Tax Planning
Tax Planning Strategies Under the One, Big, Beautiful Bill: Tips, Overtime & Car Loan Interest
New deductions under the One, Big, Beautiful Bill open up tax planning opportunities for those who earn cash tips, overtime, or have car loans. Learn how to maximize them before transitional provisions end.
By NomadicTax Research Team • 5-8 min read • November 17, 2025
## Understanding the One, Big, Beautiful Bill (OBBB)
The OBBB Act (Public Law 119-21, signed July 4, 2025) introduces sweeping changes to U.S. tax law affecting deductions, credits, thresholds, and energy incentives. Key changes include deductions for **qualified tips**, **qualified overtime compensation**, and **interest on certain car loans** for personal vehicles. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions?utm_source=openai))
## New Deductions and Eligibility Requirements
| Deduction | Effective Tax Years | Max Annual Deduction | Income Phase-Out | Key Eligibility Details |
|---|---|---|---|---|
| **Tips** | 2025-2028 | $25,000 (single); same for joint; limited by net self-employment income for self-employed | MAGI over $150,000; $300,000 for married filing jointly | Must work in occupation “customarily and regularly” receiving tips before Dec 31, 2024; occupations list proposed by IRS ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai)) |
| **Overtime** | 2025-2028 | $12,500 (single); $25,000 (joint) | Same as tips | Pay above regular rate under FLSA; must be reported on Form W-2 or 1099 or equivalent statement ([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** | 2025-2028 | $10,000 per year | MAGI over $100,000; $200,000 MFJ | Interest on new passenger vehicle loan (personal use), purchased after Dec 31, 2024; vehicle must be originally used and assembled in USA; lease payments don’t qualify ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai)) |
## Tax Planning Tips & Strategies
1. **Know your occupation’s status**: Review the IRS proposed occupations list. If your role isn’t listed, you may not qualify for the tips deduction. Example: bartenders included; role not customarily receiving tips wins’t be eligible. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-listing-occupations-where-workers-customarily-and-regularly-receive-tips-under-the-one-big-beautiful-bill?utm_source=openai))
2. **Document carefully**: For tips and overtime, ensure employers/payors provide statements showing the amounts, occupation code if required. For car loan interest, keep loan documents, interest statements, and VIN to prove eligibility. ([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. **Time purchases wisely**: Clean vehicle credits and energy-related deductions expire or are accelerated under OBBB. For example, clean vehicle credits end for new/used vehicles acquired after September 30, 2025. ([irs.gov](https://www.irs.gov/newsroom/faqs-for-modification-of-sections-25c-25d-25e-30c-30d-45l-45w-and-179d-under-public-law-119-21-139-stat-72-july-4-2025-commonly-known-as-the-one-big-beautiful-bill-obbb?utm_source=openai))
4. **Leverage the transition periods**: Tax year 2025 is treated as a transition year. For example, penalties won’t apply for mistakes in reporting qualified tips or overtime if a complete and correct return is otherwise filed. ([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))
5. **Estimate impacts ahead of 2026**: Inflation adjustments for 2026 under OBBB shift thresholds upward—standard deduction, AMT exemptions, etc.—which could move taxpayers into new brackets. Plan around these shifts. ([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))
## Practical Example
*Sarah*, a restaurant server who regularly receives cash tips totaling $30,000 in 2025, files jointly with her spouse. Her MAGI is $140,000. Under OBBB, she is eligible for deduction on up to $25,000 of tips. She should ensure her employer issues a payee statement showing cash tips and her occupation, and list her occupation code once rules finalize. For any overtime at time-and-a-half (say an extra $6,000 of “half-time” pay), she can also deduct that amount up to $12,500. This could reduce Sarah’s taxable income significantly.
## Watch Out For
- **Self-employed Limitations**: If you’re self-employed in a Specified Service Trade or Business (SSTB), some deductions (especially tips) may not be available. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai))
- **Phase-outs**: High earners will lose eligibility gradually based on MAGI. Calculate whether you fall in the safe zone.
- **Termination dates**: Energy credits and clean vehicle incentives are ending or accelerating under OBBB. Acquiring/placing in service deadlines matter. ([irs.gov](https://www.irs.gov/newsroom/faqs-for-modification-of-sections-25c-25d-25e-30c-30d-45l-45w-and-179d-under-public-law-119-21-139-stat-72-july-4-2025-commonly-known-as-the-one-big-beautiful-bill-obbb?utm_source=openai))
## Action Plan
- Review your tip and overtime reporting records for 2025.
- If planning to purchase a qualified vehicle, verify assembly and contract date requirements.
- Consult your employer to understand whether they’ll provide required statements.
- Adjust withholding or estimated payments in light of possible deductions to avoid surprises.