New Tax Deductions Unpacked: What the OBBBA Means for You

New Tax Deductions Unpacked: What the OBBBA Means for You

I. Introduction

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, marks a transformative moment in U.S. tax legislation. Building on the Tax Cuts and Jobs Act (TCJA), this new law weaves in a variety of tax-friendly provisions that can significantly impact both individual taxpayers and businesses. Those who should pay attention include anyone looking to optimize personal income tax deductions, small business owners curious about permanent expensing rules, and larger enterprises needing clarity on expanded pass-through provisions. In this article, we’ll look at how some of these new or extended deductions work, especially those dubbed “no tax on tips” or “no tax on overtime,” as well as the greatly expanded SALT cap that many have been watching.

Read on to see how the OBBBA could influence your financial planning, and discover strategies you can use to make the most of these new and expanded deductions.

II. Background on the OBBBA

Over the Independence Day weekend, President Trump added his signature to the OBBBA, finalizing a broad measure intended to not only extend the TCJA benefits but also introduce new deductions and rules—some permanent, some temporary. The legislation moved quickly through Congress, with lawmakers aiming to avoid a looming “tax cliff” that many expected when certain TCJA provisions were set to expire at the end of 2025. While the OBBBA leaves some existing rules intact, it also phases out select energy credits and extends multiple cost-saving benefits to individuals, small businesses, and estates.

In practical terms, millions of Americans—including wage earners, retirees, sole proprietors, and corporate entities—will face changes in how they compute taxes starting in 2025. Some provisions, such as higher standard deductions and an expanded estate tax exemption, deliver permanent relief. Others apply only for a few years and come with income-based phaseouts. This context underscores why anyone filing taxes in the next several years should fully understand the new landscape.

III. Key Changes and Extensions from TCJA

1. Permanent Individual Tax Brackets and Standard Deductions. Central to the OBBBA is its preservation of the TCJA’s individual tax brackets, anchored by the top rate of 37%. It also locks in enhanced standard deductions. Starting in 2025, single filers can look forward to a deduction of $15,750, with married filers jumping to $31,500. These amounts will be indexed for inflation in subsequent years.
2. Expansion of Estate Tax Exemption. Those looking to pass along family assets enjoy a permanent boost to the estate and gift tax exemption, raised to $15 million from the roughly $10 million in the TCJA (adjusted for inflation). This change offers greater flexibility in estate planning, helping families maintain more of their accumulated wealth for the next generation.
3. Continued QBI Deduction for Pass-Throughs. The critical 20% qualified business income (QBI) deduction, beloved by owners of pass-through entities such as S corporations, partnerships, and LLCs, is here to stay. The OBBBA extends this provision indefinitely, broadening opportunities for entrepreneurs to reduce their tax burdens. It also refines some conditions around the phaseout thresholds, potentially allowing more businesses to qualify for the full deduction.

IV. Newly Introduced Tax Deductions

The OBBBA isn’t just about extending old habits. It arrives with a set of brand-new or expanded deductions that will influence everyday taxpayers as well as employers. Below are some of the most widely discussed changes:

A. Expanded SALT Deduction

One of the most headline-grabbing provisions is the state and local tax (SALT) deduction limit climbing from the TCJA’s $10,000 to a notable $40,000 between 2025 and 2029. This expanded limit will help taxpayers residing in high-tax states preserve more of their income. However, the increased cap comes with a phase-down for households earning over $500,000. After 2029, the SALT cap reverts to the original $10,000 unless lawmakers decide otherwise.

B. Deduction for Tips (“No Tax on Tips”)

A significant benefit for employees in tip-based occupations, such as restaurant servers and hotel staff, is the new above-the-line deduction of up to $25,000. This special deduction applies between 2025 and 2028 and scales back once income surpasses a specific threshold. For those who rely heavily on gratuities, this can deliver meaningful tax relief while avoiding the complexity of itemizing.

C. Deduction for Overtime Pay (“No Tax on Overtime”)

Overtime can be both a blessing and a burden for hourly workers—income surges but so can tax obligations. With the OBBBA, individuals can claim a new deduction of up to $12,500 (or $25,000 for joint filers) against qualified overtime compensation for the 2025–2028 period. It’s a novel benefit designed to ease the tax hit from working extra hours, though it recedes for higher earners who exceed a defined adjusted gross income threshold.

D. Senior Deduction

Retirees see a perk in the form of a $6,000 above-the-line deduction available from 2025 to 2028 for those age 65 and older. This potential break phases out for incomes above $75,000 (or $150,000 if filing jointly). While it’s only temporary, it can offer meaningful relief for seniors managing fixed incomes or unexpected medical costs.

