Frequently Asked Questions

The One Big Beautiful Bill Act (commonly called OBBB or OBBBA) is comprehensive tax legislation signed by President Trump on July 4, 2025. It was passed through the budget reconciliation process for fiscal year 2025, allowing it to pass the Senate with a simple majority vote.

The law accomplishes several major goals: it makes permanent the 2017 tax cuts that were set to expire, introduces new tax deductions for tips, overtime pay, car loan interest, and seniors, and includes various business tax changes. The individual tax deductions are effective from 2025 through 2028.

The 2017 Tax Cuts and Jobs Act (TCJA) lowered taxes for most Americans, but many of those cuts were temporary and scheduled to expire after 2025. Without action, approximately 62% of taxpayers would have seen their taxes increase in 2026.

The OBBB Act prevents this tax increase by making the 2017 changes permanent. This includes keeping the larger standard deduction, enhanced child tax credit, lower tax rates, and modified itemized deduction rules. Making these provisions permanent was one of the primary motivations behind passing the OBBB Act.

The OBBB Act includes both permanent and temporary provisions:

Permanent provisions:

• Extended 2017 TCJA individual tax cuts
• Enhanced standard deduction and child tax credit
• 100% business expensing (bonus depreciation)
• Full R&D expensing for domestic research

Temporary provisions (2025-2028):

• No tax on tips deduction
• No tax on overtime deduction
• Car loan interest deduction
• Senior deduction ($6,000 per person)

The OBBB Act keeps the lower tax rates from 2017 in place permanently. The top rate remains at 37% instead of increasing to 39.6% as originally scheduled. The bracket thresholds received a minor inflation adjustment for the 10% and 12% brackets, providing a small additional tax cut for lower-income taxpayers.

The standard deduction has been increased and made permanent. For 2025, it's $15,750 for single filers and $31,500 for married couples filing jointly. These amounts will adjust for inflation each year going forward.

This larger standard deduction simplifies tax filing for most people. Estimates suggest only about 14% of taxpayers will itemize deductions in 2026 under the OBBB Act, compared to 32% if the law hadn't passed.

The child tax credit (CTC) has been permanently enhanced. The maximum credit is $2,200 per qualifying child in 2025, and this amount will increase with inflation in future years. The expanded CTC was scheduled to drop to just $1,000 per child, but the OBBB Act prevents that reduction.

The credit remains available to both itemizers and non-itemizers, making it accessible to most families with children.

The state and local tax (SALT) deduction has been temporarily increased. From 2025 through 2029, the cap rises from $10,000 to $40,000 for most taxpayers. However, this enhanced deduction phases out for high earners with incomes above $500,000, reverting to the $10,000 cap for those earning over $600,000.

Starting in 2030, the SALT cap returns to $10,000 permanently for all taxpayers.

If you work in a tipped occupation, you can deduct up to $25,000 in tip income when calculating your taxable income. This deduction is available from 2025 through 2028.

Key details:

• Available to both employees and self-employed individuals
• Tips must be from occupations on the IRS's official list of customarily tipped jobs (to be published by October 2, 2025)
• Tips must be reported on Form W-2, Form 1099, or Form 4137
• Deduction phases out for incomes above $150,000 ($300,000 for married filers)
• Both itemizers and non-itemizers can claim this deduction
• Tips still subject to payroll taxes

You must work in an occupation where tipping is customary. The IRS will publish an official list of qualifying occupations by October 2, 2025, but commonly tipped jobs include:

• Restaurant servers and waitstaff
• Bartenders
• Food delivery drivers
• Hairstylists and barbers
• Taxi and rideshare drivers
• Hotel and casino workers

Important restriction: If you're self-employed in a "Specified Service Trade or Business" (SSTB) as defined in Section 199A, or work for an employer in an SSTB, you are not eligible for this deduction.

The OBBB Act allows you to deduct up to $12,500 in overtime premium pay ($25,000 for married couples filing jointly) from your taxable income. This deduction is available from 2025 through 2028.

Important clarification: Only the "premium" portion of overtime is deductible. For example, if you earn time-and-a-half, only the "half" portion qualifies for the deduction—not your regular wage component.

Requirements:

• You must be subject to Fair Labor Standards Act (FLSA) overtime rules
• Overtime must be reported on Form W-2 or Form 1099
• Deduction phases out for incomes above $150,000 ($300,000 for married filers)
• Available to both itemizers and non-itemizers

You're eligible if you're a non-exempt employee under the Fair Labor Standards Act who receives overtime pay. This typically includes:

• Hourly manufacturing workers
• Retail employees
• Healthcare workers (nurses, CNAs)
• Warehouse and logistics workers
• Construction workers
• First responders and emergency personnel

Exempt employees (typically salaried professionals, executives, and managers) generally do not qualify because they're not entitled to FLSA overtime pay.

From 2025 through 2028, you can deduct up to $10,000 in interest paid on a qualifying auto loan each year. The deduction phases out for incomes above $100,000 for single filers ($200,000 for married couples).

Vehicle requirements:

• Must be a new vehicle (used cars don't qualify)
• Original use must begin with you
• For personal use only (not business or commercial)
• Must undergo final assembly in the United States
• Gross vehicle weight under 14,000 pounds
• Loan originated after December 31, 2024
• Loan must be secured by the vehicle

Eligible vehicle types: Cars, minivans, vans, SUVs, pickup trucks, and motorcycles.

There are two ways to confirm final assembly location:

1. Vehicle Information Label: Check the label attached to your vehicle at the dealership
2. VIN Decoder: Use the National Highway Traffic Safety Administration (NHTSA) VIN Decoder website to determine the plant of manufacture from your Vehicle Identification Number

Your dealership should be able to help you verify this information when purchasing a vehicle.

If you refinance a qualifying vehicle loan, the interest paid on the refinanced amount generally remains eligible for the deduction, as long as the original loan qualified under the OBBB Act rules.

If you're age 65 or older, you can claim an additional $6,000 deduction from your taxable income. If you're married and both spouses are 65+, you can claim $12,000 total. This deduction is available from 2025 through 2028.

Requirements:

• You must be age 65 or older by December 31 of the tax year
• Deduction phases out for incomes above $75,000 (single) or $150,000 (married)
• Fully phased out at $175,000 (single) or $250,000 (married)
• Available to both itemizers and non-itemizers
• Applied to all sources of income, including Social Security benefits

This is in addition to the existing higher standard deduction that seniors already receive under current tax law.

The taxation of Social Security benefits themselves did not change. Benefits remain partially taxable based on your income level, with up to 85% of benefits potentially subject to income tax.

However, the new $6,000 senior deduction effectively reduces your taxable income, which can lower the tax you pay on Social Security benefits (and all other income sources).

The OBBB Act makes permanent the increased estate tax exemption and raises it further. Starting in 2026, the exemption is $15 million per individual (adjusted for inflation annually). This means married couples can shield up to $30 million from estate taxes.

The exemption was scheduled to drop to approximately $7.1 million per person in 2026, which would have subjected many more estates to taxation. The OBBB Act prevents this reduction permanently.