Tax Planning
Tax Planning Strategies Under the One, Big, Beautiful Bill: What Everyone Should Know
The One, Big, Beautiful Bill (OBBB) Act brings permanent deductions, new benefits, and inflation-adjusted thresholds—now’s the time to adjust your tax planning strategy.
By NomadicTax Research Team • 5-8 min read • May 14, 2026
## What’s new under the One, Big, Beautiful Bill (OBBB)
The OBBB Act, signed into law on July 4, 2025, brought sweeping changes that affect individual tax planning.* Key changes include:
- **“No tax on tips” deduction**: Eligible taxpayers can deduct qualified tips up to \$25,000 per year (single or joint) for tax years **2025-2028**. Qualified tips include those captured on W-2, 1099-NEC, MISC, K, or reported via Form 4137. ([irs.gov](https://www.irs.gov/newsroom/the-one-big-beautiful-bill-what-gig-economy-workers-should-know?utm_source=openai))
- **No tax on overtime pay deduction**: Overtime or premium pay (i.e., amounts over an employee’s regular rate, usually the "half time" portion) can be deducted, subject to income phase-outs (related to MAGI levels: over \$150,000 single, \$300,000 joint). Available 2025-2028. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions-individuals-and-workers?utm_source=openai))
- **Bonus depreciation (100%)**: Eligible depreciable property acquired after January 19, 2025 can be fully depreciated in the first year under OBBB. Includes qualified sound recording productions, etc. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill?utm_source=openai))
- **Inflation adjustments for 2026 thresholds**: Standard deduction, marginal tax brackets, AMT exemptions, and more have all increased for tax year 2026. ([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))
## Planning strategies for maximizing benefits
Here are actionable tactics:
1. **Track tip income carefully**:
- Keep daily or event-based logs if tips aren’t separately reported. Self-employed tip earners must ensure documentation (e.g. customer, date, amount) to support deductions. ([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))
- Identify whether your occupation is among the ~70 code occupations “customarily and regularly receiving tips”. If so, you may qualify. ([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. **Monitor overtime classification**:
- Ensure your employer’s pay statements show the overtime premium separately or allow you to compute the “half time” portion. Without it, the deduction may be limited. ([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))
- Keep records if you’re exempt or non-exempt under the Fair Labor Standards Act; classification matters. ([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. **Leverage bonus depreciation wisely**:
- If you’ve bought property like vehicles, computers or equipment, and you use them more than 50% for business, you might deduct 100% of cost in year of service. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill?utm_source=openai))
- Assess purchases coming up—if timed after Jan. 19, 2025, eligible. Older assets do not qualify. Plan your capital investments accordingly.
4. **Adjust withholding to avoid surprises**:
- IRS updated its **Tax Withholding Estimator** to reflect OBBB changes like no tax on tips, no tax on overtime, car loan interest, and enhanced deduction for seniors. Use it to estimate current withholding and file a new W-4 if needed. ([irs.gov](https://www.irs.gov/newsroom/updated-tax-withholding-estimator-lets-millions-of-taxpayers-take-one-big-beautiful-bill-changes-into-account-when-calculating-their-withholding?utm_source=openai))
- Publication 15-T and 2026 W-4 and W-4P forms were updated to align with these new deductions. ([irs.gov](https://www.irs.gov/publications/p15t?utm_source=openai))
## Example scenarios
- **Restaurant server (“Sally”)**: Sally earned \$30,000 in cash and charged tips in 2025, with \$20,000 reported on W-2 and \$5,000 unreported but documented. She may deduct up to \$25,000 in qualified tips, reducing her taxable income by \$25,000 if MAGI below phase-out threshold. She should also adjust withholding using the estimator to avoid overpayment.
- **Overtime worker (“Mike”)**: Mike works as a warehouse worker, earned \$20,000 overtime premium in 2025 over his base. He qualifies for the overtime deduction (half-time equivalent). If his MAGI is \$140,000 (single), he can deduct up to the maximum before phase-out. This reduces taxable income and could shift him to a lower bracket.
## Key considerations & pitfalls
- Phase-outs: Above certain modified AGI, the deductions begin to phase out—watch your income carefully.
- Occupation list and qualified tip rules still under regulation or proposed guidance for tip-receiving occupations. If uncertain, keep records meticulously.
- For businesses: these changes persist only through 2028 for tip and overtime deductions. Plan large purchases or business cost structuring with that in mind.
- Correct classification: WG, 1099, Form K, etc. Misreporting may disqualify.
## Steps to take now
- Gather and organize documentation for tips and overtime premiums in 2025.
- Use the IRS Tax Withholding Estimator to estimate your tax liability and adjust W-4 if needed.
- Review whether any planned business purchases qualify for 100% bonus depreciation.
- If nearing the phase-out MAGI thresholds, consider income-shifting or deferring income where possible.
**Author**: NomadicTax Research Team
**Category**: Tax Planning
**TaxHome**: US
**ReadTime**: 5-8 min
**Published**: true