E. Auto Loan Interest Deduction

Some new vehicle owners will be able to deduct up to $10,000 in interest for qualifying passenger cars assembled in the United States. Targeting the 2025–2028 window, this deduction is subject to phaseouts tied to overall income. The idea is to promote domestic manufacturing while rewarding consumers who choose American-made vehicles.

F. Charitable Contributions for Non-Itemizers

Starting in 2026, taxpayers who forgo itemizing can deduct up to $1,000 if single, or $2,000 if married filing jointly, for charitable giving. Meanwhile, itemizers must meet a 0.5% floor relative to adjusted gross income before claiming charitable contributions. Both rules aim to encourage philanthropy, though taxpayers will need to be mindful of recordkeeping requirements as well as these new thresholds.

“In light of these new OBBBA deductions, individuals and businesses alike should revisit their recordkeeping and forecasting to maximize potential savings. Many of these provisions are temporary, requiring a careful, proactive approach every year.”
— Carla Keegan, Co-Founder & Director of Tax

V. Strategic Considerations and Potential Pitfalls

Although the OBBBA’s new provisions appear straightforward, there are nuances that can easily trip up unwary taxpayers. Many of these deductions phase out at certain income levels, so exceeding those thresholds might eliminate the benefit entirely. Similarly, some measures lapse after 2028 or 2029, injecting an element of time-sensitivity into any long-term planning.

For households and businesses, the devil is in the details when it comes to documenting tip income, overtime pay, or interest on auto loans. The IRS typically requires thorough substantiation, especially with newly created deductions. Failing to maintain precise records could mean missing out on tax savings—or facing complications if audited. On top of that, individuals need to stay aware of how their itemized deductions interact with these above-the-line breaks, while business owners should consider how pass-through rules and bonus depreciation changes fit into their broader strategies.

VI. How Keegan Linscott & Associates, PC Can Help

As you can see, the OBBBA both preserves major elements of the TCJA and introduces new incentives that could significantly reshape your personal or corporate tax profile. While these opportunities are promising, they also bring complexity that underscores the importance of professional guidance. This is where Keegan Linscott & Associates, PC can assist.

We offer an array of services tailored to each client’s unique needs. Whether you want to confirm that your entity structure remains optimal (particularly for the QBI deduction), explore robust tax-planning strategies for taking advantage of the expanded SALT cap, or properly document newfound deductions such as tips or overtime pay, our tax professionals have the expertise and experience to guide you. Our goal is to help you stay compliant and minimize your tax liabilities, giving you more resources to invest in your business or personal pursuits.

Specifically, we can help you:

• Analyze entity selection or restructuring options that may amplify pass-through deductions.
• Devise tax planning strategies that integrate new deductions like “no tax on tips” or the senior deduction in a way that works for your financial goals.
• Offer business consulting to ensure you are capitalizing on bonus depreciation, interest expense limits, and potential expansions.
• Deliver tax preparation services backed by thorough research, so your returns reflect all applicable OBBBA provisions accurately.

Ultimately, our team stays on top of fast-changing laws to ensure you’re always in the best position to make critical business and personal finance decisions.

VII. Conclusion

The One Big Beautiful Bill Act moves the needle on a wide spectrum of tax provisions, from making certain TCJA elements permanent to offering temporary but potentially lucrative deductions for tips, overtime compensation, car loan interest, and more. While it promises a wealth of fresh possibilities, the complexity of these rules underscores the advantage of professional guidance.

By starting your tax planning now—instead of waiting until your next filing—you can ensure that you’re claiming every intended break and preparing for any that may phase out. Whether you’re an individual taxpayer capitalizing on the new standard deductions and tip provisions or a business optimizing pass-through income strategies, it’s a season ripe for gains. The key is understanding how each layer of the legislation interacts so you don’t leave money on the table—or find yourself in a bind due to overlooked paperwork and compliance rules.

Expert Contributors

Moses Ard, Tax Principal
Email: mard@keeganlinscott.com
A seasoned tax professional with an extensive background in strategic tax planning and legislation analysis. Moses specializes in helping businesses transition into new tax environments smoothly and efficiently.

Carla Keegan, Co-Founder & Director of Tax
Email: ckeegan@keeganlinscott.com
An experienced advisor in business consulting, tax planning, and tax services. Carla’s expertise lies in designing proactive solutions for complex tax challenges and guiding clients through evolving regulations.