The following summarizes several proposed tax changes and new deductions included in the One Big Beautiful Bill Act, scheduled to take effect between 2025 and 2028, which may provide significant tax benefits for individuals and families.

No Tax on Tips

• Effective for tax years 2025–2028.
• Employees and self-employed individuals may deduct tips they receive.
• Tips must be earned in occupations where tipping is customary.
• Tips may be received in cash or through card transactions.
• The deduction phases out once modified adjusted gross income (MAGI) reaches $150,000 for single filers and $300,000 for married filing jointly.
• Taxpayers must still report tips as income but may deduct up to $25,000 on their tax return.

No Tax on Overtime

• Effective for tax years 2025–2028.
• Taxpayers may deduct overtime pay required under the Fair Labor Standards Act (FLSA).
• The maximum deduction is $12,500 for single filers and $25,000 for married filing jointly.
• The deduction phases out once MAGI reaches $150,000 for single filers and $300,000 for married filing jointly.

Auto Loan Interest Deduction

• Effective for tax years 2025–2028.
• Taxpayers may deduct up to $10,000 in interest paid on a loan used to purchase a qualified vehicle.
• The deduction phases out once MAGI reaches $100,000 for single filers and $200,000 for married filing jointly.
• To qualify, the vehicle must meet the following requirements:
  • Gross vehicle weight rating under 14,000 pounds
  • Final assembly in the United States
  • Vehicle loan originates after December 31, 2024
  • Vehicle is used for personal use
  • Vehicle must be new (used vehicles do not qualify)
• This deduction is available even if the taxpayer does not itemize deductions.

Deduction for Seniors

• Effective for tax years 2025–2028.
• Individuals age 65 or older may claim an additional deduction of $6,000.
• Married couples filing jointly may claim $12,000 if both spouses are 65 or older.
• This deduction is in addition to the standard deduction.
• The deduction phases out once MAGI reaches $75,000 for single filers and $150,000 for married filing jointly.

Trump Child Savings Account

• For children born between January 1, 2025, and December 31, 2028, an account will be established with an initial $1,000 government contribution.
• Parents may contribute up to $5,000 per year.
• Employers may contribute up to $2,500 per year, which will not count as taxable income to the employee.
• Total annual contributions from parents and employers may not exceed $5,000.
• If the child is already born, the account may still be established, but the initial $1,000 government deposit will not apply.