it also introduces a number of new opportunities and changes worth knowing.
Here’s a high-level look at some of the most notable updates affecting individual taxpayers:
1. No tax on (some) tips
OBBBA provides a deduction of up to $25,000 for qualified tips received in occupations that customarily and regularly receive tips. The deduction phases out for married couples with income above $300,000 and individuals above $150,000. Married taxpayers filing separately do not receive this deduction. Tips must be part of regular business activities, and the IRS is expected to publish a list of qualifying occupations within 90 days. Withholding tables will not reflect this change until 2026.
2. No tax on (some) overtime
A deduction of up to $12,500 ($25,000 for married filing jointly) is now available for qualified overtime compensation. The deduction phases out for incomes over $150,000 ($300,000 for married couples). It applies to qualifying overtime earned after December 31, 2024, and will end January 1, 2029. Married taxpayers filing separately are excluded. Employers can approximate qualifying overtime amounts before 2026 by reasonable methods, with additional IRS guidance forthcoming.
3. Enhanced deduction for seniors
An additional $6,000 deduction is now available for individuals age 65 and older. This deduction phases out for married taxpayers with income above $150,000 and for all others above $75,000. The deduction is set to expire at the end of 2028.
4. Car loan interest deduction
OBBBA introduces a deduction of up to $10,000 per year for interest paid on qualified vehicle loans for new personal-use vehicles assembled in the United States. Eligible vehicles include new cars, minivans, SUVs, pickup trucks, and motorcycles. The deduction phases out for married couples with income above $200,000 and for individuals above $100,000. This deduction is available to non-itemizers and will expire at the end of 2028.
5. Charitable contribution deduction
Beginning after December 31, 2025, non-itemizers will be able to claim a charitable contribution deduction of up to $1,000 for single filers and $2,000 for married filing jointly, applicable to certain qualifying charitable contributions.
6. Trump savings accounts
OBBBA establishes Trump Accounts for eligible newborns, including a one-time $1,000 government contribution. The accounts will track a stock index and allow additional inflation-adjusted deductible contributions up to $5,000 per year. Employers may contribute up to $2,500 tax-free under a written plan.
7. State and local tax deduction (SALT)
For taxpayers who itemize, the SALT deduction cap has been increased from $10,000 to $40,000 beginning in 2025. However, taxpayers with adjusted gross income over $500,000 may face a significant phaseout that substantially reduces the deduction.
Moving forward with clarity
At ClearPoint CPAs, we believe informed decisions begin with clarity. Our team is ready to help you understand how these changes may affect your tax planning now and in the future.
If you have questions or would like to discuss how the OBBBA impacts your situation, please don’t hesitate to reach out to our tax team.
Thank you for trusting ClearPoint CPAs. We’re here to help you move forward with confidence.
