One Big Beautiful Bill (OBBBA): New Tax Cuts and Deductions You Should Know

The Omnibus Budget and Balanced Budget Act (OBBBA), also called the “One Big Beautiful Bill Act,” is a major Republican-led tax and budget law that is reshaping how Americans pay taxes. The bill was passed without any Democratic support through the reconciliation process, a special legislative procedure that allows certain budget-related bills to pass the Senate with a simple majority rather than the usual 60 votes. It was signed into law by former President Donald Trump.

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OBBBA introduces a range of tax changes, from permanent lower tax rates and higher standard deductions to new deductions for seniors, overtime workers, tip earners, and small business owners. These changes aim to simplify taxes and provide financial relief for middle-income families, workers, and business owners, while reflecting the Republican priorities of tax reduction and economic growth.

Permanent Lower Taxes & Higher Standard Deduction

  • Tax rates: Permanent lower rates and brackets beyond 2025
  • Standard deduction 2025: $15,750 (single), $31,500 (joint)
  • Benefit: Keeps more of your income and makes long-term planning easier

Example: Married couple earning $80,000 can reduce taxable income to $48,500 using the standard deduction.

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Tips Deduction for Service Workers (2025–2028)

  • What counts: Cash/card tips and tip pools (not mandatory service charges)
  • New deduction: Up to $25,000 of qualified tips
  • Phase-out: $150,000 MAGI (single), $300,000 (joint)
  • Self-employed: Deduction limited to net business income
  • Tip: Keep a daily log and report all tips
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Overtime Pay Deduction (2025–2028)

  • Deduction applies to overtime above regular wagess
  • Must comply with Fair Labor Standards Act (FLSA)
  • Limits: $12,500 (single), $25,000 (married)
  • Above-the-line deduction: reduces taxable income without itemizing
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New Car Loan Interest Deduction (2025–2028)

  • Deduct up to $10,000 per year in loan interest on new vehicles
  • Qualifying vehicles: new, personal use, < 14,000 pounds
  • Phase-outs: Single MAGI > $100,000, Joint MAGI > $200,000
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SALT Deduction Expansion

  • Cap raised from $10,000 → $40,000 for most taxpayers
  • Phases out above ~$500,000 income
  • Mainly helps homeowners in high-tax states
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Seniors Tax Deduction (65+)

  • $6,000 per person, $12,000 per couple
  • Applies even with standard deduction
  • Phases out for higher-income seniors
  • Valid 2025–2028
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Permanent 20% QBI Deduction for Small Businesses

  • Deduct up to 20% of business income
  • Minimum $400 deduction for small side hustles
  • Phase-outs: Single ~$182,100, Joint ~$364,200
  • Supports small businesses and self-employed individuals
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Bottom Line

OBBBA means more money stays in your pocket. It lowers taxes, increases deductions, and creates new benefits for:

  • Middle-income families
  • Service workers earning tips
  • Overtime employees
  • Seniors
  • Small businesses and side hustles

Pro tip: Keep accurate records of income, deductions, and expenses to maximize savings. Consult a tax professional for personalized guidance.

With OBBBA, planning for your financial future is simpler, and you can make the most of these new tax benefits.