New OBBBA Deductions You May Qualify For
Maximize your refund. OBBBA makes it possible.
The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, and introduces several new tax benefits designed for workers, seniors, and people who finance major purchases like cars.
These deductions will be available starting in tax year 2025, which means you’ll be able to apply them when you file your return in 2026. Here are three key deductions that could directly impact your wallet.
Overtime Pay Deduction
If you work hourly and your employer pays you extra for working more than usual (known as overtime), you can now deduct a portion of that extra income from your tax return.
This benefit allows you to deduct up to $12,500 of your overtime income for the year. If you file jointly with your spouse, the amount increases to $25,000. This deduction is available whether or not you itemize deductions, which makes it very accessible.
The key is to keep accurate records of how much you earned in overtime and ensure it’s correctly reported on your year-end tax forms. This deduction does not apply to income from tips. Employers must also make sure these extra hours are properly recorded.
Tip Income Deduction
If you work in industries where you receive tips like restaurants, bars, or personal services you may now be able to deduct part of that income on your tax return.
The benefit allows you to deduct up to $10,000 of tip income earned throughout the year. If you're married and filing jointly, the amount increases to $20,000.
This deduction is available whether you itemize or take the standard deduction, making it very accessible.
The key is to have your tips properly reported on your W-2, as only officially declared tips qualify. Unreported cash tips do not count.
Senior Deduction
If you are 65 or older, OBBBA allows you to claim a new deduction of up to $6,000 on your tax return. This amount is applied directly to your total income and can help lower your federal tax bill, even if you don’t itemize deductions.
The deduction begins to phase out if your income is over $75,000 per year (single filers) or $150,000 (married filing jointly). You’ll just need your basic documentation (such as a valid Social Security Number) and meet the age and income criteria.
How Does It Work Based on Your Income?
Filing Status Extra Deduction Full Deduction If Income Is Under (MAGI) Phased Out Completely At...
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Single $6,000 Up to $75,000 $175,000
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Married $12,000 Up to $150,000 $250,000
If your income is within the limit, you get the full deduction.
If your income is above the limit, the deduction phases out gradually until it’s gone.
This deduction assists seniors living on pensions or part-time income.
Interest Deduction for New Auto Loans
If you’re planning to buy a new car with financing (in other words, with a loan), OBBBA allows you to deduct up to $10,000 in interest paid on that loan, as long as the vehicle was assembled in the United States.
This is a significant change because personal loan interest (like auto loans) used to be non-deductible. Now, if you buy a car for personal or family use (not an RV or camper), you can deduct part of the interest paid—even without itemizing deductions.
This benefit phases out if your income exceeds $100,000 per year (single) or $200,000 (joint). That’s why it’s important to check your eligibility before you make the purchase, and to keep all loan documents.
What Can You Do Now?
If you work hourly, start tracking any extra payments you receive for overtime starting January 2025.
If you’re 65 or older, check whether your annual income allows you to claim the full deduction.
If you plan to buy a new car, ensure it was assembled in the U.S. and save the loan agreement.
If you're unsure how to apply these deductions or whether you qualify, consider speaking with one of our tax professionals to get everything prepared the right way from the start.
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