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Tax News
March 13, 2026
With President Trump's new One Big Beautiful Bill Act (OBBBA), we have a few obvious winners.
What is OBBBA?
The One Big Beautiful Bill Act, often shortened to OBBBA, brought in several new federal tax breaks that started with the 2025 tax year. The four changes getting the most attention are the new deduction for tips, the new deduction for overtime pay, a deduction for certain vehicle loan interest, and an extra deduction for older adults. These breaks are temporary and currently apply from 2025 through 2028.
No tax on tips
Workers in qualifying tipped jobs may be able to deduct up to $25,000 in reported tip income on their federal tax return. This deduction is available whether someone itemizes or takes the standard deduction, but income limits apply, and married taxpayers generally must file jointly to claim it.
No tax on overtime
Some workers can now deduct the qualifying overtime portion of their pay. In general, this applies to the extra pay above the regular rate, such as the added half in time-and-a-half. The deduction is capped at $12,500 for most filers or $25,000 for married couples filing jointly, with phaseouts at higher income levels. There is also the requirement for a full 40 hours worked during a week, so you can't have a deduction without working full-time.
New vehicle loan interest deduction
People who buy a qualifying new personal-use vehicle may be able to deduct up to $10,000 a year in loan interest. The loan must meet a few specific rules, and lease payments exclude the vehicle. This deduction also phases out at higher income levels.
This deduction is only available for new cars, so if you wish to claim this deduction make sure that the purchase statement says "new".
Extra deduction for seniors
Taxpayers age 65 and older may qualify for an additional $6,000 deduction per eligible person. For married couples where both spouses qualify, that can mean up to $12,000 total. This is separate from the already existing additional standard deduction for seniors, though income limits do apply. This was Trump's solution to finding a way to not tax social security income. For most elderly people, this deduction would save them thousands.
If any of this is interesting, or confusing, reach out! We would love to talk more about all these changes.
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