The One Big Beautiful Bill Act of 2025 (OBBB) is the most sweeping tax law since the Tax Cuts and Jobs Act. Signed into law on July 4, 2025, it adds several new deductions aimed at working Americans and seniors. Below we break down the major provisions and what they could mean for your tax return.
For tax years 2025–2028, employees and self‑employed workers who receive tips in occupations listed by the IRS can deduct qualified tips up to $25,000 per year. Qualified tips include voluntary cash or charged tips reported on a W‑2, 1099 or the taxpayer’s own records. The deduction phases out at modified adjusted gross income of $150,000 for single filers or $300,000 for joint returns.
A similar deduction applies to overtime. Individuals may deduct the overtime pay that exceeds their regular rate—commonly called the “half” portion of time‑and‑a‑half—up to $12,500 ($25,000 for joint filers). Like the tip deduction, it phases out above $150,000 ($300,000 joint) of income.
If you purchase a personal‑use vehicle in 2025 or later, interest on the loan may be deductible up to $10,000 per year. The vehicle must be assembled in the United States and the loan must be secured by the vehicle. The deduction is not available for leased or business vehicles and phases out above $100,000 ($200,000 joint) of income.
Taxpayers who are at least 65 years old by year end can claim an additional $6,000 deduction ($12,000 for a qualifying couple) from 2025 through 2028. This is on top of the existing additional standard deduction for seniors. The benefit begins to phase out at $75,000 of modified adjusted gross income ($150,000 joint).
Collectively, these provisions provide targeted relief for service workers, overtime earners, car buyers and retirees. To qualify, taxpayers generally must include their Social Security number and file jointly if married.
As with any new legislation, the IRS is expected to release further guidance. Keep an eye on updates and consult a tax professional to see how these deductions apply to your situation.
In addition to new deductions for individuals, the One Big Beautiful Bill Act makes several permanent changes to the business tax code. Pass‑through business owners can continue to claim the Section 199A deduction on up to 20% of qualified business income. Companies investing in new equipment or qualified production property may write off 100% of the cost in the first year for assets acquired after January 19, 2025, with an optional 40% election for that first year. Research and experimental costs paid after December 31, 2024 for domestic projects can be deducted immediately, while foreign research must be amortized over 15 years. The bill also restores a more generous interest‑deduction limit by allowing businesses to compute adjusted taxable income without reducing it for depreciation, amortization and depletion. Other provisions include a permanent credit of 12.5–25% of wages paid to employees on qualifying family or medical leave, a clarification that meals provided on certain fishing vessels remain fully deductible, and an increase in the Section 179 expensing limit to $2.5 million with a phase‑out starting at $4 million (indexed for inflation). Finally, a new elective 100% depreciation deduction applies to qualified production property used in manufacturing or processing, provided the property meets strict use and recapture rules.
Internal Revenue Service guidance on the One Big Beautiful Bill Act; Center for Agricultural Law and Taxation analysis of the Act’s business provisions; Latham & Watkins overview of key business and investment impacts.
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