Important Tax Update: Highlights of the “One, Big, Beautiful Bill Act”
On July 4, 2025, the One, Big, Beautiful Bill Act was signed into law, introducing some of the most significant changes to the federal tax code in years. While many provisions of the 2017 Tax Cuts and Jobs Act have now been made permanent, the new law also introduces several unique deductions and credits specifically for the 2025 and 2026 tax years.
Below is a summary of the key highlights that may affect your upcoming tax filings.
- Increased Standard Deductions: To help offset inflation, the standard deduction has been significantly increased. Most taxpayers will find that these higher limits reduce their taxable income more effectively than itemizing.
| Filing Status | Tax Year 2025 | Tax Year 2026 |
| Married Filing Jointly | $31,500 | $32,200 |
| Head of Household | $23,625 | $24,150 |
| Single / Married Filing Separately | $15,750 | $16,100 |
2. Higher Tax Deductions for Seniors:
Effective 2025 through 2028, individuals age 65 and older may claim an additional $6,000 deduction (or $12,000 for a married couples). This is in addition to the standard deduction for senior.
Income Limits: This benefit phases out for taxpayers with modified adjusted gross income (MAGI) over $75,000 (single) or $150,000 (joint filers).
3. No tax on Tips and Overtime: The new law provides significant relief for hourly and service-industry workers through 2028:
a) Tips: Qualified tips received in eligible occupations (as identified by the IRS) are now deductible. These must be reported on your W-2 or Form 1099.
b) Overtime: Individuals may deduct the portion of qualified overtime pay that exceeds their regular rate of pay. This pay must be clearly documented on your tax statements.
4. Deduction for Car Loan Intertest (even if you do not itemize)
For the first time in decades, interest on personal car loans may be deductible (effective 2025–2028):
a) Maximum Deduction: Up to $10,000 annually.
b) Eligibility: The vehicle must be for personal use, purchased after Dec 31, 2024, and have undergone final assembly in the U.S.
c) Requirement: You must provide your vehicle’s VIN on your tax return. You can check your vehicle’s assembly location at vpic.nhtsa.dot.gov/decoder/.
d) Note: This is an “above-the-line” deduction, meaning you can claim it even if you do not itemize. Income phase-outs apply starting at $100,000 MAGI ($200,000 for joint filers).
5. Expiration of Clean Vehicle Credits
New or Used Vehicle Credits are not allowed for any vehicle acquired after Sept 30, 2025. Any vehicle acquired after this date will no longer be eligible for these specific credits.
