The One Big Beautiful Bill Act 2025: Everything You Need to Know About the New U.S. Tax Law

🇺🇸 The One Big Beautiful Bill Act 2025: Everything You Need to Know About the New U.S. Tax Law

The One Big Beautiful Bill Act (OBBBA) reshapes U.S. taxes beginning in 2025. It extends major TCJA provisions and adds new deductions for tips, overtime, and car loan interest while making long-term changes to the standard deduction, education benefits, small-business incentives, and more. This guide walks you through what matters before the next filing season.

1) What Is the OBBBA?

The OBBBA is a 2025 tax reform package that simplifies rules and expands deductions for middle-income Americans. Effective timeline: several deductions start for 2025 (tips, overtime, car loan interest); permanent changes roll in from 2026 (e.g., AMT thresholds, mortgage interest stability, charitable above-the-line).

• Immediate: 2025 worker deductions (tips, overtime) and car loan interest relief
• Ongoing: inflation indexing and permanence for key TCJA-era items
• Targeted: seniors, families, service workers, commuters, and small businesses

2) Standard Deduction Increases

Tip: The standard deduction remains permanently indexed for inflation so most filers won’t need to itemize.

3) Senior Bonus Deduction (65+)

New $6,000 deduction in addition to the standard deduction for taxpayers aged 65+ or with qualifying disabilities. Phases out above $75,000 (single) / $150,000 (joint). Applies 2025–2028.

4) “No Tax on Tips” & “No Tax on Overtime”

• Tips: Exclude up to $25,000 (couples $50,000) from taxable income (2025–2028).
• Overtime: Deduct up to $12,500 (couples $25,000) in overtime pay (2025–2028).
• Phase-out: AGI above $150,000 (single) / $300,000 (joint) reduces benefits.

5) Car Loan Interest Deduction

For new vehicles assembled in the U.S., up to $10,000 of loan interest is deductible (personal use allowed). Applies 2025–2028. Excludes used cars and leases. Phases out above $100,000 / $200,000 (single/joint).

6) Child Tax Credit Increases

The CTC rises to $2,200 per child starting in 2025 and is indexed for inflation thereafter. Refundability expands for lower-income families.

7) Housing & Mortgage Rules

• Mortgage interest limit ($750,000) made permanent.
• Moving expense deduction remains repealed (except active-duty military).
• Mortgage insurance premiums (MIP) return as deductible in 2026 under set criteria.

8) 529 Plan Expansion

From July 4, 2025, qualified withdrawals cover homeschool materials, tutoring, online courses, and certain therapies for students with disabilities, beyond traditional tuition.

9) Small-Business Incentives (Quick View)

10) Key Filing Dates for the 2025 Return

• Forms W-2, 1099, 1099-DA issued by: Jan 31, 2026
• IRS opens e-file: ~Jan 27, 2026
• Tax Day: Apr 15, 2026 (extension to Oct 15)

Fastest refunds: e-file + direct deposit (often within ~21 days).

11) What It Means for You

• Track AGI to stay under phase-out thresholds (tips/overtime/senior/vehicle deductions).
• Keep simple records for tips and car loan interest.
• Use QBI or retirement contributions to optimize taxable income.
• Plan ahead for 2026 permanence (AMT thresholds, mortgage rules, charitable above-the-line).

Related Posts (EA Tax Guide)

• 2025 Guide to Trusts Eligible as S Corporation Shareholders
• Understanding Business Travel Expense Deductions in 2025: A Clear Guide for U.S. Taxpayers

External References

• Congress.gov — OBBBA Bill Text
• IRS Newsroom — 2025 Tax Reform Updates
• Tax Foundation — Analysis of OBBBA 2025

⚖️ This article is for general educational purposes and is not tax advice. Consult an Enrolled Agent or tax professional for guidance specific to your situation.