The One Big Beautiful Bill Act: What You Need to Know Before Year-End

The One Big Beautiful Bill Act, which became law in July 2025, introduced significant changes to the tax framework we’ve been waiting for. But now, as we get closer to the end of the year, it’s crucial to shift our focus to the temporary provisions. These are designed to offer quick tax relief but come with serious limitations and phase-out periods. Thoughtful planning here can really impact your tax situation for 2025.

Since many of these benefits expire by 2028 or 2029, the time to act is now. Here are four steps you can take today to maximize the interim provisions of the OBBBA.

1. Don’t Overlook Itemizing Deductions

For a long time, most taxpayers have simply taken the standard deduction because it’s relatively high. However, the OBBBA has temporarily raised the state and local tax (SALT) deduction limit to $40,000 for married couples and single filers; this is up from the previous limit of $10,000. This new cap is in effect from 2025 to 2029.

Your action steps:

Run the numbers.

The standard deduction for 2025 will be $31,500 for married couples and $15,750 for singles. If your total itemized deductions exceed the standard deduction—this includes mortgage interest, charitable donations, and state and local taxes up to that new $40,000 limit—you’ll need to itemize.

Caution: Keep an eye on your income.

The new $40,000 SALT cap isn’t for everyone. It starts phasing out for all filers when your modified adjusted gross income (MAGI) exceeds $500,000. By the time your MAGI hits $600,000, the SALT deduction will revert to the original $10,000 limit. So if you’re nearing that threshold, be cautious about realizing large capital gains or executing significant Roth conversions this year, as it could nullify your benefits.

2. Make the Most of New Targeted Deductions If Eligible

OBBBA introduced several new temporary deductions specifically for middle-income workers. These deductions are only beneficial if you meet strict income and benefit criteria.

Qualified Overtime Deduction

This allows for a deduction on “qualified overtime compensation,” capped at $25,000 for married couples and $12,500 for singles. Be aware that only the additional “half-time” portion is deductible, not the full pay for overtime hours. This benefit starts phasing out for couples with a MAGI above $300,000 and disappears entirely at $550,000.

Qualified Tip Income Deduction

You can deduct up to $25,000 of qualified tip income per tax return. However, accurate reporting is crucial; it applies only to tips documented on Form W-2 or the correct Form 1099 for contractors. Similar to the overtime deduction, this breaks down for higher income brackets starting at $300,000 for married couples and $150,000 for singles, disappearing entirely at $550,000 and $400,000 respectively.

Auto Loan Interest Deduction

This provision offers a temporary deduction of up to $10,000 for interest on specific auto loans. Ensure your vehicle meets certain criteria—it must be a new personal vehicle with final assembly in the U.S. Leased vehicles don’t qualify. The deduction phases out for married filers starting at $200,000 and for singles at $100,000, disappearing completely at $250,000 and $150,000.

3. Seniors: Timing on Roth Conversions Matters

If you’re 65 or older, there’s a one-time deduction for seniors up to $12,000 for married couples ($6,000 for each eligible spouse) and $6,000 for singles. It’s a beneficial tax cut, but it’s delicate.

Your action steps:

Be mindful of MAGI limits.

This deduction will phase out quickly for couples with a MAGI above $150,000 and for singles above $75,000.

Plan your Roth conversions carefully.

Seniors near the $150,000 MAGI cap should be cautious with major Roth conversions, as this could push income over the limit and negate the entire $12,000 deduction. Work with an advisor to model your conversion plans to weigh the potential loss of deductions against long-term Roth benefits. Sometimes, waiting until 2026 for a conversion could result in significant savings on your 2025 return.

4. Optimize Your Income for Maximum Benefits

Many of the valuable temporary provisions in OBBBA hinge on income, so for numerous taxpayers, keeping their MAGI under the phaseout threshold could substantially reduce their 2025 tax bill.

Your action steps:

Take control of what you can.

If you’re approaching phase-out limits for deductions, consider deferring income until 2026. This might involve:

• Delaying the sale of high-value stocks to avoid capital gains.
• Postponing exercising nonqualified stock options.
• Maximizing contributions to your 401(k) and health savings accounts to lower your MAGI for the year.
• Avoiding large Roth conversions.

Taking a proactive stance on these expiring OBBBA provisions is essential as we approach year-end. With some careful planning, you can maximize your savings for 2025.