The One Big Beautiful Bill Act (OBBB) was signed into law on July 4, 2025.
There are many provisions to the OBBB but below are some of the highlights we wanted to bring to your attention that could affect your tax returns:
No Tax on Tips: There is a temporary deduction of up to $25,000 for tips received by a taxpayer whose profession is one that customarily receives tips. This is a deduction taken on your tax return. It will not affect your net paycheck. Tips are still subject to social security and Medicare taxes. This deduction is effective for tax years 2025 through 2028 and begins to phase out once your income reaches $150,000 for a single taxpayer and $300,000 for joint taxpayers. The deduction cannot be claimed on a married filing separately tax return.
No Tax on Overtime: There is a temporary deduction of up to $12,500 ($25,000 for a joint return) for qualified overtime received by a taxpayer. This is a deduction taken on your tax return. It will not affect your net paycheck. Overtime is still subject to social security and Medicare taxes. This deduction is effective for tax years 2025 through 2028 and begins to phase out once your income reaches $150,000 for a single taxpayer and $300,000 for joint taxpayers. The deduction cannot be claimed on a married filing separately tax return. As of now it appears that the amount that qualifies as overtime pay is the rate difference that was received. For example, an employee makes $18 per hour and worked overtime hours at $27 per hour; the amount that would qualify for the deduction would be $9 per hour.
State and Local Tax (SALT) Limitation: SALT includes real estate taxes, sales tax and state income taxes. Beginning with tax year 2025, the amount that can be taken as an itemized deduction is increased from $10,000 to $40,000. This increase is effective through 2029 and has an annual increase of 1%.
Child Tax Credit: For tax year 2025 the child tax credit has increased from $2,000 to $2,200
Age 65 Exemption: For taxpayers who are 65 or older before the close of the tax year there is an additional $6,000 exemption. This is effective for tax years 2025 through 2028. The exemption begins phasing out when the modified adjusted gross income is $75,000 for single taxpayers and $150,000 for joint taxpayers.
Car Loan Interest: You may be able to claim a deduction for interest you pay on a car loan. The loan must be for a new vehicle that had its final assembly with the United States and was purchased between January 1, 2025, and December 31, 2028. The maximum deduction allowed is $10,000 and will begin phasing out when modified adjusted gross income reaches $100,000 for single taxpayers and $200,000 for married filing joint.
Electric Vehicle Credit: This credit is eliminated for any vehicle purchased after September 30, 2025.
Home Energy Credit: This credit is eliminated for any purchases after December 31, 2025.
Qualified Business Deduction (QBI): This deduction has been made permanent and will continue to give business owners a 20% deduction.
Bonus Depreciation: For assets placed in service after January 19, 2025, the bonus depreciation is 100%. This has been made permanent.
Form 1099K: This is the form that providers use to report credit card sales. The reporting requirements were set to change but that was stopped. Companies are required to report 1099K sales if the total received was $20,000 and there were at least 200 transactions.
Form 1099NEC: This form is issued to independent contractors. Currently if a business pays an independent contractor for services it needs to issue them a 1099NEC form if the amount was $600 or more. Beginning January 1,2026, the form 1099NEC will need to be issued for payments totaling $2,000 or more.
Gambling Losses: Previously you could deduct gambling losses up to 100% of your winnings. Beginning in 2026 you will only be able to deduct up to 90% of your winnings.
Mortgage Insurance Premiums: Beginning in 2026 mortgage insurance premiums will once again be included as an itemized deduction.
Educator Expenses: Beginning in 2026 educators who spend more than $300 for classroom supplies can take that amount over the $300 deduction allowed as an itemized deduction.
Charitable Contributions: Beginning in 2026 an adjustment to income is allowed for up to $1,000 ($2,000 joint) for cash contributions made.
Trump Accounts: Beginning July 4, 2026 parents will be able to contribute up to $5,000 annually to a Trump IRA account for children under 18. The pilot program provides a $1,000 tax credit for opening a Trump account for a child born between January 1, 2025 and December 31, 2028.