How does the One Big Beautiful Bill (OBBB) affect you?

Makes the standard deduction increase from 2018 permanent with an enhancement for 2025, which is as follows:

• Joint Filers – $31,500
• Head of Household – $23,625
• Single/Separate – $15,750

Inflation adjusted for years thereafter.

Makes the expiring child tax credit permanent with an increased maximum of $2,200 in 2025, inflation adjusted thereafter.

Effective for 2025 through 2028, individuals who are age 65 and older may claim an additional deduction of $6,000. This new deduction is in addition to the current additional standard deduction for seniors under existing law.

• The $6,000 senior deduction is per eligible individual (i.e., $12,000 total for a married couple where both spouses qualify)
• Deduction phases out for taxpayers with modified adjusted gross income over $75,000 for Single and $150,000 for joint filers.

Qualifying Taxpayers: To qualify for the additional deduction, a taxpayer must attain age 65 on or before the last day of the taxable year.

Taxpayer eligibility: The deduction is available for both those who itemize and those who take the standard deduction, but it is not available for those who file Married Filing Separately.

Effective for 2025 through 2028, employees and self-employed individuals may deduct qualified tips received in occupations that are listed by the IRS as customarily and regularly receiving tips, and are reported on a Form W-2, Form 1099, or other specified statement furnished to the individual or reported directly by the individual on Form 4137.

• “Qualified tips” are voluntary cash or charged tips received from customers or through tip sharing.
• Maximum annual deduction is $25,000; for self-employed, deduction may not exceed individual’s net income (without regard to this deduction) from the trade or business in which the tips were earned.  
• Deduction phases out for taxpayers with modified adjusted gross income over $150,000 for single and $300,000 for joint filers.  

Taxpayer eligibility: The deduction is available for both those who itemize and those who take the standard deduction, but it is not available for those who file Married Filing Separately. 

Effective for 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay, such as the “half” portion of “time-and-a-half” compensation, that is required by the Fair Labor Standards Act (FLSA) and that is reported on a

• Form W-2, Form 1099, or other specified statement furnished to the individual.
• Maximum annual deduction is $12,500 ($25,000 for joint filers).
• Deduction phases out for taxpayers with modified adjusted gross income over $150,000 for single and $300,000 for joint filers. 

Taxpayer eligibility: The deduction is available for both those who itemize and those who take the standard deduction, but it is not available for those who file Married Filing Separately. 

Please Note: The IRS is not requiring employers to furnish this information on the Form W-2 for 2025 (likely in 2026, it will be in box 12 of Form W-2 coded TT). For 2025, if your employer does not provide a letter or notation on your W2, a Year-to-Date last pay stub for 2025 would be helpful to assist us in calculating the deduction.

Effective for 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria. (Lease payments do not qualify.)

• Maximum annual deduction is $10,000.
• Deduction phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).

Qualified interest: To qualify for the deduction, the interest must be paid on a loan that is:

• Originated after December 31, 2024
• Used to purchase a vehicle originally used by the taxpayer (used vehicles do not qualify)
• For a personal use vehicle (not for business or commercial use)
• Secured by a lien on the vehicle

If a qualifying vehicle loan is later refinanced, interest paid on the refinanced amount is generally eligible for the deduction.

Qualified vehicle: A qualified vehicle is a car, minivan, van, SUV, pick-up truck or motorcycle, with a gross vehicle weight rating of less than 14,000 pounds, and that has undergone final assembly in the United States.

To determine if a vehicle had final assembly in the U.S., check one of these:

• The information label attached to the vehicle on a dealer’s premises
• The vehicle identification number (VIN)
• The National Highway Traffic Safety Administration (NHTSA) VIN Decoder

Taxpayer eligibility: Deduction is available for both itemizing and non-itemizing taxpayers. The taxpayer must include the vehicle identification number (VIN) of the vehicle on the tax return for any year when the deduction is claimed.

Reporting: Lenders or other recipients of qualified interest must file information returns with the IRS and furnish statements to taxpayers showing the total amount of interest received during the taxable year. However, 2025 is a transition year, and this will not be enforced for tax year 2025, so taxpayers may need to reach out directly to their lending institution for this information.

As mandated by an Executive Order, the IRS is phasing out paper tax refund checks. For 2025 tax returns filed in 2026, taxpayers will need to provide direct deposit information to avoid significant delays in receiving their refunds. As well, if you owe the IRS, your balance due should be submitted electronically.

Please see Trump Savings Accounts for more information.

With current tax law, all individual income tax energy credits will expire with 2025 tax returns.