Overview of New Deductions in OBBB Act (2025-2028)
The One, Big, Beautiful Bill introduced major deductions available for tax years 2025 through 2028. These include:
- Overtime Compensation: You can deduct the portion of “time-and-a-half” (the portion above your regular rate) of qualified overtime pay. Phase-outs begin at $150,000 AGI for single filers, $300,000 for joint. (irs.gov)
- Car Loan Interest: Interest on a loan used to purchase a new qualified vehicle for personal use, secured by a lien, may be deductible up to $10,000 annually. Phase-out starts at AGI $100,000 (single), $200,000 (joint). Leases don't qualify. (irs.gov)
- Senior Enhanced Deduction: Taxpayers aged 65+ may claim an additional $6,000 deduction per qualifying person (married filing jointly = $12,000) beyond standard deduction. Phases out over $75,000 (single) / $150,000 (joint). (irs.gov)
- “No Tax on Tips” Deduction: Tips received in occupations that customarily receive tips (list to be published) are deductible even if using standard deduction. Max $25,000; same phase-out limits. (irs.gov)
How to Claim and Qualify
- Use tax year 2025 or 2026, but reporting and forms may differ; ensure correct forms/statements like W-2, 1099, or Form 4137. (irs.gov)
- Administer AGI phase-outs: know your modified AGI to see if deductions are reduced or eliminated.
- Keep documentation: interest statements, overtime pay statements, tip reports, etc.
- If married filing jointly, both spouses' incomes and eligibility matter for phase-outs.
Inflation Adjustments & Standard Deduction Increase
For tax year 2026, there are substantial inflation-based increases:
- Standard Deduction: $32,200 for married filing jointly; $16,100 for singles; $24,150 for heads of households. (irs.gov)
- Many credits and thresholds shifted: adoption credit $17,670; Foreign Earned Income Exclusion $132,900. (irs.gov)
Example Scenarios
- Overtime: Jane earned $180,000 AGI (single). Her overtime pay exceeding regular rate qualifies for the deduction but gets phased-out partially.
- Senior deduction: Bob and Sue, both 66 years old, file jointly with AGI $145,000. They still qualify (under $150,000 joint threshold) for full $12,000 senior deduction.
- Car loan interest: Al buys a new car Jan 2025 with a loan, not a lease; pays $800 in interest. This qualifies, provided AGI under $100,000 (single).
Planning Tips
- Compute AGI mid-year to estimate eligibility.
- For tipped workers, ensure occupation is listed by IRS before making tips deduction.
- Combine deductions thoughtfully: if itemizing, consider whether these new deductions outweigh benefits lost via standard deduction changes.
These new deductions under the OBBB Act offer powerful tax planning opportunities — stay informed and plan with documentation to maximize benefits.