The One Big Beautiful Bill Act (Pub. L. 119-21) was signed on July 4, 2025, and most of it landed on tax year 2025 returns — the ones filed this past spring. With a full filing season behind us, here is what actually changed for individual and small-business filers: the dollar limits, the phase-outs, and which pieces disappear after 2028.
What is permanent and what expires
One half is permanent; the other is a four-year window covering 2025 through 2028.
| Provision | Status | Years it applies |
|---|---|---|
| Deductions for tips, overtime, seniors and car loan interest | Temporary | 2025–2028 |
| Higher state and local tax (SALT) cap | Temporary | 2025 through the end of the decade |
| Section 199A, 100% bonus depreciation, Section 179, domestic Section 174 | Permanent | From 2025; see dates below |
| $2,200 Child Tax Credit | Permanent | From 2025, indexed |
| $15,000,000 estate and gift exclusion | Permanent | From 2026, indexed |
| Clean vehicle and home energy credits | Terminated | Ended during 2025 |
The standard deduction also rose and stayed up: for 2026, $16,100 single, $32,200 joint, $24,150 head of household (2025: $15,750, $31,500, $23,625).
The four new deductions: tips, overtime, seniors and car loans
These go on Schedule 1-A (Form 1040), Additional Deductions, a form that did not exist before 2025. All four work whether you take the standard deduction or itemize, all require a valid Social Security number, and married filers must file jointly. Phase-outs run on modified adjusted gross income (MAGI) — for almost everyone, just the adjusted gross income on the face of the return.
| Deduction | Maximum | Phase-out starts | Reduction | Zero at |
|---|---|---|---|---|
| Qualified tips | $25,000 | MAGI $150,000 / $300,000 joint | $100 per full $1,000 | $400,000 / $550,000 |
| Qualified overtime | $12,500 / $25,000 joint | $150,000 / $300,000 joint | $100 per full $1,000 | $275,000 / $550,000 |
| Age 65 and older | $6,000 each / $12,000 couple | $75,000 / $150,000 joint | 6% of excess | $175,000 / $250,000 |
| Car loan interest | $10,000 | $100,000 / $200,000 joint | $200 per $1,000 | $150,000 / $250,000 |
Qualified tips
Voluntary cash or charged tips, including tip sharing. A mandatory service charge counts only if the customer can change or remove it, and the occupation must appear on the IRS List of Occupations that Receive Tips — over 70, fixed by final regulations in April 2026. Self-employed people qualify, capped at net profit.
Example. A single server with $58,000 of MAGI and $19,400 of qualified tips is below $150,000, so nothing phases out. The full $19,400 is deductible — $2,328 at a 12% marginal rate.
Qualified overtime
Only the premium counts — pay above the regular rate that the Fair Labor Standards Act requires, the "half" in time-and-a-half. Ten overtime hours at a $30 regular rate paid at $45 give $15 × 10 = $150, not $450.
Example. Joint filers, $332,000 of MAGI, $18,000 of qualified overtime — under the $25,000 joint cap. MAGI exceeds $300,000 by $32,000: 32 increments of $1,000, times $100, a $3,200 reduction. Deduction: $18,000 − $3,200 = $14,800.
Age 65 and older
A separate $6,000 deduction per qualifying person that stacks on top of the long-standing additional standard deduction for age — in 2026, $1,650 per box married, $2,050 unmarried.
Example. A couple, both 65, $166,000 of MAGI, taking the 2026 standard deduction. MAGI exceeds $150,000 by $16,000; 6% is $960; each spouse's $6,000 drops to $5,040, or $10,080 combined. Add $1,650 each: $32,200 + $3,300 + $10,080 = $45,580.
Car loan interest
The narrowest of the four. The vehicle must be new, for personal use, under 14,000 pounds gross vehicle weight rating, and have undergone final assembly in the United States. The loan must have originated after December 31, 2024 and be secured by a lien on the vehicle. Schedule 1-A asks for the VIN.
Example. A single filer with $106,000 of MAGI and $2,900 of interest: MAGI exceeds $100,000 by $6,000, six increments times $200, a $1,200 reduction. Deduction $1,700.
None of these four reduce Social Security or Medicare tax. They come off after adjusted gross income, so wages still carry full payroll tax and self-employment income the full 15.3% self-employment tax.
