Changes from the One Big Beautiful Bill Act

On July 4, 2025 the One Big Beautiful Bill Act (OBBBA)—also known as the Working Families Tax Cut—was signed into law. This legislation brings many updates to the tax landscape, including new deductions for qualified tips and overtime pay.

We know tax changes can feel complicated, but don’t worry—we’ve got your back.

Changes Starting in 2025

  • Standard deduction increased to $15,750 for single filers, $31,500 for couples
  • Individuals age 65 and older can claim an additional $6,000 deduction whether they itemize or not
  • Child tax credit increased to $2,200 per child
  • SALT cap increased to $40,000
  • Clean vehicle credits and residential energy credits sunset in 2025
  • No Tax on Tips: individuals who earn income from certain qualified tips may deduct up to $25,000 of their tip income (whether they itemize or not)
  • No Tax on Overtime: individuals who receive qualified overtime pay may deduct the amount that exceeds their normal rate of pay up to $12,500 (whether they itemize or not)
  • Deduction added for up to $10,000 of interest on new personal car loans for autos with final assembly in the US
  • Investment Accounts for Newborns: the federal government will contribute $1,000 to an investment account for every child born on or after January 1, 2025, and up to $5,000 in after-tax contributions can be made annually by parents, employers, and/or private entities until the child is 18
  • IRS will no longer issue paper checks for refunds in favor of digital payments
  • Qualified Business Income Deduction applicable to business income is made permanent with deduction rate remaining at 20% of net income
  • Bonus depreciation is deductible at 100% of the cost for assets purchased after January 19, 2025

Changes Starting in 2026

  • Charitable monetary contributions of up to $1,000 per individual can now be claimed if not itemizing
  • New charitable contributions deduction floor of .5% of adjusted gross income
  • New itemized deduction allowing K-12 teachers, counselors, coaches, and aides working at least 900 hours per year to deduct unreimbursed classroom expenses (like books, supplies, and equipment)
  • Only 90% of wagering losses and deductions are allowed.
  • Itemized deductions for 37% tax bracket taxpayers are reduced
  • For payments made in calendar year 2026 and beyond, the threshold for reporting on 1099-NEC and 1099-MISC increases from $600 to $2,000
  • The deduction for business meals provided to employees is eliminated entirely for amounts paid or incurred after December 31, 2025

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