The large budget reconciliation bill known as the One Big Beautiful Bill Act (OBBBA) made some modest adjustments to the individual tax landscape. While many of the changes are minor, they can reshape your overall tax picture when added together. Before you file your 2025 tax return, take some time to review these changes so you know what to expect. If the result isn’t ideal, you still have time to change your strategy before year end.

Let’s walk down the pages of your tax return and address the provisions within each of the following four categories: Income, Above-the-Line Deductions, Deductions, and Taxes & Credits.

Other Deductions

“No tax on overtime”

Some taxpayers will be able to deduct up to $12,500 (or $25,000 for joint filers) of overtime pay from taxation. Some caveats:

• Overtime pay will still be subject to payroll taxes.
• Employers must continue withholding income taxes for 2025 overtime pay. IRS is expected to update rules for 2026 to 2028.
• Only the amount that exceeds your typical pay rate is eligible for the deduction. For example, if you work 50 hours in a week at $20 per hour, you’ll earn $800 for the first 40 hours and $300 in overtime for the extra 10 hours, bringing total pay to $1,100. Of that overtime, only the $100 premium (the half-time portion above your regular rate) can be excluded from taxation.
• You must be a non-exempt W-2 employee, which means that many salaried workers will be ineligible.
• The deduction is only available for tax years 2025 through 2028.
• The deduction will begin to phase out once your modified AGI is more than $150,000 (or $300,000 for joint filers).
• You don’t have to itemize to claim the overtime deduction.

“No tax on tips”

Certain taxpayers will be able to deduct up to $25,000 of tip income. This means that a taxpayer in the 22% tax bracket who reports $10,000 of tip income could see a $2,200 drop in taxes from this deduction ($10,000 x 22%). The deduction is only available for tips earned in occupations that customarily receive tips (the IRS recently released proposed guidance that lists eligible occupations).

This deduction applies exclusively to tax years 2025 through 2028, and it begins to phase out once your modified adjusted gross income is more than $150,000 (or $300,000 for joint filers). Married taxpayers must file jointly to claim this deduction.

Car loan interest deduction

Like the “no tax on overtime” and “no tax on tips” incentives, one of the OBBBA’s purported benefits for working Americans is an incentive for interest paid on certain car loans.

Beginning in 2025 and through the end of 2028, taxpayers can deduct up to $10,000 of interest they pay from financing a vehicle if:

• The vehicle is new (not used)
• The vehicle was assembled in the US
• The vehicle is for personal use
• The loan is secured by a lien on the vehicle that originated in 2025 or later

The deduction begins to phase out when the taxpayer’s AGI reaches $100,000 and fully phases out once their AGI reaches $150,000 (or $200,000 and $250,000 for joint filers, respectively). Lease payments don’t qualify, but interest payments on refinanced loans will if the original loan meets all the requirements.

Extension of the 20% qualified business income deduction

The qualified business income (QBI) deduction  let owners of pass-through entities (like partnerships, S corporations, and sole proprietors) deduct up to 20% of qualified business income. The QBI deduction was initially set to expire at the end of 2025, but the OBBBA made it permanent and established that all eligible business owners would receive a minimum deduction of $400.

Non-itemized charitable deduction

If you are one of the roughly 90% of taxpayers who takes the standard deduction, beginning in 2026, you may be able to deduct donations to charity. Taxpayers who don’t itemize are afforded a $1,000 (or $2,000 for joint filers) deduction for cash donations to qualified charities (excluding donations to donor-advised funds and private foundations). This is a permanent addition to the tax code, but it’s not indexed for inflation.

Larger standard deduction

During President Trump’s first term, Congress passed the Tax Cuts and Jobs Act (TCJA), which nearly doubled the standard deduction. This expanded deduction was set to expire at the end of 2025. The OBBBA kept the larger standard deduction, ensuring that most Americans will take the standard deduction rather than itemize.

Senior exemption deduction

Seniors can receive an additional benefit for tax years 2025 through 2028.  People who are at least 65 by the end of the tax year can deduct $6,000 (or $12,000 for joint filers) on top of their additional standard deduction. The senior exemption begins to phase out once modified AGI reaches $75,000 and is fully phased out at $175,000 (or $150,000 and $250,000 for joint filers, respectively).

Larger standard deduction

During President Trump’s first term, he passed the Tax Cuts and Jobs Act (TCJA), which nearly doubled the standard deduction. This expanded deduction was set to expire at the end of 2025. The OBBBA kept the larger standard deduction, ensuring that most Americans will take the standard deduction rather than itemize.

Senior exemption deduction

Seniors can receive an additional benefit. Beginning this year and through 2028, people who are at least 65 by the end of the tax year can increase their standard deduction by an additional $6,000 (or $12,000 for joint filers). This begins to phase out once modified AGI reaches $75,000 and is fully phased out at $175,000 (or $150,000 and $250,000 for joint filers, respectively).

Itemized Deductions

Expanded SALT deduction

Since 2018, the Tax Cuts and Jobs Act has limited the state and local tax deduction (SALT) to $10,000 per year, with no ability to carry forward excess deductions. Beginning in 2025, this threshold jumps to $40,000 and increases by 1% every year until 2030, when it drops back down to $10,000.

0.5% floor for charitable contributions

Beginning in 2026, taxpayers who itemize can only deduct charitable contributions that exceed 0.5% of their AGI. For example, if your AGI is $100,000 and you donate $2,000 to charity in 2026, you can only deduct $1,500 because the first $500 (0.5% of your AGI) doesn’t count toward the deduction.

Repeal of 2% miscellaneous deductions

The 2% miscellaneous itemized deductions, which included things like tax prep fees and certain unreimbursed job expenses, were suspended in 2018, but they were set to come back in 2026. The OBBBA permanently eliminated miscellaneous deductions.

Taxes & Credits

Larger child tax credit & lower phase-out

The OBBBA enhanced the child tax credit, increasing the max credit to $2,200 (from $2,000) and indexing it for inflation. It also retained the ability for a portion of the credit to be refundable. Starting in 2026, the credit begins phasing out when modified AGI exceeds $110,000 for married filing jointly, $55,000 for married filing separately, and $75,000 for other taxpayers (down from $400,000 for married individuals filing jointly and $200,000 for other taxpayers in 2025).

Tax brackets

The OBBBA retained the tax brackets that were established in 2018 by the TCJA. Without this legislation, these new brackets were set to expire at the end of 2025.

Tax Planning for 2026

To make better sense of when these changes kick in, review the following chart. Reach out to your CRI advisor when you’re ready to review your tax plan.