Tax Planning

Maximizing Your Deductions Under the One Big Beautiful Bill (OBBB)

Explore how new deductions—no tax on tips, overtime, car loan interest, plus an enhanced senior deduction—can save you money in tax years 2025–2028 under OBBB.

By NomadicTax Research Team • 5-8 min read • March 8, 2026

## What Is the One Big Beautiful Bill (OBBB)? The One Big Beautiful Bill Act (Public Law 119-21), signed into law on July 4, 2025, introduced sweeping changes to U.S. tax policy under the “OBBB” moniker. These take effect beginning in the 2025 tax year (returns filed in 2026) and run through 2028. Key for many taxpayers are **new deduction opportunities**—including “no tax on tips,” “no tax on overtime,” car loan interest deductions, and an enhanced deduction for seniors.([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai)) --- ## Key New Deductions & Eligibility Below are the major new deduction provisions and **who qualifies**: | Deduction | What it Covers | Limit & Income Phase-Outs | Who’s Eligible | |-----------|------------------|-----------------------------|----------------| | **Tips** | Qualified tips (cash, card, etc.) earned in occupations customarily receiving tips. | Up to **$25,000** per taxpayer. Phases out for MAGI over **$150,000** (single) / **$300,000** (joint). | Both itemizers and those taking standard deduction. But not eligible if your job or business is a Specified Service Trade or Business (SSTB) in certain cases. Valid SSN required, and if married, must file jointly.([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai)) | **Overtime** | Pay beyond regular rate (e.g., time-and-a-half) mandated by FLSA. | Up to **$12,500** (single) / **$25,000** (joint). Similar phase-outs apply. | Same scope as tips. Eligibility includes SSN, filing jointly if married.([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai)) | **Car Loan Interest** | Interest on loan used to purchase a passenger vehicle (light truck, SUV, motorcycle) with **final assembly in U.S.**, for personal use. | Max **$10,000** annually. Phases out above MAGI thresholds. | Available whether standard deduction or itemizing. VIN must be reported.([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai)) | **Enhanced Senior Deduction** | Additional deduction for those age **65+**. | **$6,000 per person**. Married filing jointly doubles to **$12,000** if both spouses qualify. Phases out above **$75,000** (single) / **$150,000** (joint). | Must be age 65 by end of year, valid SSN, married couples must file jointly. Available even if you use standard deduction.([irs.gov](https://www.irs.gov/newsroom/2026-filing-season-updates-and-resources-for-seniors?utm_source=openai)) --- ## Actionable Steps to Maximize Your Savings 1. **Check if you're eligible**: Review your SSN status, filing status, income, and job type. If married, joint filing may unlock higher limits. If you’re 65+, ensure you were born before January 2, 1961.([irs.gov](https://www.irs.gov/newsroom/2026-filing-season-updates-and-resources-for-seniors?utm_source=openai)) 2. **Gather documentation**: - Tip logs, paystubs, employer statements. - Overtime pay records showing the premium portion. - Car loan documents and VIN, final assembly evidence. - Documents confirming age and SSN validity.([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)) 3. **Use Schedule 1-A** (Form 1040 instructions, Part V etc.) to claim these deductions. Even standard deduction filers can benefit.([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)) 4. **Be aware of transition rules**: For tax year 2025, some reporting changes are made mandatory, but Forms W-2 / 1099 etc. were **not updated yet**, and employers are granted penalty relief during this transition.([irs.gov](https://www.irs.gov/newsroom/irs-announces-no-changes-to-individual-information-returns-or-withholding-tables-for-2025-under-the-one-big-beautiful-bill-act?utm_source=openai)) 5. **Plan for income-based phase-outs**: Deductions reduce once MAGI passes certain thresholds. If you’re close, see whether boosting retirement contributions or deferring income could help. Use worksheets in IRS instructions.([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)) --- ## Examples - *Waiter situation*: Jamie, single, with MAGI $140,000, gets $20,000 in tips. Eligible tips deduction is the full $20,000 (under $25,000 cap) since MAGI below $150,000.\ - *Senior married couple*: Both spouses born in 1959, file jointly. MPG $140,000, so phase-out may apply. Maximum enhanced senior deduction is $12,000.\ - *Overtime case*: Alex (single) earns overtime premiums of $15,000. Eligible deduction is **$12,500** (max for single filers). Phase-outs based on MMAGI.\ --- ## Final Thoughts These provisions under OBBB represent some of the most significant tax changes for individuals in decades. The key is to **track your income**, **preserve documentation**, and **file accurately using the updated forms**. Whether you’re a tipped employee, senior, or simply earn overtime, these deductions could meaningfully lower your tax owed over 2025 through 2028. Consulting a tax professional may help maximize your benefits.