The Big Beautiful Tax Cuts: What You Need to Know
Big, beautiful, and loaded with changes. The new tax law (nicknamed the “One Big Beautiful Bill”) is one of the most sweeping updates to the tax code in recent years. Whether you’re a homeowner, a small business owner, a nurse working overtime, or a parent trying to maximize deductions, these new rules could mean more money in your pocket.
Here’s a simple breakdown of what’s changing, when it takes effect, and how it might help you.
What are the key tax changes?
🚗 Auto loan interest deduction
Starting in tax year 2025, you can deduct up to $10,000 per year in interest on a qualified auto loan, as long as the car is for personal use and assembled in the U.S. This phases out for incomes over $100,000 (single) or $200,000 (married filing jointly).
🍽️ New deduction for tips
If you work in a tipped profession (i.e. servers, bartenders, baristas) there’s a new above-the-line deduction for tips up to $25,000. This runs from 2025 through 2028 and phases out for incomes above $150,000.
👉 Example: If you earn $5,000 in tips and are in the 12% tax bracket, this deduction could save you around $600 in taxes.
⏰ New deduction for overtime pay
There’s also an above-the-line deduction for overtime income up to $12,500, available from 2025 through 2028. This could be a big help for nurses, police officers, retail workers, and others putting in extra hours.
👉 Example: A nurse with $12,500 in overtime pay in the 22% bracket could save about $2,750 on taxes.
🧓 Enhanced deduction for seniors
Seniors over 65 will get an extra deduction of up to $6,000, phasing out at $75,000 for singles or $150,000 for married couples.
🏡 Bigger SALT deduction
If you live in a high-tax state, you’ll love this: the new bill raises the SALT cap (state and local tax deduction) from $10,000 to $40,000, starting in 2025. This runs through 2029 and helps those paying hefty state income or property taxes.
👨👩👧 Child Tax Credit boost
Beginning in 2025, the Child Tax Credit jumps to $2,200 per child under 17, with inflation adjustments going forward. To claim it, both you and your child will need valid Social Security numbers.
What stays from the old Tax Cuts and Jobs Act?
The new bill makes permanent some of the biggest features of the 2017 tax reform, including:
Lower individual tax rates (the familiar 10%, 12%, 22%, 24%, 32%, 35%, and 37%)
Nearly double the standard deduction (currently $14,600 for singles and $29,200 for married in 2024, adjusted yearly)
The 20% deduction for qualified business income (QBI) if you’re self-employed or own a pass-through entity like an S corp or partnership
Also important: miscellaneous itemized deductions, including unreimbursed employee expenses, remain gone for good (unless you’re self-employed, in which case home office and related expenses still count).
What tax breaks are ending?
Energy credits for EVs & home improvements: Credits for buying electric vehicles or installing energy-efficient upgrades end after September 30, 2025 (EVs) and December 31, 2025 (home improvements).
👉 So if you’re planning to go solar or buy an EV, consider doing it soon.
When do these changes kick in?
Most of the new tax provisions start with tax year 2025, meaning they’ll affect the taxes you file in 2026. Some provisions run through 2028 or 2029.
What does it mean for you?
If you’re a homeowner, you may get to deduct more in property taxes.
If you’re self-employed, you keep that valuable 20% QBI deduction and can fully expense equipment purchases in the year you buy them.
If you earn tips or overtime, new deductions can lower your taxable income.
If you’re a parent or senior, new credits and deductions could ease your tax bill.
Have more questions on the Big Beautiful Tax Credits?
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