On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBB) into law. The legislation had been billed as the largest tax overhaul since the 2017 Tax Cuts and Jobs Act — and depending on who you ask, it either delivered on that promise or fell short. What's not debatable is that it created six brand-new federal tax deductions that millions of Americans can claim starting with their 2025 returns.
Here's what each one actually does, who qualifies, and the fine print most coverage skips.
| Deduction | Max Amount | Income Phase-Out | Expires |
|---|---|---|---|
| No Tax on Tips | $25,000 | $150K single / $300K joint | After 2028 |
| No Tax on Overtime | $12,500 / $25,000 | $150K single / $300K joint | After 2028 |
| Car Loan Interest | $10,000 | None specified | Permanent |
| Senior Bonus Deduction | $6,000 | $75K single / $150K joint | After 2028 |
| SALT Cap Increase | $40,400 (2026) | $505K MAGI | 2029 (reverts) |
| Trump Accounts | $5,000/year | Income limits apply | Permanent |
All six are claimed on the new Schedule 1-A, which is separate from Schedule A. That means you do not need to itemize to claim most of these. They're above-the-line deductions that reduce your adjusted gross income directly.
If you work in a customarily tipped occupation — waitstaff, bartenders, hairdressers, valets, and similar roles — you can deduct up to $25,000 of reported tip income from your federal taxes.
The key word is "reported." Cash tips you don't report don't qualify (and not reporting them was already illegal). Credit card tips, tip pooling distributions, and cash tips reported on your return all count. Mandatory service charges do not — those are treated as regular wages.
Phase-out: The deduction starts shrinking once your modified adjusted gross income (MAGI) exceeds $150,000 for single filers or $300,000 for married filing jointly. It phases out completely at roughly $175K / $350K.
This provision is temporary — it applies to tax years 2025 through 2028 unless Congress extends it.
This one sounds broader than it is. The deduction covers only the 0.5x premium portion of overtime pay as defined under the Fair Labor Standards Act (FLSA). That's the extra half-time rate you earn on hours beyond 40 per week — not the base rate for those hours.
Example: You earn $30/hour and work 50 hours in a week. Your overtime pay is $45/hour × 10 hours = $450. But only the premium portion — $15/hour × 10 hours = $150 — qualifies for the deduction. The base $30/hour for those 10 overtime hours is regular income.
The cap is $12,500 for single filers and $25,000 for married filing jointly. The same $150,000 MAGI phase-out applies as with the tips deduction (single filers; $300K joint).
Salaried workers classified as FLSA-exempt generally don't qualify, since their extra hours aren't legally "overtime" under federal law. This deduction also expires after 2028.
You can deduct up to $10,000 in interest paid on an auto loan — but only if the vehicle was manufactured in the United States. This includes assembly in the U.S., not just final sale.
There's no income-based phase-out written into this provision, and it's permanent (no sunset date). The vehicle must be purchased new or used after the date of enactment, and the loan must be in the taxpayer's name.
This is a narrower benefit than it first appears. On a typical $35,000 auto loan at 6.5% interest, the first-year interest is roughly $2,200 — well under the $10,000 cap. You'd need a large loan on an expensive vehicle to approach the limit.
Taxpayers aged 65 or older get an additional $6,000 above-the-line deduction on top of the existing standard deduction and the existing additional standard deduction for seniors.
This one has a tight income phase-out: it begins at just $75,000 MAGI for single filers ($150,000 joint) and phases out completely by $100,000 / $200,000. That means a retired couple with a combined income of $160,000 from Social Security, pensions, and investments would get a reduced benefit — and at $200,000, nothing at all.
Like the tips and overtime deductions, the senior bonus is temporary through 2028.
The State and Local Tax (SALT) deduction cap — one of the most contentious provisions from the 2017 TCJA — got a significant bump. The cap rises from $10,000 to $40,400 in 2026, with small annual increases through 2029 before reverting to $10,000 in 2030 unless extended again.
Unlike the other new deductions, you must itemize on Schedule A to claim the SALT deduction. There's also an income-based phase-out starting at $505,000 MAGI, which reduces the cap by 30 cents for every dollar above that threshold (with a floor of $10,000 — you can always deduct at least that much).
We cover SALT in detail in our separate article on the new SALT cap.
The OBBB created a new tax-advantaged savings account for children: the Trump Account. Parents or guardians can contribute up to $5,000 per year per child, with contributions growing tax-free. At age 18, the account holder receives a one-time $1,000 government match (for accounts opened before the child turns 4).
Withdrawals are tax-free when used for qualified expenses including education, homebuying, and starting a business. Income limits apply for the contribution deduction, and the accounts are permanent (no sunset date).
We'll cover Trump Accounts in greater detail in a future article once IRS guidance on account custodians and qualified institutions is finalized.
Two things the OBBB preserved that are worth noting:
The OBBB is less a single sweeping reform and more a bundle of targeted deductions — each with its own rules, limits, and expiration dates. The biggest risk for taxpayers is assuming a deduction applies to them without checking the fine print. Tips and overtime have occupation-specific requirements. The senior bonus phases out at modest incomes. The car loan deduction only works for U.S.-made vehicles.
If any of these apply to your situation, the payoff can be real — potentially thousands of dollars in reduced federal tax. But the details matter, and four of the six provisions expire after 2028. Plan accordingly.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation.