How to File OBBBA Deductions 2025: Step-by-Step Tax Filing Guide

Filing your 2025 taxes just got more rewarding thanks to the One Big Beautiful Bill Act (OBBBA). This step-by-step guide walks you through exactly how to claim each of the new deductions—No Tax on Tips, No Tax on Overtime, Auto Loan Interest, the $40,000 SALT cap, and the Senior Bonus—on your federal tax return.

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1. Overview: OBBBA Deductions and Schedule 1

Most OBBBA deductions are reported on Schedule 1 (Form 1040), Part II – Adjustments to Income. These are "above-the-line" deductions, meaning they reduce your Adjusted Gross Income (AGI) whether you itemize or take the standard deduction.

Deduction	Where to Report	Max Amount
No Tax on Tips	Schedule 1, Part II	$25,000
No Tax on Overtime	Schedule 1, Part II	$12,500 / $25,000 MFJ
Auto Loan Interest	Schedule 1, Part II	$10,000
SALT Deduction	Schedule A (Itemized)	$40,000
Senior Bonus (65+)	Schedule 1, Part II	$6,000 / $12,000 MFJ

Note: The SALT deduction is the exception—it goes on Schedule A (Itemized Deductions). You must itemize to claim SALT.

2. Documents You Need Before Filing

Gather these documents before starting your return:

For Tips Deduction

Form W-2 (Box 7 shows allocated tips)
Daily tip log or records
Form 4137 (if reporting unreported tips)

For Overtime Deduction

All pay stubs showing overtime hours and pay
Year-end summary from employer
Confirmation of non-exempt FLSA status

For Auto Loan Interest Deduction

Form 1098-AUTO (or annual loan statement)
Vehicle purchase agreement
VIN for US assembly verification

For SALT Deduction

Form W-2 (Box 17 shows state taxes withheld)
State tax return copy (if paid additional)
Property tax statement

For Senior Bonus Deduction

Proof of age (birth certificate, driver's license)
Spouse's age documentation (if MFJ and both 65+)

3. Filing the Tips Deduction

Step-by-Step: Claiming Tips Deduction

Step 1: Calculate total qualified tips (W-2 Box 7 + any Form 4137 tips)
Step 2: Apply the $25,000 maximum
Step 3: Check income phase-out ($150K single / $300K MFJ)
Step 4: Enter final amount on Schedule 1, Part II, Line 25 (or designated OBBBA line)
Step 5: Total flows to Form 1040, Line 10

4. Filing the Overtime Deduction

Step-by-Step: Claiming Overtime Deduction

Step 1: Calculate total overtime pay from all 2025 pay stubs
Step 2: Verify you are FLSA non-exempt (hourly, paid 1.5x OT)
Step 3: Apply maximum ($12,500 single / $25,000 MFJ)
Step 4: Apply phase-out if MAGI > $150K ($300K MFJ)
Step 5: Enter on Schedule 1, Part II

5. Filing the Auto Loan Interest Deduction

Step-by-Step: Claiming Auto Loan Deduction

Step 1: Confirm vehicle eligibility (new, US-assembled, personal use)
Step 2: Get total interest paid from 1098-AUTO or loan statements
Step 3: Apply $10,000 maximum
Step 4: Apply phase-out if MAGI > $100K ($200K MFJ)
Step 5: Enter on Schedule 1, Part II
Step 6: Keep VIN documentation in your records

6. Filing the SALT Deduction

Step-by-Step: Claiming SALT Deduction

Step 1: Choose to itemize (compare total itemized vs. standard deduction)
Step 2: Add up state income tax + property tax
Step 3: Apply $40,000 cap ($20,000 MFS)
Step 4: Apply phase-out if MAGI > $500K
Step 5: Enter on Schedule A, Line 5d

⚠️ Important: SALT Requires Itemizing

Unlike other OBBBA deductions, SALT goes on Schedule A. You must itemize your deductions (not take the standard deduction) to claim SALT.

7. Filing the Senior Bonus Deduction

Step-by-Step: Claiming Senior Bonus

Step 1: Confirm you (and/or spouse) are 65+ by Dec 31, 2025
Step 2: Determine amount: $6,000 (single/one 65+) or $12,000 (both 65+)
Step 3: Apply phase-out if MAGI > $75K ($150K MFJ)
Step 4: Enter on Schedule 1, Part II
Step 5: No receipts or documentation required

8. Stacking Multiple Deductions

Good news: You can claim multiple OBBBA deductions on the same return if you qualify for each. Here's how they stack:

Example: Maximum Stacking

A 66-year-old married couple where both spouses work:

Spouse 1: Tips (server) $25,000

Spouse 2: Overtime (nurse) $15,000

Auto Loan Interest (new Honda) $4,000

Senior Bonus (both 65+) $12,000

Total Above-the-Line OBBBA Deductions $56,000

SALT (if itemizing) $40,000

Potential Total Tax Benefit $96,000 in deductions

9. Common Mistakes to Avoid

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Claiming Tips Without Eligible Occupation

Only IRS-approved occupations qualify. Office workers who receive occasional bonuses labeled "tips" do not qualify.

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Claiming Overtime as a Salaried Exempt Employee

Only FLSA non-exempt workers qualify. Salaried managers and professionals typically don't have "overtime" under FLSA.

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Claiming Auto Interest on Used or Foreign-Made Cars

Vehicle must be new AND assembled in the US. Always verify with VIN.

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Claiming SALT While Taking Standard Deduction

SALT requires itemizing. If you take the standard deduction, you cannot claim SALT.

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Ignoring Income Phase-Outs

Each deduction has income limits. Higher earners may have reduced or eliminated deductions.

10. Using Tax Software for OBBBA

Major tax software programs will be updated to handle OBBBA deductions for 2025 returns. Here's what to expect:

TurboTax, H&R Block, TaxAct, FreeTaxUSA

Interview questions will ask about tips, overtime status, vehicle purchases, and age
Software will automatically calculate phase-outs based on your MAGI
Deductions will be placed on correct forms (Schedule 1 or Schedule A)

Tips for Accuracy

Enter information exactly as shown on W-2s and 1099s
Have your VIN ready for auto loan deduction
Double-check your birthdate for senior bonus eligibility
Review the final return to confirm all deductions appear on Schedule 1

Know Your Numbers Before Filing

Use our comprehensive calculator to determine all your OBBBA deductions before you start your return.