The One Big Beautiful Bill Act (OBBBA) became law July 4, 2025, locking in certain tax changes and introducing new ones. Here’s what the new bill could mean for your taxes.
Effective for 2025 through 2028, individuals who are 65+ may claim an additional deduction of $6,000 per individual ($12,000 total for a married couple where both spouses qualify). This new deduction is in addition to the current additional standard deduction and for both itemizing and non-itemizing taxpayers.
Effective for 2025 through 2028, the OBBBA introduces a deduction for qualified overtime pay, meaning overtime income won’t be taxed the same way as regular wages. This is designed to boost take-home pay for hourly and salaried workers.
Effective for 2025 through 2028, qualifying taxpayers may deduct tips up to $25,000 per year. This deduction applies to those making less than $150,000 ($300,000 for joint filers).
Effective for 2025 through 2028, qualifying taxpayers may deduct up to $10,000 per year for new, qualifying vehicles.
The lower individual tax rates and income tax brackets set to expire in 2025 are now made permanent by OBBBA. The increased standard deduction set to expire in 2025 has been made permanent and increased to $15,750 for single filers and $31,500 for joint filers for 2025.
The Child Tax Credit was set to default to $1,000 after 2025, however, the OBBBA increased the Child Tax Credit to $2,200 for every qualifying child starting in 2025. The credit amount will be adjusted annually for inflation starting in 2026.
The $10,000 SALT deduction limit was set to expire in 2025, however the OBBBA increased the cap to $40,000 for 2025 for those with incomes up to $500,000. This increased cap will rise by 1% annually through 2029 and default back to $10,000 in 2030.
The 20% pass-through business income deduction was set to expire in 2025, but the OBBBA made it permanent. The bill also created a minimum deduction of $400 for businesses with at least $1,000 of income.
While every tax situation is different, your taxes may look a little different in 2025 and beyond.
Maggie
SENIOR
Additional Deductions | $6,750 |
Total Tax Savings | $810 |
Maggie is a 70-year-old single retiree with an adjusted gross income (AGI) of $57,000. Thanks to the new OBBBA, she received an increased standard deduction of $750 and a new senior deduction of $6,000. These changes reduced her taxable income, saving her a total of $810.
What does this mean for you?
If you’re retired or over 65, the new deductions may lower your taxable income and increase your refund.
Zack & Kara
OVERTIME WORKERS
Additional Deductions | $38,520 |
Additional Credits | $200 |
Total Tax Savings | $6,407 |
Zach and Kara are a married couple with two children, filing jointly with a combined adjusted gross income (AGI) of $144,000. Thanks to the new OBBBA, they qualified for $20,000 in overtime pay deductions, $5,000 in car loan interest deductions, and a $200 increase in the child tax credit. They also benefited from a higher SALT deduction cap of $23,520. These changes reduced their taxable income by $37,520, allowed them to itemize instead of taking the standard deduction, and lowered their tax bracket from 22% to 12%, saving them a total of $6,407.
What does this mean for you?
If you have children, work overtime, or live in a high-tax state, these updates could significantly reduce your tax bill.
Nikki
PARENT
Additional Deductions | $1,125 |
Additional Credits | $400 |
Total Tax Savings | $535 |
Nikki is a teacher who has two children and files as Head of Household with an adjusted gross income (AGI) of $57,700. Thanks to the new OBBBA, her standard deduction increased by $1,125 and her child tax credit went up by $400. These changes lowered her taxable income and total tax bill, saving her a total of $535.
What does this mean for you?
If you’re a parent or file as Head of Household, you might benefit from similar updates.
Julia
TIP-BASED WORKER
Additional Deductions | $20,750 |
Total Tax Savings | $1,562 |
Julia is a single waitress with an adjusted gross income (AGI) of $30,000, including $20,000 in tips. Thanks to the new OBBBA, she qualified for an increased standard deduction of $750 and a full deduction of her $20,000 in tips. These changes lowered her taxable income enough to move her from the 12% tax bracket to the 0% bracket, saving her $1,562 in taxes.
What does this mean for you?
If you earn tip income or have a similar financial profile, you might see tax savings too.