The One Big Beautiful Bill Act (OBBBA) became law July 4, 2025, locking in certain tax changes and introducing new ones. Here’s what the new bill could mean for your taxes.
Effective for 2025 through 2028, individuals who are 65+ may claim an additional deduction of $6,000 per individual ($12,000 total for a married couple where both spouses qualify). This new deduction is in addition to the current additional standard deduction and for both itemizing and non-itemizing taxpayers.
Effective for 2025 through 2028, the OBBBA introduces a deduction for qualified overtime pay, meaning overtime income won’t be taxed the same way as regular wages. This is designed to boost take-home pay for hourly and salaried workers.
Effective for 2025 through 2028, qualifying taxpayers may deduct tips up to $25,000 per year. This deduction applies to those making less than $150,000 ($300,000 for joint filers).
Effective for 2025 through 2028, qualifying taxpayers may deduct up to $10,000 per year for new, qualifying vehicles.
The lower individual tax rates and income tax brackets set to expire in 2025 are now made permanent by OBBBA. The increased standard deduction set to expire in 2025 has been made permanent and increased to $15,750 for single filers and $31,500 for joint filers for 2025.
The Child Tax Credit was set to default to $1,000 after 2025, however, the OBBBA increased the Child Tax Credit to $2,200 for every qualifying child starting in 2025. The credit amount will be adjusted annually for inflation starting in 2026.
The $10,000 SALT deduction limit was set to expire in 2025, however the OBBBA increased the cap to $40,000 for 2025 for those with incomes up to $500,000. This increased cap will rise by 1% annually through 2029 and default back to $10,000 in 2030.
The 20% pass-through business income deduction was set to expire in 2025, but the OBBBA made it permanent. The bill also created a minimum deduction of $400 for businesses with at least $1,000 of income.
While every tax situation is different, your taxes may look a little different in 2025 and beyond.
Maggie
SENIOR
Additional Deductions | $6,750 |
Total Tax Savings | $810 |
Maggie is a 70-year-old single retiree with an adjusted gross income (AGI) of $57,000. Thanks to the new OBBBA, she received an increased standard deduction of $750 and a new senior deduction of $6,000. These changes reduced her taxable income, saving her a total of $810.
What does this mean for you?
If you’re retired or over 65, the new deductions may lower your taxable income and increase your refund.
Zack & Kara
OVERTIME WORKERS
Additional Deductions | $38,520 |
Additional Credits | $200 |
Total Tax Savings | $6,407 |
Zach and Kara are a married couple with two children, filing jointly with a combined adjusted gross income (AGI) of $144,000. Thanks to the new OBBBA, they qualified for $20,000 in overtime pay deductions, $5,000 in car loan interest deductions, and a $200 increase in the child tax credit. They also benefited from a higher SALT deduction cap of $23,520. These changes reduced their taxable income by $37,520, allowed them to itemize instead of taking the standard deduction, and lowered their tax bracket from 22% to 12%, saving them a total of $6,407.
What does this mean for you?
If you have children, work overtime, or live in a high-tax state, these updates could significantly reduce your tax bill.
Nikki
PARENT
Additional Deductions | $1,125 |
Additional Credits | $400 |
Total Tax Savings | $535 |
Nikki is a teacher who has two children and files as Head of Household with an adjusted gross income (AGI) of $57,700. Thanks to the new OBBBA, her standard deduction increased by $1,125 and her child tax credit went up by $400. These changes lowered her taxable income and total tax bill, saving her a total of $535.
What does this mean for you?
If you’re a parent or file as Head of Household, you might benefit from similar updates.
Julia
TIP-BASED WORKER
Additional Deductions | $20,750 |
Total Tax Savings | $1,562 |
Julia is a single waitress with an adjusted gross income (AGI) of $30,000, including $20,000 in tips. Thanks to the new OBBBA, she qualified for an increased standard deduction of $750 and a full deduction of her $20,000 in tips. These changes lowered her taxable income enough to move her from the 12% tax bracket to the 0% bracket, saving her $1,562 in taxes.
What does this mean for you?
If you earn tip income or have a similar financial profile, you might see tax savings too.
Dotty
BAKER
Additional Deductions | $31,500 |
Additional Credits | $0 |
Total Tax Savings | $13,933 |
Bakery owner Dotty and her spouse have an AGI of $180,000. In 2025, she spent $50,000 on improvements to the building she leases. With OBBBA, Dotty claims $30,000 more in bonus depreciation and a larger standard deduction, saving $13,933. In 2026, she’s required to provide any overtime pay info to her to employees.
