Big Beautiful Bill Act 2025: Complete Guide to Every New Tax Deduction
The Big Beautiful Bill at a Glance
Table of Contents
The One Big Beautiful Bill Act (OBBBA), also known as H.R.1, was signed into law on July 4, 2025. It represents the most significant tax legislation since the Tax Cuts and Jobs Act of 2017, introducing multiple new deductions that could save American families thousands of dollars annually. This comprehensive guide breaks down every major provision.
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Calculate All My Deductions →1. What Is the Big Beautiful Bill Act (OBBBA)?
The One Big Beautiful Bill Act is a comprehensive tax reform package that:
- Creates new above-the-line deductions for tips, overtime, auto loan interest, and seniors
- Increases the SALT deduction cap from $10,000 to $40,000
- Makes TCJA individual tax cuts permanent (previously set to expire in 2025)
- Enhances the Child Tax Credit by $200 per child
- Creates "Trump Accounts" – tax-deferred savings accounts for children
Most provisions take effect for tax years 2025 through 2028, though some (like the TCJA extensions) are permanent.
2. No Tax on Tips ($25,000 Deduction)
The "No Tax on Tips" provision creates a federal income tax deduction for qualified tip income:
Key Details
- Maximum Deduction: $25,000 per year
- Effective Period: Tax years 2025-2028
- Eligible Workers: 68+ tipped occupations (servers, bartenders, hairstylists, rideshare drivers, etc.)
- Phase-Out: Begins at $150,000 MAGI ($300,000 MFJ)
Important: This is a deduction from federal income tax only. Tips remain subject to Social Security, Medicare, and state taxes.
3. No Tax on Overtime ($25,000 Deduction)
Non-exempt hourly workers under the Fair Labor Standards Act (FLSA) can now deduct overtime pay:
Key Details
- Maximum Deduction: $12,500 single / $25,000 MFJ
- Eligibility: Must be FLSA non-exempt (hourly, paid 1.5x for overtime)
- Phase-Out: Begins at $150,000 MAGI ($300,000 MFJ)
- What Qualifies: Hours worked beyond 40/week at 1.5x+ rate
This particularly benefits manufacturing workers, healthcare staff, retail employees, and other hourly workers who regularly work overtime.
4. Auto Loan Interest Deduction ($10,000)
Buyers of new, US-assembled vehicles can deduct auto loan interest:
Key Details
- Maximum Deduction: $10,000 per year
- Vehicle Requirements:
- Must be NEW (original use begins with you)
- Must be assembled in the United States
- Must be for personal use (not business)
- GVWR under 14,000 pounds
- Phase-Out: Begins at $100,000 MAGI ($200,000 MFJ)
You can verify if your vehicle qualifies by entering the VIN number in our calculator.
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5. SALT Deduction Cap Increase ($40,000)
The State and Local Tax (SALT) deduction cap has been quadrupled:
Key Details
- New Cap: $40,000 (up from $10,000)
- MFS Cap: $20,000
- Effective Period: 2025-2029 (1% annual increase)
- Phase-Out: Begins at $500,000 MAGI
- Includes: State income + local income + property taxes
This particularly benefits residents of high-tax states like California, New York, New Jersey, and Connecticut.
6. Senior Bonus Deduction (65+)
Americans aged 65 and older receive a flat additional deduction:
Key Details
- Maximum Deduction:
- Single: $6,000
- MFJ (one spouse 65+): $6,000
- MFJ (both spouses 65+): $12,000
- Eligibility: Must be 65+ by end of tax year
- Phase-Out: Begins at $75,000 MAGI ($150,000 MFJ)
- No Expenses Required: This is a flat deduction, not based on actual spending
7. Child Tax Credit Changes
The OBBBA enhances the Child Tax Credit:
- Amount: Increased by $200 to $2,200 per child
- Refundable Portion: Up to $1,700 is refundable
- "Trump Accounts": New tax-deferred savings accounts for children (up to $5,000/year contributions)
8. TCJA Provisions Made Permanent
The OBBBA makes several 2017 Tax Cuts and Jobs Act provisions permanent that were set to expire:
- Individual Tax Rates: Lower brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) are permanent
- Enhanced Standard Deduction: $15,000 single / $30,000 MFJ (nearly doubled from pre-2018)
- 20% QBI Deduction: Pass-through business income deduction made permanent
- Doubled Estate Tax Exemption: ~$13+ million exemption made permanent
9. Who Benefits Most?
The OBBBA provides targeted benefits to specific groups:
Service Industry Workers
Servers, bartenders, hairstylists, rideshare drivers can save up to $5,500+ in federal taxes on their tips.
Hourly Workers
FLSA non-exempt employees working overtime can deduct up to $25,000 in overtime pay.
High-Tax State Residents
The $40,000 SALT cap benefits homeowners in NY, CA, NJ, CT, and other high-tax states.
Seniors (65+)
Retirees get an automatic $6,000-$12,000 deduction with no expenses to track.
New Car Buyers
Buyers of US-assembled vehicles can deduct up to $10,000 in loan interest.
Families with Children
Enhanced Child Tax Credit and new Trump Accounts for children's savings.
10. Calculate Your Savings
Use our free calculators to see exactly how much you'll save under the OBBBA:
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Calculate All Deductions →Disclaimer: This article is for informational purposes only and does not constitute tax advice. The One Big Beautiful Bill Act (OBBBA/H.R.1) was signed into law July 4, 2025. Tax laws are complex and individual situations vary. Consult a qualified tax professional for advice specific to your circumstances.