The One Big Beautiful Bill Act (also called OBBBA), was signed into law on July 4, 2025, and introduced some of the most significant changes to federal tax rules in recent years. It affects individual tax rates, deductions, credits, and how certain income is taxed — especially for the 2025 tax year (returns filed in 2026). Many of the bigger structural tax changes will begin in 2026.
This page highlights the key provisions and changes that will most likely impact your federal tax return and overall tax planning.
Standard Deduction and Tax Rates
The bill keeps many of the current tax rules in place, including today’s tax brackets and the higher standard deduction that many taxpayers already use.
SALT Deduction Cap Changes
The limit on State and Local Tax (SALT) deductions increases for the 2025 tax year, allowing more taxpayers to deduct state and local taxes paid — though future indexing and phaseouts may apply.
New or Expanded Deductions & Credits
Extra Deduction for Seniors (2025–2028)
Taxpayers age 65 or older can take an additional deduction of up to $6,000 (with income-based phaseouts) on top of the standard or itemized deduction.
“No Tax on Tips” (2025–2028)
Workers in roles where tipping is customary (e.g., servers, bartenders) can claim a deduction for reported tip income up to a capped amount, reducing taxable income from tips.
“No Tax on Overtime” (2025–2028)
A new deduction lets qualifying taxpayers exclude a portion of overtime pay from taxable income, potentially lowering taxes for workers who regularly earn overtime.
Form 1099-K reporting threshold (2025-2028)
If you receive third-party payments, those entities are only required to send you a Form 1099-K if your total payments are over $20,000 and you received over 200 transactions on any one platform in a given year. It is important to keep track of all income, as you are still required to report all earnings.
Car Loan Interest Deduction (2025–2028)
If you buy a new vehicle and take out a loan, you may be able to deduct up to $10,000 of qualifying interest paid — subject to income limits.
Family & Education Tax Changes
Child Tax Credit
The higher Child Tax Credit remains in place and is slightly increased, offering more relief for families with qualifying children.
Other Dependent Credit
Dependents who don’t qualify for the Child Tax Credit may still qualify for the Other Dependent Credit, now preserved under the new law.
Expanded 529 Plan Benefits
The rules for 529 education savings plans now allow more types of educational expenses — including up to $20,000 for K-12 costs.
Clean Energy & Home-Related Credits
Certain clean energy and residential energy credits (including the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit) have been phased out or repealed under the new law for vehicles acquired or home improvements made after specific deadlines.
Disaster Loss Rules
The law extends enhanced rules for claiming personal casualty losses from federally declared disasters, making it easier for some taxpayers affected by disasters to claim deductions they would otherwise lose.
How This Affects Your Tax Return
- Refunds and balances due could shift compared with prior years because of new deductions.
- You may benefit from new worker-focused deductions (tips/overtime).
- Families may see expanded credits and benefits.
- Some energy-related tax incentives are no longer available.
- You may itemize or have other items for us to address that may increase your tax preparation costs.
Our staff will apply the current tax rules to your return and help you mitigate your tax burden or take advantage of every credit and deduction you qualify for.