Recently, the IRS released guidance regarding the new provisions included in the One Big Beautiful Bill Act (OBBBA). If you’re feeling a bit lost about this legislation, you’re not alone. Before President Donald Trump enacted the bill on July 4, 2025, there was already a mix of misinformation and confusion surrounding it.
The Forbes team has been investigating the recent legal changes to share essential information regarding individual tax cuts. If you’re curious about the most pressing questions people are asking on social media or through emails, you might want to check out our previous Reddit session where answers were provided.
The IRS plans to publish a simplified explanation of the new provisions, which are set to take effect in 2025. A brief summary of each provision will be available on their site.
Tax Information on Tips
Quick Overview:
From 2025 to 2028, tip income will be taxable for employees in traditional industries, where deductions can be temporarily claimed. The deduction, capped at $25,000, is a federal income tax credit. It’s worth noting that tips are still subject to state and local taxes. For joint filers, high earners above $150,000 will face a phase-out of benefits.
IRS Guidance:
This new deduction will apply for tax years 2025 to 2028, and tax filers can choose whether to itemize. To qualify, you must receive tips from jobs listed by the IRS by December 31, 2024. A qualifying tip includes cash or card tips.
As mentioned, the maximum you can deduct annually is $25,000. If you’re self-employed, your deduction can’t exceed your net business income. For married couples, both spouses must file under their Social Security numbers. There will be a gradual phase-out for those with higher incomes.
No Tax on Overtime
Quick Overview:
Employees eligible for overtime will see a deduction of $12,500 ($25,000 for married couples filing jointly). This deduction applies from 2025 to 2028. Overtime is defined as what exceeds normal pay rates, and high earners will also face a phase-out similar to the tip deduction.
IRS Guidance:
The deduction will be available for those receiving eligible overtime pay between 2025 and 2028, regardless of whether you itemize. The maximum deduction mirrors the structure laid out for tips and depends on your income level.
No Tax on Car Loan Interest
Quick Overview:
Interest on auto loans became deductible again due to new temporary provisions for 2025 to 2028, but only for vehicles assembled in the U.S. This does not include campers or RVs.
IRS Guidance:
Selecting the deduction allows you to account for interest paid on loans for eligible vehicles purchased after December 31, 2024. The vehicle must be personally used and should not be used for commercial purposes. Strict criteria regarding the type and weight of vehicles apply.
Tax-Free Social Security for Seniors
Quick Overview:
Seniors above 65 can claim a new temporary deduction of $6,000 starting in 2025, which will last until 2028. This amendment follows Trump’s earlier promise of no taxes on Social Security.
IRS Guidance:
This deduction, effective between 2025 and 2028, comes in addition to existing senior deductions. It will also phase out for higher income levels. You’ll want to ensure your filings are accurate to qualify.
What’s Next?
One crucial note is that the guidance found on the IRS website shouldn’t be seen as absolute. They often clarify that FAQ sections aren’t legal authority and shouldn’t be relied upon for legal matters. So, if you’re unsure, it’s advisable to seek further clarification.
For more information, be sure to check IRS guidance directly.
