By Torkelson & Associates
Featured image for One Big Beautiful Bill Act deductions: two people reviewing a pay stub with a calculator at a kitchen table.
Check your pay records and forms before you file. Photo by Mikhail Nilov from Pexels

One Big Beautiful Bill Act deductions: the highlights

Several new deductions began in 2025 under the One, Big, Beautiful Bill Act. For the full IRS source, see the official fact sheet: One, Big, Beautiful Bill Act: Tax deductions for working Americans and seniors. We summarize the practical parts below and link to IRS pages so you can verify each rule.

Note: the IRS updated the car-loan section on July 25 to clarify the “final assembly in the United States” requirement.

1) “No Tax on Tips” (2025-2028)

  • What it does: lets eligible workers deduct qualified tips they report on a W-2, 1099, or on Form 4137.
  • Limits: up to $25,000 per year. Phases out above $150,000 modified AGI ($300,000 joint).
  • Who qualifies: occupations the IRS lists as “customarily and regularly receiving tips” by Oct. 2, 2025. Self-employed individuals in an SSTB under section 199A are not eligible. Employees whose employer is an SSTB are also not eligible.
  • How to claim: keep accurate tip records and make sure your reported tips match the forms you receive. See Tip recordkeeping and reporting.
  • Other filing rules: you must include your SSN on the return and file jointly if married to claim this deduction. Available whether or not you itemize.

2) “No Tax on Overtime” (2025–2028)

  • What it does: lets you deduct the part of overtime that is above your regular rate of pay. Think of the “half” in time-and-a-half required by the FLSA.
  • Limits: up to $12,500 per year ($25,000 joint). Phases out above $150,000 modified AGI ($300,000 joint).
  • How to claim: your overtime must be reported on a W-2 or 1099. You must include your SSN and file jointly if married. Itemizers and non-itemizers can claim it.

3) “No Tax on Car Loan Interest” (2025–2028)

  • What it does: lets you deduct interest on a qualifying new personal-use vehicle loan originated after Dec. 31, 2024. Leases do not qualify.
  • Limits: up to $10,000 per year. Phases out above $100,000 modified AGI ($200,000 joint).
  • Vehicle rules: must be under 14,000 lbs. and have final assembly in the United States. You will list the VIN on your return. To confirm the plant of manufacture, use the NHTSA VIN Decoder.

4) New deduction for seniors (2025–2028)

  • What it does: an additional $6,000 deduction for taxpayers age 65 or older. This is on top of the existing additional standard deduction for seniors.
  • Per person: $6,000 each, so $12,000 for a married couple when both qualify.
  • Phase-out: modified AGI above $75,000 ($150,000 joint). Available to itemizers and non-itemizers. Include SSNs and file jointly if married.

What this means for you

These One Big Beautiful Bill Act deductions can shift your 2025 tax picture if you work for tips, rely on overtime, plan to finance a new car, or are age 65 or older. The savings depend on income, filing status, occupation, and documentation. If you are unsure whether you qualify or how the phase-outs apply, we can review your pay records and notices and file correctly.

Contact Torkelson & Associates CPAs

Handy links