Tax Planning
Maximize Your Savings: Navigating the Working Families Tax Cuts Deductions
New deductions like no tax on overtime, car loan interest, tips, and enhanced senior benefits offer big savings—learn how to qualify and claim them correctly.
By NomadicTax Research Team • 5-8 min read • June 3, 2026
## Understanding the Working Families Tax Cuts and One, Big, Beautiful Bill
The **One, Big, Beautiful Bill Act** (Public Law 119-21), signed into law on July 4, 2025, introduced a number of changes under the umbrella of the Working Families Tax Cuts that affect individual taxpayers from tax years **2025 through 2028**. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions?utm_source=openai)) Key among them are:
- **No Tax on Tips**: Qualified tips received in listed occupations may be deducted. Maximum $25,000 for individuals, phases out for taxpayers with MAGI over $150,000 ($300,000 joint). ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-guidance-for-individuals-who-received-tips-or-overtime-during-tax-year-2025?utm_source=openai))
- **No Tax on Overtime**: The portion of overtime pay exceeding the regular rate (often the “half” portion of time-and-a-half) may be deducted. Same phase-out thresholds. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-guidance-for-individuals-who-received-tips-or-overtime-during-tax-year-2025?utm_source=openai))
- **No Tax on Car Loan Interest**: Up to $10,000 deduction if you purchased a qualified vehicle (personal use, final assembly in U.S.) with interest paid on a loan after December 31, 2024. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions-individuals-and-workers?utm_source=openai))
- **Enhanced Deduction for Seniors**: Individuals age 65+ (by year-end) may claim an extra deduction—$6,000 per individual ($12,000 married filing jointly, both spouses eligible)—in addition to the standard deduction. Eligibility includes income phase-outs. ([irs.gov](https://www.irs.gov/newsroom/2026-filing-season-updates-and-resources-for-seniors?utm_source=openai))
## How to Qualify and Claim
Here’s how to make sure you're taking full advantage:
| Step | What to Do | Key Requirements |
|---|---|---|
| Determine eligibility | Valid Social Security number; if married, must file jointly for many of these deductions. | Verified SSN; joint-filing status where required. ([irs.gov](https://www.irs.gov/newsroom/irs-published-schedule-taxpayers-will-use-to-claim-deductions-on-no-tax-on-tips-no-tax-on-overtime-no-tax-on-car-loans-no-tax-on-seniors?utm_source=openai)) |
| Identify qualified tips/overtime amounts | For tips: those in occupations IRS lists as “customarily and regularly” receiving tips pre-Dec 31, 2024. Overtime: only the portion exceeding regular pay under FLSA, often shown separately, or use IRS examples to compute. | Occupation list; FLSA-eligible; correct wage statements. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-guidance-for-individuals-who-received-tips-or-overtime-during-tax-year-2025?utm_source=openai)) |
| Use Schedule 1-A and correct instructions | New Schedule 1-A on 2025 Form 1040 is used to claim these deductions; instructions provide worksheets and examples. | Correct use of Schedule 1-A; follow instructions for line items. ([irs.gov](https://www.irs.gov/newsroom/irs-published-schedule-taxpayers-will-use-to-claim-deductions-on-no-tax-on-tips-no-tax-on-overtime-no-tax-on-car-loans-no-tax-on-seniors?utm_source=openai)) |
| Watch phase-outs | MAGI limits: $150,000 individual / $300,000 joint; deductions shrink above those limits. | Be accurate about your MAGI and deductions. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions-individuals-and-workers?utm_source=openai)) |
## Examples to Illustrate
- **Overtime Deduction**: Jane, single, earns $160,000 MAGI, receives $6,000 overtime premium, and her paystub shows overtime $18,000 (includes regular pay portion). She uses IRS example to compute qualified overtime (often one-half or one-third rules). Claim her deduction up to $12,500. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-guidance-for-individuals-who-received-tips-or-overtime-during-tax-year-2025?utm_source=openai))
- **Car Loan Interest Deduction**: Mark bought a U.S.-assembled electric pickup in early 2025, with $1,200 interest paid in the year. He can deduct that interest up to $10,000 phase-outs apply. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions-individuals-and-workers?utm_source=openai))
- **Senior Deduction**: Anna and her spouse are both over 65 and file jointly, MAGI under $150,000. They get standard deduction plus additional $12,000. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions-individuals-and-workers?utm_source=openai))
## Actionable Tips
- Review your 2025 paystubs and hour logs now. Save tip logs and overtime detail.
- Update your **Form 1040 / Schedule 1-A** properly – watch IRS instructions and worksheets.
- Check whether your occupation is listed for “customarily and regularly receiving tips.”
- If married, ensure both spouses meet requirements where needed.
- Use IRS’s **Tax Withholding Estimator** to see if you need to adjust your withholding midyear. ([irs.gov](https://www.irs.gov/newsroom/updated-tax-withholding-estimator-lets-millions-of-taxpayers-take-one-big-beautiful-bill-changes-into-account-when-calculating-their-withholding?utm_source=openai))
Using these provisions wisely can translate into meaningful tax savings—and ensure you’re compliant with the latest changes.