What this means for you:
If you’re a business owner with large expenditures, you may benefit from bonus depreciation.
Luis
GIG WORKER
Additional Deductions | $4,890 |
Total Tax Savings | $1,069 |
Luis is a gig worker with an adjusted gross income (AGI) of $70,294, plus $3,300 in tips. Thanks to the new OBBBA, he claims a higher standard deduction and $5,550 in new deductions from tip and car loan interest. This drops him from the 22% to the 12% tax bracket. Since Luis’ deducted his tips, he sees a $660 reduction in his qualified business income deduction, however, he still saves $1,069. Luis got a 1099-K Form in 2024, but won’t receive one in 2025 because the OBBBA increased the reporting threshold. Luis should report any gig income and keep accurate records throughout the year.
What this means for you:
If you earn tips or gig work income, these updates could lower your tax bill. Even if you don’t receive a 1099-K, you should always report gig income.
Hunter & Addie
ADOPTIVE PARENTS
Additional Deductions | $16,500 |
Additional Credits | $4,263 |
Total Tax Savings | $5,000 |
Hunter and Addie are a married couple, filing jointly with a combined adjusted gross income (AGI) of $69,000. Thanks to the new OBBBA, they qualified for $10,000 in overtime pay deductions and $5,000 in car loan interest deductions — plus a refundable adoption credit of $4,263. These changes lowered their taxable income, moved them to a lower tax bracket, and resulted in $5,000 in total tax savings, including a refund for adoption expenses.
What does this mean for you?
If you’re married, have adoption expenses, or work overtime, these updates could lead to meaningful savings.
The 1099-K threshold increased to $20,000 in payments and 200+ transactions for 2025, so if you received a 1099-K in the past, you may not receive one in the future.
In 2026, businesses with employees who earn tips or overtime pay must provide this information to employees.
In 2026, if your business pays independent contractors $2,000+ (increased from $600), you’ll need to issue a Form 1099-NEC.
In 2026, the Qualified Business Income (QBI) deduction will be made permanent and a new minimum $400 deduction will be available for certain taxpayers.
With the new tax law, it may be worth changing your business to an S corp to save you money on your taxes. Learn more about business structures
Tax changes are nothing new to us — H&R Block has been navigating tax law for over 70 years and counting. We’ll help keep you informed, educated, and ready to file with confidence.
With nearly 70 years of experience and 20 million tax returns filed each year, H&R Block is uniquely qualified to help you get the best possible tax outcome in an ever-evolving economy.
The One Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025. It is a large package that includes sweeping tax reform, making many provisions from the 2017 Tax Cuts and Jobs Act (TCJA) permanent. It also introduces new tax rules affecting individuals, families, and businesses starting this year, 2025, and beyond.
There is not a single effective date for all the provisions in the the new tax law. Some of the provisions are effective for tax year 2025, while the remainder are mostly effective for tax year 2026 and beyond. Some provisions to consider for 2025 include the increased Child Tax Credit, an increase in the 1099-K threshold, deductions for tips and overtime, and the elimination of the credit for electric vehicles and energy efficient home improvements.
Many provisions from the 2017 Tax Cuts and Jobs Act (TCJA) will be made permanent. The Act also creates new tax benefits such as a deduction for qualified tips and overtime, a deduction for seniors, and a deduction for qualifying new car loan interest.
Due to the OBBBA, a large number of tax changes are being made that will impact every single taxpayer in at least one way. For example, it extends the tax brackets created by the TCJA. Those brackets are 10%, 12%, 22%, 24%, 32%, 35% and 37%. Additionally, many of the benefits that are considered when determining taxable income are affected along with new benefits being added.
The OBBBA affects all taxpayers in some way, no matter their situation — whether from an extension of the TCJA tax rates, new deductions for overtime and tips, or more. Every taxpayer should evaluate their withholdings and/or estimated payments to make sure they are accounting for the provisions that affect them.
The standard deduction from the TCJA is now permanent and slightly expanded. For 2025, this means:
Several clean energy credits are being eliminated or repealed, including:
This means you may need to move quickly if you wish to purchase a qualifying vehicle for the credit or make qualifying home improvements.
No, personal and dependent exemptions are permanently eliminated under the OBBBA, with an exception for certain seniors 65 and older.