The SALT cap increase
The cap on deducting state and local income, sales and property taxes rose from $10,000. For 2026 it is $40,400 ($20,200 married filing separately), phasing down above $505,000 of MAGI ($252,500 separately) but never falling below $10,000 ($5,000 separately).
Joint filers with $46,000 of state and property tax and $310,000 of MAGI deduct $40,400 instead of $10,000 — $30,400 more, worth about $7,296 at a 24% marginal rate. You must itemize, so it helps only where your itemized total clears the $32,200 joint standard deduction.
Temporary, and later-year numbers are not settled. Under the statute the cap steps up modestly each year, then reverts to a flat $10,000 at the start of the next decade. The IRS has confirmed figures only for 2026 — and issued a formal correction because the printed 2026 Form 1040-ES showed $40,000 instead of $40,400.
What changed for small businesses
Section 199A is now permanent. The 20% deduction on qualified business income from sole proprietorships, partnerships and S corporations was scheduled to expire; that sunset was repealed. Two changes first apply to tax years beginning after December 31, 2025, so 2026 is the first year you see them: the phase-in range widened from $50,000 to $75,000 for single filers and $100,000 to $150,000 for joint filers, softening the cliff; and a new minimum deduction of $400, indexed, goes to anyone with at least $1,000 of net qualified business income from an active business they materially participate in. The 2026 thresholds are $403,500 joint, $201,775 married filing separately, $201,750 otherwise.
100% bonus depreciation is permanent for qualified property acquired after January 19, 2025; the step-down to 80%, then 60%, then zero was repealed. Acquisition date governs, so a binding contract signed before January 20, 2025 can push a purchase outside the rule. An elective 40% is available instead (60% for long-production-period property and certain aircraft).
Section 179 expensing rose from $1,000,000 to $2,500,000 for tax years beginning after December 31, 2024, and is now indexed. For 2026 the limit is $2,560,000, phasing out above $4,090,000 of qualifying property placed in service, with a $32,000 cap on heavy SUVs.
Section 174 research costs. Domestic research is immediately deductible again from tax year 2025, or you may elect to capitalize over 60 months or more; foreign research is still amortized over 15 years. The small-business election to apply this retroactively to tax years beginning after December 31, 2021 was due by July 4, 2026, a date now past.
Child Tax Credit and Trump Accounts
The Child Tax Credit is $2,200 per qualifying child under 17, permanently and indexed; inflation rounding left it at $2,200 for 2026 as well. Up to $1,700 per child is refundable for 2026 through the Additional Child Tax Credit. The credit phases out above $200,000 of income ($400,000 joint). Each qualifying child now needs a Social Security number valid for work, issued before the return's due date, and so does the taxpayer — at least one spouse on a joint return.
Trump Accounts are new tax-advantaged savings accounts for children under 18. Treasury will deposit a one-time $1,000 pilot contribution for each eligible child born between January 1, 2025 and December 31, 2028 who is a U.S. citizen with a Social Security number. Contributions may begin July 4, 2026 — up to $5,000 a year from individuals, plus up to $2,500 from an employer. Balances must sit in a mutual fund or exchange-traded fund tracking a U.S. stock index such as the S&P 500, and withdrawals are generally restricted until age 18. Use Form 4547 to open the account. The pilot rules are still proposed regulations.
1099-K and 1099-NEC reporting thresholds
- Form 1099-K. The $600 threshold enacted in 2021 was repealed retroactively. For 2025 and 2026 a payment platform reports only when gross payments exceed $20,000 and transactions exceed 200 — both tests. Payment card transactions still have no minimum.
- Forms 1099-NEC and 1099-MISC. For tax years beginning after 2025 the general threshold rises from $600 to $2,000, inflation-adjusted starting 2027. It covers nonemployee compensation, rents and other income; royalties stay at $10 and direct sales at $5,000. It does not apply to 2025 payments — $600 governed the forms issued in January 2026.
A form you do not receive is not tax-free income. A reporting threshold changes who must send paper, not what is taxable.
Estate and gift exclusion
The basic exclusion is $15,000,000 per person for 2026, permanent and indexed — $30,000,000 for a couple using portability. The scheduled 2026 drop did not happen. The annual gift exclusion is $19,000 per recipient for 2026, unchanged.
