The One, Big, Beautiful Bill Act (OBBBA) is loaded with many provisions, so I thought it would be helpful to highlight the ones most relevant to individual income tax filing for 2025.
Deduction for Seniors
- If you are 65 on or before the last day of the tax year, you can deduct an additional $6,000 ($12,000 for joint filers) over the standard deduction.
- The deduction does phase out for taxpayers with a modified gross income of $75,000 ($150,000 for married couples).
State and Local Income Tax (SALT) Deduction Cap Increased
- The SALT deduction was increased from $10,000 to $40,000 ($20,000 for married filing separately).
- The deduction phases out for individuals who have incomes between $500,000 and $600,000.
No Tax on Tips
- Employees and self-employed individuals can deduct qualified tips in occupations where receiving tips is customary or regular, and the tips are reported on a W-2.
- Qualified tips include cash tips, charged tips, and shared tips.
- The maximum deduction is $25,000.
- The deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
No Tax on Overtime
- Individuals can deduct the portion of qualified overtime pay that exceeds their regular pay.
- The overtime must be reported on a W-2 or Form 1099.
- The maximum deduction is $12,500 ($25,000 for joint filers).
- The deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
Car Loan Interest Deductibility
- Individuals can deduct interest paid on qualified vehicles used for personal purposes. Leased cars do not qualify.
- The maximum deduction is $10,000 and phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).
- The loan must have originated after December 31, 2024, be used to purchase the vehicle, and be secured by the vehicle.
- A qualified vehicle is a car, minivan, van, truck, or motorcycle weighing less than 14,000 pounds that underwent final assembly in the United States.
- You can use NHTSA’s VIN decoder to look up a vehicle’s 17-character VIN and view manufacturer data, including the build plant and country where the vehicle was assembled.
- NHTSA VIN Decoder (official): https://vpic.nhtsa.dot.gov/decoder/ This is the authoritative public resource for decoding VIN information. It will not state whether a vehicle qualifies for tax purposes, but it does show the assembly location needed to determine whether the vehicle meets the U.S. final-assembly requirement.
It is important that you discuss the above with your tax preparer to see how the above changes impact you. Our December newsletter highlighted other areas that impact retirement accounts and HSA contributions and limitations. You can review it by clicking on this link: LINK TO ARTICLE. There are more changes for 2026 that we will review in the next newsletter.
