What is No Tax on Overtime?
If you earned overtime pay in 2025, you can claim an annual deduction of up to $12,500, which phases out once your modified adjusted gross income exceeds $150,000. It is important to note that this only applies to overtime as defined by the Fair Labor Standards Act, which requires employers to pay 1.5 times the usual wage for any work performed more than 40 hours per work week. Also, the deduction only applies to the 0.5 part of the pay, not to the pay you would receive for that hour anyway were it not overtime. The deduction is available to both itemizing and non-itemizing taxpayers, and it expires after 2028.
What is No Tax on Tips?
If you earned tips in 2025, you may claim an annual deduction up to $25,000. This applies to wait staff, service workers, and other professions which regularly and customarily receive tips. This applies to direct tips and to tip sharing. For self-employed people, the deduction may not exceed your net income, prior to this deduction, from the trade or business in which the tips were earned. The deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers). This deduction expires after 2028.
Is it true that this applies only if you make under $25,000 a year and itemize your deductions?
No. You can deduct up to $25,000 of reported tips (you can have other income) and you do not need to itemize to claim the deduction.
I’ve read that cash-only tips mean that only tips actually paid in cash qualify. Is that true?
No. The deduction applies to cash or cash-equivalent tips (including tips on credit cards).
What is the Senior Deduction?
For seniors aged 65 and above, the OBBB provides an annual deduction of $6,000, in addition to the standard deduction already available to them. The deduction starts phasing out for modified adjusted gross income over $75,000. This is based solely on age, and it expires after 2028.
How did the Child Tax Credit change?
The Child Tax Credit increased from $2,000 to $2,200 per qualifying child. It is indexed to inflation so it will continue to increase. This still requires a valid Social Security Number for the child to qualify. The child must be under 17.
What are Trump Savings Accounts?
Any American citizen under 18 can open a Trump Savings Accounts starting July 5, 2026. Children born in the years 2025–2028 will be given $1,000 as a seed deposit from the government. Money will be invested in low-cost index funds and cannot be withdrawn until the child is 18.
What is the SALT deduction cap increase?
SALT refers to state and local taxes. A deduction cap limits the amount of tax deductions any person can write off from SALT. The OBBBA increases the SALT cap to $40,000 ($20,000 for married filing separately) for 2025 and $40,400 for 2026. For tax years beginning after 2026 and before 2030, the cap will be increased by 1% per year. For tax years beginning in 2030, the cap will revert to $10,000 ($5,000 for married filing separately). The increased SALT cap phases out once your modified adjusted gross income exceeds $500,000 for 2025 and $505,000 for 2026. The phase-out threshold increases by 1% every year after that.
Which credits and incentives for green energy and vehicles are sunsetting?
Among others, the following energy-related credits are scheduled to sunset quicker under the OBBBA: (1) The clean vehicle credit and the previously owned clean vehicle credit for vehicles acquired after September 30, 2025. (2) The alternative fuel vehicle refueling property credit, for property placed in service after June 30, 2026. (3) The energy-efficient home improvement credit terminates after December 31, 2025. (4) The residential clean energy credit expires for expenditures after December 31, 2025. (5) The energy-efficient commercial buildings deduction expires for property construction beginning after June 30, 2026.