The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, introduced significant tax changes that will affect your taxes this year.
Some of these changes — like higher SALT caps and new “no tax on overtime and tips” deductions — don’t change the rates you pay, but they can lower your taxable income and possibly boost your refund.
Here are the four major tax provisions to look for as you prepare and file your taxes.
For the 2025 tax year, the state and local tax (SALT) deduction quadruples to $40,000. This massive jump from the previous $10,000 limit is a standout 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:
State and local income taxes: Payroll withholdings or quarterly payments.
Property taxes: Taxes on your primary home, second home, or land.
Local taxes: City income taxes or personal property taxes, like vehicle taxes in some states.
Sales taxes (optional): If your state has no income tax — or you made a large purchase — you can deduct sales taxes instead, including those on cars, boats, or major home projects.
Homeowners and residents of high-tax states (e.g., California, New York) now get a much larger deduction.
You can claim this deduction only if you itemize: If you take the standard deduction, this tax break is off the table.
To prevent the deduction from becoming a massive windfall for the ultra-wealthy, the deduction starts shrinking once your income goes above $500,000 ($250,500 if married filing separately). For every dollar over that level, the deduction decreases — but it can never fall below $10,000.
Read more: What to know about the new (higher) SALT deduction — and how to claim it
This new tax break doesn’t totally 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 some of the pay that exceeds your regular pay rate. So if you get time-and-a-half, you can deduct the half. Put another way, not all overtime is deductible — only the pay above your regular rate is deductible, and the amount is capped.
The maximum deduction for no tax on overtime is $12,500 or $25,000 for joint filers.
The deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers)
You’re eligible whether you itemize or take the standard deduction.
Learn more: How to claim the new ‘no tax on overtime’ deduction
For millions of service workers, the promise of “no tax on tips” sounds like a straight boost to your paycheck. But the reality is more nuanced: You can deduct a portion of the money you earn in tips, reducing the income the IRS uses to calculate your taxes and eligibility for certain tax breaks.
There’s a cap: You can deduct up to $25,000 a year in qualified tips.
You can claim it whether you itemize or take the standard deduction.
What counts: The IRS defines “qualified tips” as voluntary, non-negotiated payments determined solely by the customer. In other words, if the customer didn’t freely choose to tip, the IRS doesn’t treat it as deductible. That means:
You can deduct these tips: Cash tips, credit card tips, and pooled tips.
But you can’t deduct these tips: Automatic service charges and any “gratuities” that aren’t truly optional.
Learn more: Who’s eligible for ‘no tax on tips,’ and how do you claim it?
If you financed a new vehicle recently, you may be eligible for a tax break when you file your return — up to $10,000 of car loan interest is now tax-deductible in certain situations.
You can claim the $10,000 deduction even if you take the standard deduction (you don’t have to itemize).
Your taxable income can’t exceed $100,000 if you’re single or $200,000 if you’re married filing a joint return.
You won’t be able to deduct car loan interest at all if your income is above $150,000 (single filers) or $250,000 (joint filers).
The vehicle must be new and assembled domestically (verified by VIN/assembly code). Other requirements also apply.
Read more: How to qualify for the new car loan interest deduction
Older, middle-income Americans get a $6,000 boost to their standard deduction this year. The catch: The poorest seniors already don’t pay taxes on their Social Security benefits, so this deduction won’t help them.
The deduction phases out for single filers who earn over $75,000 ($150,000 for those married filing jointly).
You’re eligible whether you itemize or take the standard deduction.
