The “One Big Beautiful Bill Act” (OBBBA) is officially the law of the land, and it fundamentally shifts the tax landscape for the 2025 tax year. Whether you are an employee, a business owner, or a retiree, the new rules—effective for tax years beginning after December 31, 2024—offer new opportunities to lower your tax liability.
With the year ending, now is the time to adjust your strategy. Here is the definitive breakdown of the key changes you need to know.
1. The “Standard” Is Raising the Bar
The standard deduction has been significantly enhanced, making it harder for many to justify itemizing unless they have substantial deductions.
- Single Filers: Increased to $15,750.
- Married Filing Jointly: Increased to $31,500.
- Heads of Household: Increased to $23,625.
2. The SALT Cap is Finally Loosened
For residents in high-tax states (like California and New York), this is the news you’ve been waiting for. The State and Local Tax (SALT) deduction cap has quadrupled.
- New Cap: The limit is now $40,000 for 2025 (up from $10,000).
- The Catch: The benefit has an income phaseout. It begins to reduce for married couples with a Modified Adjusted Gross Income (MAGI) over $500,000.
- Planning Tip: If you’ve been holding off on paying property taxes, 2025 is the year to maximize this deduction if you fall under the income threshold.
3. “No Tax on Tips” (With Conditions)
Service industry workers can now breathe a sigh of relief. The OBBBA creates a new “above-the-line” deduction for qualified tips.
- The Benefit: You can deduct up to $25,000 of qualified tip income.
- Eligibility: This applies to cash tips in occupations that “customarily and regularly” received tips before 2025.
- Income Limit: The deduction phases out for single filers earning over $150,000 and joint filers over $300,000.
- Action Item: Ensure your tips are properly reported on your W-2 or 1099. “Under the table” tips do not qualify.
4. “No Tax on Overtime”
Hourly workers putting in extra time get a dedicated break.
- The Benefit: A deduction of up to $12,500 (Single) or $25,000 (Joint) for qualified overtime pay.
- Definition: This applies to FLSA-required overtime (time-and-a-half) pay.
- Phaseout: Similar to tips, this benefit reduces for incomes over $150,000 (Single) / $300,000 (Joint).
5. New “Senior Deduction” for Age 65+
Seniors get a double win: the standard deduction increase plus a new specific deduction.
- The Boost: An additional $6,000 deduction for each qualified individual age 65 or older.
- Income Limit: This phases out for single seniors earning over $75,000 and couples earning over $150,000.
- Impact: A married couple over 65 could potentially claim a total deduction of over $46,000 (Standard + Senior enhancements).
6. Family & Future Planning
- Child Tax Credit: Increased to $2,200 per qualifying child.
- Adoption Credit: Enhanced with a refundable portion of up to $5,000.
- Trump Accounts: A new savings vehicle for children born after Dec 31, 2024. The government may provide a $1,000 “kickstarter” contribution, and families can contribute up to $5,000 annually.
7. Car Loan Interest is Deductible (Again)
In a nod to the auto industry, interest on new car loans is now deductible.
- The Deal: You can deduct up to $10,000 in interest on new passenger vehicles purchased after Dec 31, 2024.
- Restriction: This is for new cars only (not used) and applies to loans originated in 2025.
Summary Table: 2025 at a Glance
| Provision | New 2025 Limit/Amount |
| Standard Deduction (Single) | $15,750 |
| Standard Deduction (MFJ) | $31,500 |
| SALT Cap | $40,000 |
| Tip Deduction Limit | $25,000 |
| Overtime Deduction Limit | $12,500 (Single) / $25,000 (MFJ) |
| Senior Deduction (65+) | $6,000 |
Looking Ahead:
The OBBBA brings complex phaseouts and new qualification rules (especially for tips and overtime). Don’t assume your payroll department has automatically adjusted your withholdings to match these breaks.
Let’s Discuss: Which of these changes impacts your family or business the most? Drop a comment below! 👇
#TaxPlanning2025 #BigBeautifulBill #SALTcap #TaxSeason #IRS #SmallBusiness #FinanceTips
Aloe Advisors CPA Inc. 
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