On July 4, 2025, legislation known as the One Big Beautiful Bill was signed into law which is bound to affect most all taxpayers. Most of the new provisions are effective for only the tax years 2025 through 2028. Detailed analysis of the bill will be forthcoming, here is a summary of the key points of the bill:
No tax on qualified tips. This provision provides a deduction of up to $25,000 for tips provided to taxpayers in an occupation that customarily receives tips. Those occupations will be determined later by the Treasury Secretary, but are likely to include waiters, bartenders, bellhops, casino dealers, hairdressers and other similar service roles. This is not a full exclusion – the tips will still be subject to Social Security and Medicare tax. There is also a $150,000 income limitation on the full deduction ($300,000 for joint).
No tax on overtime pay. The new bill allows you to take a deduction of up to $12,500 in qualified overtime pay from your federal taxable income. To qualify, your employer must report the overtime separately on your W-2. Similar to the tip provision, the overtime is still subject to payroll taxes and has the same income limitation.
Senior deduction. Taxpayers age 65 and older can each claim a $6,000 deduction against their adjusted income. The deduction is reduced and eventually phased out for those with income over $75,000 ($150,000 for joint filers).
Increased child tax credit. Families with children will see an increase in the $2000 child tax credit. The new credit will be $2200, with no expiration date specified.
New car loan interest now deductible. Up to $10,000 in interest may be deductible on loans for cars assembled in the United States. The deduction is reduced (and eventually phased out) if your income is over $100,000 ($200,000 for joint filers).
Charitable contribution deduction. Non-itemizers can now claim a deduction of up to $1000 ($2000 for joint filers) for donations to charity. Itemizers are imposed a .5% floor for donations starting in 2026.
Educator Expenses. Starting in 2026, educators may get more tax benefits for expenses incurred if they itemize deductions.
New savings options for children under 18 (effective July 4, 2026). Named a “Trump Account”, this works similar to an IRA where money is invested in the child’s name and the earnings are tax-deferred. The government will kick in $1000 for children born in 2025 through 2028, thereafter parents can make after-tax contributions of up to $5000 per year. Much more guidance will be forthcoming on this provision.
SALT (State and Local Tax) Deduction increased. The $10,000 SALT limitation has been increased to $40,000 (subject to phasedown for very high income taxpayers) for tax years 2025-2029. The $40K will increase by 1% per year, then revert back to the $10K starting 2030.
Mortgage insurance premiums (MIP). Starting in 2026, MIP will be deductible for some taxpayers (similar to pre-2022 tax years).
Home solar credit. The 30% credit will expire on December 31, 2025. You must have your solar system up and running prior to the expiration date to get the credit on your 2025 tax return.
Clean vehicle credit. This credit for electric vehicles is repealed for vehicles acquired after September 30, 2025.
Energy efficient home improvement credit. Repealed for property placed in service after December 31, 2025.
1099-K reporting thresholds. Increases the Form 1099-K threshold to $20,000 and more than 200 transactions.
1099-NEC and 1099-MISC reporting. Increases the old threshold of $600 to $2000 and adjusts the threshold for inflation after 2026.
Alternative Minimum Tax (AMT). Changes to the AMT will mean more taxpayers will be subject to the tax in 2026.
Gambling. Beginning with the 2026 tax year, only 90% of gambling losses incurred up to the amounts of gains will be deductible. That means even if you lose money gambling, you will still pay tax on 10% of the winnings (and it may increase the taxable part of your social security).
TCJA (Tax Cuts and Jobs Act). Most of the provisions from the 2017 TCJA are now permanent. This includes the tax rates and brackets, the increased standard deduction amounts, the elimination of many itemized deductions, the 199A deduction, etc.
Disclaimer: This recap contains only general information and should not be considered tax advice. All tax matters should be discussed directly with us or another tax professional before taking any action. All information is subject to change and we are not responsible for any mis-information or typos.
No tax on qualified tips. This provision provides a deduction of up to $25,000 for tips provided to taxpayers in an occupation that customarily receives tips. Those occupations will be determined later by the Treasury Secretary, but are likely to include waiters, bartenders, bellhops, casino dealers, hairdressers and other similar service roles. This is not a full exclusion – the tips will still be subject to Social Security and Medicare tax. There is also a $150,000 income limitation on the full deduction ($300,000 for joint).
No tax on overtime pay. The new bill allows you to take a deduction of up to $12,500 in qualified overtime pay from your federal taxable income. To qualify, your employer must report the overtime separately on your W-2. Similar to the tip provision, the overtime is still subject to payroll taxes and has the same income limitation.
Senior deduction. Taxpayers age 65 and older can each claim a $6,000 deduction against their adjusted income. The deduction is reduced and eventually phased out for those with income over $75,000 ($150,000 for joint filers).
Increased child tax credit. Families with children will see an increase in the $2000 child tax credit. The new credit will be $2200, with no expiration date specified.
New car loan interest now deductible. Up to $10,000 in interest may be deductible on loans for cars assembled in the United States. The deduction is reduced (and eventually phased out) if your income is over $100,000 ($200,000 for joint filers).
Charitable contribution deduction. Non-itemizers can now claim a deduction of up to $1000 ($2000 for joint filers) for donations to charity. Itemizers are imposed a .5% floor for donations starting in 2026.
Educator Expenses. Starting in 2026, educators may get more tax benefits for expenses incurred if they itemize deductions.
New savings options for children under 18 (effective July 4, 2026). Named a “Trump Account”, this works similar to an IRA where money is invested in the child’s name and the earnings are tax-deferred. The government will kick in $1000 for children born in 2025 through 2028, thereafter parents can make after-tax contributions of up to $5000 per year. Much more guidance will be forthcoming on this provision.
SALT (State and Local Tax) Deduction increased. The $10,000 SALT limitation has been increased to $40,000 (subject to phasedown for very high income taxpayers) for tax years 2025-2029. The $40K will increase by 1% per year, then revert back to the $10K starting 2030.
Mortgage insurance premiums (MIP). Starting in 2026, MIP will be deductible for some taxpayers (similar to pre-2022 tax years).
Home solar credit. The 30% credit will expire on December 31, 2025. You must have your solar system up and running prior to the expiration date to get the credit on your 2025 tax return.
Clean vehicle credit. This credit for electric vehicles is repealed for vehicles acquired after September 30, 2025.
Energy efficient home improvement credit. Repealed for property placed in service after December 31, 2025.
1099-K reporting thresholds. Increases the Form 1099-K threshold to $20,000 and more than 200 transactions.
1099-NEC and 1099-MISC reporting. Increases the old threshold of $600 to $2000 and adjusts the threshold for inflation after 2026.
Alternative Minimum Tax (AMT). Changes to the AMT will mean more taxpayers will be subject to the tax in 2026.
Gambling. Beginning with the 2026 tax year, only 90% of gambling losses incurred up to the amounts of gains will be deductible. That means even if you lose money gambling, you will still pay tax on 10% of the winnings (and it may increase the taxable part of your social security).
TCJA (Tax Cuts and Jobs Act). Most of the provisions from the 2017 TCJA are now permanent. This includes the tax rates and brackets, the increased standard deduction amounts, the elimination of many itemized deductions, the 199A deduction, etc.
Disclaimer: This recap contains only general information and should not be considered tax advice. All tax matters should be discussed directly with us or another tax professional before taking any action. All information is subject to change and we are not responsible for any mis-information or typos.
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