Clean energy credits that ended early
| Credit | Terminated for |
|---|---|
| New Clean Vehicle Credit (Section 30D) | Vehicles acquired after Sept. 30, 2025 |
| Used Clean Vehicle Credit (Section 25E) | Vehicles acquired after Sept. 30, 2025 |
| Qualified Commercial Clean Vehicle Credit (Section 45W) | Vehicles acquired after Sept. 30, 2025 |
| Energy Efficient Home Improvement Credit (Section 25C) | Property placed in service after Dec. 31, 2025 |
| Residential Clean Energy Credit (Section 25D) | Expenditures made after Dec. 31, 2025 |
The triggers differ: vehicles on acquisition, home improvements on placed in service, solar on when the expenditure was made. A heat pump paid for in December 2025 but installed in January 2026 earns nothing.
Planning moves still open for 2026
- Manage MAGI against the phase-out edges. Near a threshold, one dollar of MAGI costs more than a dollar. Joint filers with $312,000 of MAGI and $22,000 of qualified overtime lose $1,200 to the phase-out; deferring an extra $12,000 into a 401(k) drops MAGI to $300,000 and restores the full $22,000. The 2026 deferral limit is $24,500, plus $8,000 catch-up at 50 and over or $11,250 at ages 60 through 63. Deductible IRA and HSA contributions also cut MAGI.
- Confirm your occupation is on the tipped-occupations list and that tips are reported. Unreported tips are not deductible.
- Ask your payroll provider to break out qualified overtime on the 2026 Form W-2. The IRS allowed transition relief for 2025 reporting; do not assume it repeats.
- Time equipment purchases. Bonus depreciation and Section 179 both require property placed in service by December 31, 2026 — delivered and ready for use, not just ordered.
- Revisit Section 199A. The wider phase-in range and $400 minimum are new this year and can change whether an S corporation election or a wage adjustment makes sense.
Common mistakes on tax year 2025 returns
- Deducting all overtime pay rather than the premium. The most frequent error by a wide margin.
- Filing separately while married. All four deductions require a joint return; couples who filed separately for unrelated reasons forfeited every one.
- Claiming the senior deduction instead of the age-65 standard deduction addition. Both apply.
- Occupations added late. April 2026 final regulations added visual artists, floral designers and gas pump attendants to the tipped-occupations list. Workers in those roles who already filed may need an amended return.
- Car loan interest on an ineligible vehicle — foreign assembly, business use, or a pre-2025 loan.
- Omitting income because no 1099-K arrived. With the threshold back at $20,000 and 200 transactions, many sellers who got a form for 2024 got nothing for 2025. The income was still reportable.
Still subject to IRS guidance
- SALT after 2026. The IRS has confirmed only the 2026 cap, the $505,000 phase-down start and the $10,000 floor.
- Trump Accounts. The pilot-program rules are proposed, not final.
- Bonus depreciation. Notice 2026-11 is interim guidance; final regulations are not out.
- The $2,000 threshold. Indexing begins in 2027; the adjusted figure is not yet announced.
Sources: IRS Working Families Tax Cuts · 2026 inflation adjustments · Rev. Proc. 2025-32 · Schedule 1-A · 1099-MISC/NEC instructions.
Which of these is worth acting on depends on your numbers — MAGI, filing status, whether you itemize, what your business owns. That is the work in tax planning and projections: running your real figures against current rules before the year closes, while the levers still move.
This article is general information, not advice about your situation, and it does not create a client relationship. Tax law and IRS guidance change — confirm any figure before relying on it, or get in touch.
Key takeaways
- Tips, overtime, seniors and car loan interest run only for 2025 through 2028. All go on Schedule 1-A, need a Social Security number, and require a joint return if you are married.
- Only the overtime premium counts, not the whole check — the most common error on 2025 returns.
- The $6,000 senior deduction stacks on the age-65 standard deduction addition — $1,650 per box married, $2,050 unmarried, in 2026.
- The SALT cap is $40,400 for 2026, phasing down above $505,000 of MAGI but never below $10,000. Later years are not yet confirmed.
- The business side is permanent: Section 199A with a wider phase-in range and a $400 minimum, 100% bonus depreciation for property acquired after January 19, 2025, and $2,560,000 of Section 179 in 2026.
- Clean vehicle credits ended September 30, 2025; home energy credits ended December 31, 2025. Nothing is left to claim.
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