The One Big Beautiful Bill Act (OBBBA) was signed into law in July 2025, bringing significant tax changes that will impact your taxes this year. Some of these changes, such as higher SALT caps and new deductions for “no tax on overtime and tips,” may not alter the rates you pay but can reduce your taxable income and potentially increase your refund.
Here are the four major tax provisions to keep an eye on as you prepare and file your taxes:
1. State and Local Tax (SALT) Deduction: For the 2025 tax year, the SALT deduction has quadrupled to $40,000, a substantial increase from the previous $10,000 limit. This change is particularly beneficial for high-income taxpayers, with the deduction encompassing state and local income taxes, property taxes, local taxes, and optional sales taxes.
2. No Tax on Overtime Deduction: This new tax break doesn’t eliminate taxes on overtime earnings entirely, but it can reduce your federal tax liability by allowing you to deduct the portion of pay that exceeds your regular rate. The maximum deduction for this provision is $12,500 for individuals or $25,000 for joint filers, phasing out for those with modified adjusted gross incomes over $150,000.
3. No Tax on Tips Deduction: Service workers can now deduct a portion of their tips, up to $25,000 annually, reducing their taxable income. Qualified tips include voluntary, non-negotiated payments determined solely by the customer, such as cash tips, credit card tips, and pooled tips.
4. Car Loan Interest Deduction: Individuals who financed a new vehicle may be eligible to deduct up to $10,000 of car loan interest in certain situations. This deduction is available regardless of whether you itemize or take the standard deduction, with income limits for eligibility and requirements for the vehicle being new and domestically assembled.
Additionally, older, middle-income Americans receive a $6,000 boost to their standard deduction this year, with phase-out limits for higher earners. This deduction is available whether you itemize or take the standard deduction.
These tax changes introduced by the OBBBA aim to provide relief and benefits to various groups of taxpayers. As you navigate through the tax season, it’s essential to be aware of these provisions and how they may impact your financial situation. Stay informed and consult with a tax professional if needed to ensure you are maximizing your tax benefits within the new framework set by the OBBBA.
