Trump's 'Big Beautiful Bill' Makes Sweeping Tax Changes: Here Are the New Deductions You Can Expect

CNET

19 hours ago

Trump's OBB adds a few new tax deductions worth keeping in mind.
CNET
The "One Big Beautiful Bill Act" was signed into law by President Donald Trump in early July, and by now, you've probably heard a lot of heated debate about its provisions. Beyond all that divisiveness, you might at least have some new tax deductions coming your way.
The OBB is essentially a massive government funding and spending bill, sweeping in scope by design. Initially designed as a measure to extend the tax cuts implemented during Trump's first term in the White House, it was expanded to encompass a much wider range of his second-term political goals. This includes cutting many of the green energy tax credits introduced during the Biden administration and allocating a historically massive increase in funding for ICE. In order to offset the cost of extending the 2017 tax cuts, the bill is also set to make huge cuts to Medicaid, including adding new requirements that could result in nearly 12 million people losing their coverage.
All of those provisions have sparked intense debate and scrutiny across the political spectrum, and rightly so, but if you're hoping for even a small silver lining, you're in luck. Included alongside all those huge changes are a handful of new tax deductions. While the extension of the Trump tax cuts might not mean much change for your tax dues, these new policies might do the trick, at least a little bit.
To help you get a handle on what new options you'll have come tax season, I've pulled together a list of the new deductions created by the OBB and how you might be able to use them. For all the details, keep reading, and to find out about another new money policy created by the bill, check out my explainer on the newborn investment savings accounts.
'No Tax on Tips' deduction
The idea for this new deduction has been floating around for a while, gaining traction from both major party tickets during the 2024 election. I've written about it at length in the past when it was being proposed, but under the OBB, a tax deduction for tipped income is officially on the way.
Starting with your income for the 2025 tax year, you'll be able to claim a deduction for tipped income if you work a job that the IRS says is "customarily and regularly receiving tips." Annoyingly, there isn't a list of such professions available yet, but the IRS is required to release one by Oct. 5.
Despite that name, there are some limits on how much tipped income you can claim. The maximum deduction is $25,000, and that amount begins to phase out for people making $150,000 or more in a year, or $300,000 for joint filers.
So is this deduction even a good idea? While it might be a bit of relief for certain taxpayers, the jury's definitely still out on that question. Critics have argued that a deduction won't address the underlying issue of tipped workers earning low hourly wages and might push more jobs toward a tip-based model to avoid taxation.
'No Tax on Overtime' deduction
This one goes hand-in-hand with the "no tax on tips" deduction and works in a similar way. Under this policy, you can deduct the pay you get from working qualified overtime from your reported income.
The limit on the deduction is $12,500 for single filers and $25,000 for joint filers. It has the same $150,000/$300,000 income limits as the tipped income deduction.
'No Tax on Car Loan Interest' deduction
The third major new deduction you need to know about concerns interest paid on a car loan. This deduction will allow you to claim up to $10,000 in such interest paid throughout the tax year, but the loan will have to originate after Dec. 31, 2024. Essentially, it's meant to encourage new car loans, so that loan you've been working on since, say, 2019 doesn't count, sorry to say.
It also applies only to loans on new cars for personal use. So anyone who gets a loan for a used car or a car for their business need not apply for this deduction.
The income limits are also slightly different for this one: $100,000 for single filers and $200,000 for joint filers.
A tax deduction just for being a senior citizen?
Aside from those deductions, there's also the somewhat curious "deduction for seniors" created by the OBB. It's as simple as it sounds: a $6,000 deduction you can claim just for being 65 or older. That goes up to $12,000 for couples where both spouses are senior citizens. And good news if you were born on Dec. 31, 1960: You only need to have turned 65 on or before the last day of the tax year to qualify for this deduction.
The income limit is set at $75,000 for single filers and $150,000 for joint filers.
When do these deductions take effect?
All of the deductions I broke down for you above will be in effect for the 2025 tax year and stick around through the 2028 tax year.
That neatly lines up with the timeline for Trump's second term in office, a trend that can be seen all over the OBB's provisions. Benefits to the American people last throughout his remaining time in office, while detriments don't kick in until he leaves in 2029. Critics have tarred this as an attempt to avoid the blame for the bill's negative aspects by passing them onto whoever occupies the White House next.
For more, check out CNET's in-depth breakdown of Trump's tariff plans.