The One Big Beautiful Bill Act (OBBBA), which was 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 “tax on overtime and tips” deductions — don’t change the rates you pay, but they can reduce your taxable income and possibly boost your refund.
Here are four major tax provisions you should look out for when preparing and filing your taxes.
For the 2025 tax year, the state and local tax (SALT) deduction quadruples to $40,000. This big jump from the previous $10,000 limit is a welcome change for high-income taxpayers. How much of the SALT deduction you actually get depends on your income, your state and local tax burden, and any other deductions you claim on your return.
These letters of salt deficit include:
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State and local income taxes: payroll 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 tax (optional): If your state has no income tax — or you’ve made a big purchase — you can deduct sales tax instead, including on cars, boats, or major home projects.
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Homeowners and residents of high-tax states (for example, California, New York) now receive a larger deduction.
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You can only claim this deduction if you itemize: If you take the standard deduction, this tax is off the table.
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To prevent the deduction from becoming a big windfall for the very wealthy, the deduction is reduced when your income exceeds $500,000 ($250,500) ($250,500 if married filing separately). For every dollar above that level, the deduction is reduced — but it can never go 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 completely eliminate taxes on overtime earnings, but if you qualify, it means more money in your pocket because it lowers your federal tax liability.
You can deduct certain wages that exceed your normal wage rate. So if you get half the time, you can cut it in half. Put another way, not all overtime is deductible—only wages above your regular rate are deductible, and the amount is limited.
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The maximum deduction for overtime tax is $12,500 or $25,000 for joint filers.
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Exemption for taxpayers with adjusted 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.
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 direct boost to your paycheck. But the truth is more important: You can deduct a portion of the money you receive in tips, reducing the income the IRS uses to calculate your taxes and qualifying for certain tax breaks.
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There is a cap: You can deduct up to $25,000 a year in qualified tips.
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You can claim this if you itemize or take the standard deduction.
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What counts: The IRS defines “qualified tips” as voluntary, non-negotiable payments that are determined solely by the customer. In other words, if the consumer doesn’t freely choose the tip, the IRS doesn’t treat it as deductible. ie:
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You can reduce these tips: cash tips, credit card tips, and pooled tips.
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But you can’t deduct these tips: auto service costs and any “knowledge” that isn’t really optional.
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learn more: Who is not taxed on tips, and how do you claim it?
If you recently financed a new car, 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 under certain circumstances.
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You can claim the $10,000 deduction even if you take the standard deduction (you don’t have to itemize).
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Your taxable income cannot exceed $100,000 if you’re single or $200,000 if you’re married filing a joint return.
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You will not be able to deduct car loan interest if your income is above $150,000 (single filer) or $250,000 (joint filer).
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Vehicle must be new and assembled in-house (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 will increase their standard deduction by $6,000 this year. The catch: The poorest seniors already don’t pay taxes on their Social Security benefits, so this cut won’t help them.
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The deduction levels out for single filers with income over $75,000 ($150,000 for married couples filing jointly).
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You are eligible whether you itemize or take the standard deduction.
