The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, introduced important tax changes that will affect your taxes this year.
Some of these changes, such as higher SALT limits and new “non-tip and overtime tax” deductions, don’t change the rates you pay, but they may reduce your taxable income and possibly increase your refund.
These are the four main tax provisions to look for when preparing and filing your taxes.
For tax year 2025, the state and local tax (SALT) deduction quadruples to $40,000. This huge jump from the previous limit of $10,000 is a notable change for high-income taxpayers. How much you actually receive from the SALT deduction depends on your income, your state and local tax burden, and any other deductions you claim on your return.
The SALT deduction includes these write-offs:
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State and local income taxes: Payroll withholdings or quarterly payments.
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Property taxes: Taxes on your primary home, second home, or land.
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Local taxes: City income taxes or personal property taxes, such as vehicle taxes in some states.
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Sales taxes (optional): If your state doesn’t have income taxes, or if you made a large purchase, you can deduct sales taxes, including those on cars, boats, or major home projects.
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Homeowners and residents of high-tax states (e.g., California, New York) now get a much larger deduction.
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You can claim this deduction only if you itemize: If you take the standard deduction, this tax break is ruled out.
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To prevent the deduction from becoming a huge windfall for the ultra-wealthy, the deduction begins to reduce once your income exceeds $500,000 ($250,500 if married filing separately). For every dollar above that level, the deduction decreases, but it can never fall below $10,000.
Read more: What you should know about the new (higher) SALT deduction and how to claim it
This new tax break doesn’t completely eliminate taxes on overtime earnings, but if you qualify, it could mean more money in your pocket because it reduces your federal tax liability.
You can deduct part of the salary that exceeds your regular rate of pay. So if you get time and a half, you can deduct half. In other words, not all overtime is deductible; Only salary above your regular rate is deductible and the amount is limited.
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The maximum deduction for not paying overtime taxes is $12,500 or $25,000 for joint filers.
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The deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers)
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You are eligible whether you itemize or take the standard deduction.
More information: How to Claim the New ‘No Overtime Tax’ Deduction
For millions of service workers, the “no tip tax” promise sounds like a direct increase in their pay. But the reality is more nuanced: You can deduct a portion of the money you earn in tips, which reduces the income the IRS uses to calculate your taxes and your eligibility for certain tax breaks.
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There’s a limit: You can deduct up to $25,000 a year in qualified tips.
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You can claim it whether you itemize or take the standard deduction.
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What counts: The IRS defines “qualified tips” as voluntary, non-negotiated payments determined solely by the customer. In other words, if the customer did not freely choose to tip, the IRS does not treat it as deductible. That means:
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You can deduct these tips: cash tips, credit card tips, and pooled tips.
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But you can’t deduct these tips: automatic service charges and any “tips” that aren’t truly optional.
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More information: Who is eligible for the tip tax exemption and how can you claim it?
If you recently financed a new vehicle, you may be eligible for a tax break when you file: Up to $10,000 of auto loan interest is now tax deductible in certain situations.
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You can claim the $10,000 deduction even if you take the standard deduction (no need to itemize).
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Your taxable income cannot exceed $100,000 if you are single or $200,000 if you are married filing jointly.
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You won’t be able to deduct any car loan interest if your income is more than $150,000 (single filers) or $250,000 (joint filers).
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The vehicle must be new and assembled in the country (verified by VIN/assembly code). Other requirements also apply.
Read more: How to Qualify for the New Car Loan Interest Deduction
Older and middle-income Americans will receive a $6,000 increase in their standard deduction this year. The problem: Poorer seniors no longer pay taxes on their Social Security benefits, so this deduction won’t help them.
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The deduction phases out for single taxpayers earning more than $75,000 ($150,000 for married filing jointly).
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You are eligible whether you itemize or take the standard deduction.