Tax Planning
Maximizing Your 2025 Deductions: Strategies for Tax Planning Under the One, Big, Beautiful Bill
Explore key planning moves to reduce taxable income this year, optimize available credits, and anticipate changes for 2026 under the One, Big, Beautiful Bill.
By NomadicTax Research Team • 5-8 min read • November 18, 2025
## Understanding the One, Big, Beautiful Bill (OBBB)
The One, Big, Beautiful Bill (public law 119-21) introduced sweeping tax changes effective in 2025 and 2026. Among its major shifts are permanently increased standard deductions and new deductions for **qualified overtime** and **cash tips**, plus expanded employer-childcare credits. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions?utm_source=openai))
## Tax-Planning Moves for 2025
### 1. Item vs. Standard Deduction: run the numbers
With the standard deduction now at $31,500 for married filing jointly ($15,750 for single) in 2025, many taxpayers will find it's still more advantageous unless you’ve significant itemized deductions. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions?utm_source=openai))
### 2. Take advantage of deductions for overtime and tips before penalties apply
Although the law requires reporting of qualified overtime and cash tips under OBBB, **employers/payors receive penalty relief for the 2025 tax year** for failing to report correctly — as long as returns are filed properly and completely. Use this transition period to ensure your systems capture needed info. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-tax-year-2025-for-information-reporting-on-tips-and-overtime-under-the-one-big-beautiful-bill?utm_source=openai))
### 3. Boost retirement contributions and take advantage of changes for 2026
The IRS has raised the 2026 contribution limit for 401(k) plans to $24,500 (up from $23,500 in 2025), and IRA contributions increase to $7,500. To maximize tax savings, plan to hit those limits where possible. ([stayexempt.irs.gov](https://www.stayexempt.irs.gov/newsroom?utm_source=openai))
### 4. Use credits wisely
Credits like the Earned Income Tax Credit (EITC), adoption credits, and childcare credits have higher thresholds or values for 2026. Make sure you're eligible and claiming them. ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai))
## Anticipating Key 2026 Changes
| Change | Who's Affected |
|--|--|
| Deduction increases for standard deduction and other inflation adjustments | All individual filers |
| Expanded employer childcare tax credit (higher caps) | Employers/small businesses |
| Increased qualified overtime & cash tip deductions | Employees in tipped or hourly jobs |
|
## Actionable Examples
- **Hourly worker**: Lives in California, wages include overtime. Make sure your employer begins tracking “qualified overtime compensation” so you can claim deduction for 2025 when filing.
- **Small business owner with employees**: Set up systems now to collect tip amounts along with occupation codes so both you and employees can benefit under new rules while avoiding penalty risk.
- **Retiree or income layerer**: If you have flexibility, shift taxable income or realize capital gains in 2025 versus 2026 depending on marginal rate shifts.
## Practical Checklist
- Review all income sources for tips and overtime and ensure records are sufficient by year-end.
- Max out retirement contributions for 2025 now, and plan to hit the raised caps for 2026.
- Gather documentation for childcare expenses, adoption, or other credits that may phase out or increase.
- Use 2025’s penalty relief period to test new reporting procedures.
By staying ahead of these policy changes and taking proactive steps, you’ll be able to lower your tax liability and avoid surprises when 2026 rules kick in.