Tax Planning
Planning for New Deductions Under the One, Big, Beautiful Bill
With OBBBBA now law, individuals can begin using new deductions—tips, overtime, car loan interest, and for seniors—plus increased standard deductions and child tax credit amounts. This article explains how to plan around them.
By NomadicTax Research Team • 5-8 min read • November 24, 2025
## What’s New Under the One, Big, Beautiful Bill (OBBBBA)
The **One, Big, Beautiful Bill** (Public Law 119-21), enacted July 4, 2025, introduces a set of new deductions and enhancements for the 2025-2028 period. Key among them: deductions for qualified tips, overtime pay, interest on certain car loans, and an additional deduction for seniors. It also provides higher standard deductions and an increased child tax credit. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions?utm_source=openai))
## Tax Planning Strategies
| Deduction | What it Offers | Who Qualifies | Strategic Tips |
|---|---|---|---|
| **No Tax on Tips** | Deduction up to **$25,000** of qualified tips; phases out over MAGI thresholds. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions?utm_source=openai)) | Employees and self-employed in occupations that “customarily and regularly” receive tips before Dec 31, 2024. Excludes Specified Service Trades or Businesses (SSTBs) for some self-employed. Must report via certain forms or statements. ([irs.gov](https://www.irs.gov/irb/2025-42_IRB?utm_source=openai)) | Keep excellent records; ensure the occupation is listed; if married filing jointly, both SSNs on return. Use transition relief to adjust to new reporting. |
| **No Tax on Overtime** | Deduction up to **$12,500** (single) or **$25,000** (joint); for overtime above regular rate under FLSA. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions?utm_source=openai)) | Any worker receiving overtime compensation over their regular rate, reported correctly. | Clarify how your overtime is defined; ensure reporting aligns; phaseout applies for high earners. |
| **Car Loan Interest Deduction** | Up to **$10,000** interest deduction for qualified passenger vehicle loans for personal use; certain criteria including domestic final assembly. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions?utm_source=openai)) | Loan originated after Dec 31, 2024; used for vehicle originally used by taxpayer; vehicle weight under 14,000 lbs; final assembly in US. Excludes used vehicles and leases. | Check VIN and ascertain final assembly; track interest receipts/statements; lenders to provide required reporting—transition relief in effect. |
| **Senior Deduction** | Individuals 65+ get an **additional $6,000** ($12,000 if married when both qualify), phased out over MAGI thresholds. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions?utm_source=openai)) | Anyone aged 65+ by the last day of tax year; available whether itemizing or not. | Seniors should confirm age eligibility; coordinate with spousal returns; project income to anticipate phaseouts. |
## Take-Home Example: Applying the Deductions
Sarah is single, age 30, works as a server at a restaurant. Her MAGI is $140,000. In 2025, she received $20,000 in tips (qualified) and earned $5,000 in overtime above her regular rate.
1. **Tip deduction**: Her tips are below the $25,000 cap. Since her MAGI ($140,000) is just under the tip-phaseout threshold, she gets close to full deduction.
2. **Overtime deduction**: $5,000 of overtime—below the $12,500 cap—so allowable.
3. **Combined effect**: These will reduce her taxable income, potentially dropping her into a lower bracket.
4. **Actionable step**: Sarah should ensure her employer or tip payors provide the required reporting; file accurately; and track her deductions to determine whether she benefits more from itemizing or using standard deduction plus these new items.
## Practical Takeaways
- Update your **Form W-4**: If you expect these deductions, adjust your withholding based on the newly increased standard deduction and child tax credit amounts. ([irs.gov](https://www.irs.gov/forms-pubs/how-to-update-withholding-to-account-for-tax-law-changes-for-2025?utm_source=openai))
- Use the **IRS tools**: Use the IRS Tax Withholding Estimator or worksheets to include these items. Make sure to follow guidance for tips, overtime, and car interest. ([irs.gov](https://www.irs.gov/forms-pubs/how-to-update-withholding-to-account-for-tax-law-changes-for-2025?utm_source=openai))
- Phase-outs matter: Plan your MAGI (Modified Adjusted Gross Income) to avoid sudden reduction of benefits.
- Keep detailed records: For tips, overtime, interest, and age status—it is critical for audit defense.
*This planning will help you maximize benefit from the OBBBBA provisions through 2028.*