President Trump’s One Big Beautiful Bill (OBBB) could change your tax return in real ways. The bill offers potential relief for parents raising kids, workers earning tips or overtime, and seniors on fixed incomes. There are a few key areas to pay attention to. Here’s what to know.
No Taxes on Tips
When tips are counted as taxable income, it decreases take-home pay, and there’s a chance you could get pushed into a higher tax bracket. The OBBB created a temporary deduction for tips up to $25,000 through tax year 2028, whether you itemize or claim the standard deduction on your return. If your modified adjusted gross income (MAGI) is greater than $150,000 ($300,000 for married couples filing jointly), the tip deduction gradually phases out. Keep in mind that tips are still subject to payroll taxes and may also be taxed at the state or local level.
No Taxes on Overtime
When Trump was campaigning, he pitched “no taxes on overtime” as a win for blue-collar workers, and it is. Workers can deduct up to $12,500 in overtime ($25,000 for joint filers). For a worker making $25 an hour who logs 10 overtime hours, that’s an extra $375 before taxes. Over time, those overtime hours can make a big difference in take-home pay. As with “no taxes on tips,” the deduction phases out with MAGIs greater than $150,000. And workers should remember that the exemption applies only to true overtime, not bonuses.
Bigger Tax Breaks for Seniors
Under the OBBB, if you’re 65 or older as of December 31, 2025, and making less than $75,000 a year, you get an extra $6,000 standard deduction (up to $12,000 for married couples filing jointly). That’s on top of the usual standard deduction. The deduction is gradually reduced if your MAGI exceeds $75,000 ($150,000 for married couples filing jointly) and is completely phased out at $175,000 ($250,00 for married couples filing jointly). Again, this is active from tax years 2025-2028.
Car Loan Interest Deductible
In a nod to middle-class families who rely on cars for work and everyday life, the OBBB allows individuals to deduct interest on auto loans. Effective from 2025-2028, it applies to new and used cars for personal use. For those financing a car, especially in today’s high-interest rate environment, this can provide real savings.
Expanded Child Tax Credit
The OBBB also increases the child tax credit from $2,000 to $2,200, and it will be adjusted annually for inflation beginning in 2026. Phaseout thresholds are $200,000 for single filers and $400,000 for married couples filing jointly.
Critics of the OBBB say the measures discussed above will add to the deficit, but for the average taxpayer, these deductions could mean a bigger refund or a smaller tax payment.
