OBBBA Tax Deductions Explained (2025–2028)
The One Big Beautiful Bill Act, signed July 4, 2025, created four new federal income tax deductions available through 2028. Here's what each one covers, who qualifies, and how much you can save.
Quick Comparison Table
| Deduction | Max Amount | Income Limit (Single) | Income Limit (MFJ) | Key Requirement |
|---|---|---|---|---|
| Overtime | $12,500 / $25,000 | $150K–$275K phase-out | $300K–$550K | W-2 hourly, only premium 0.5× |
| Tips | $25,000 | $150K–$275K phase-out | $300K–$550K | W-2, traditionally tipped job |
| Car Loan | $10,000 | $100K–$150K phase-out | $200K–$250K | New vehicle, US-assembled |
| Senior Bonus | $6,000 | $75K (hard cap $150K) | $150K (hard cap $300K) | Age 65+ |
No Tax on Overtime →
Only the premium portion of overtime pay (the extra 0.5× above your regular rate) is deductible. If you earn $25/hour and work at time-and-a-half ($37.50), only the extra $12.50/hour counts. Maximum $12,500 for single filers, $25,000 for married filing jointly. Phases out between $150K–$275K (single) or $300K–$550K (MFJ). Self-employed and 1099 contractors do not qualify.
No Tax on Tips →
Up to $25,000 of qualified tip income is deductible for W-2 employees in traditionally tipped occupations. Same income phase-out as overtime. Tips from cash, credit card, and tip-sharing arrangements may qualify. App-based tips have specific IRS rules.
No Tax on Car Loan Interest →
Up to $10,000 of interest paid on loans for new, US-assembled vehicles. Different income limits from overtime/tips: phase-out at $100K–$150K (single) or $200K–$250K (MFJ). Check your VIN to confirm the vehicle was assembled in the United States.
Senior Bonus Deduction →
An additional $6,000 deduction for taxpayers 65 and older. This is not a Social Security tax exemption — it's an additional standard deduction. Phases out from $75K to $150K (single) or $150K to $300K (MFJ). Available whether you itemize or take the standard deduction.
How to Claim These Deductions
All four deductions are claimed on IRS Schedule 1-A, filed with Form 1040, starting tax year 2025. Key points:
- • These are deductions (reduce taxable income), not tax credits
- • They reduce federal income tax only — FICA (Social Security & Medicare) still applies
- • You can claim them whether you itemize or take the standard deduction
- • State conformity varies — check your state's rules
- • The deductions expire after tax year 2028 unless extended by Congress
⚠️ This calculator provides estimates for informational and educational purposes only. It is not tax advice. Results are based on the One Big Beautiful Bill Act (OBBBA) and IRS Schedule 1-A. Consult a qualified tax professional for your specific situation.