The One Big Beautiful Bill
On July 4th, 2025, the president signed the OBBB. I reviewed and selected some tax changes so you know how it could impact your wallet.
Termination of EV Subsidies
Making energy efficient home improvements? Thinking of buying an electric vehicle? The time is now! The following tax credits are expiring this year:
Used EV Credit – terminates after September 30, 2025
$7500 New EV credit – terminates after September 30, 2025
Energy-efficient home improvement (windows, water systems, solar panels etc.) – terminates after December 31, 2025
State and Local Taxes.
The state and local tax (SALT) limitation is increasing from $10,000 to $40,000 in 2025!
Those of you with high state income tax, property taxes, and sales tax will benefit if you itemize. For those of you with an income of over $500,000; the deduction will be reduced, but not below the original $10,000 limit.
Those of you who itemize and have made big purchases will benefit from this increase.
Mortgage Interest and Mortgage Insurance
The bill makes the $750,000 mortgage interest deduction permanent. If your total mortgage debt on your primary & secondary home is over $750,000, the interest deduction will be prorated. Starting 2026 the IRS will also bring back the deduction for mortgage insurance premiums (PMI and FHA MIP.)
“No Tax on Tips”
From 2025 – 2028 there will be a $25,000 deduction allowed for tip income for qualified occupations (servers, barbers, etc.). The deduction is reduced once your gross income exceeds $150,000 for single filers, $300,000 for married joint returns.
Example: If you are single, make $50,000 and of that amount $30,000 comes from tips, then you get a $25,000 deduction. This translates into ballpark $3000 in tax savings.
Overtime Tax Deduction
IRS will allow a deduction of $12,500 (single) or $25,000 (married) for overtime wages from 2025 to 2028. The deduction is reduced once your gross income exceeds $150,000 for single filers, $300,000 for married joint returns.
This applies to federal income taxes, not payroll taxes (FICA, FUTA). Employers, you will still need to pay the applicable payroll taxes for employees.
At this point the reporting mechanics are still unclear. There will need to be a change made to Form W-2 to show the overtime pay amount.
Charitable Contributions
Effective 2026, charitable contributions up to $1000 ($2000 married) to qualified organizations will be deductible to taxpayers, even if you do not itemize! If you typically take the standard deduction, waiting to donate until 2026 instead of 2025 will save you money on taxes.
Senior Deduction
From 2025 – 2028, there will be a deduction of $6000 for taxpayers who are age 65 before the close of the year.
However, the $6,000 deduction will be reduced by 6% of the amount by which your adjusted gross income exceeds $75,000 ($150,000 if you are filing jointly).
For example, say you have $85,000 income. Since the threshold is $75,000, the deduction is reduced by $600 (6% of $10,000) down to a $5,400 deduction.
529 Plan Expansion
The first day of school is just around the corner! New law now allows expenses related to elementary or secondary public, private, and religious schools (including homeschooling) as qualified expenses from a 529 plan. Qualified expenses include:
Tuition and materials.
Tuition for tutoring from licensed teachers and subject matter experts.
Fees for college entrance exams and advanced placed tests. (From personal experience, these can add up!)
Fees for dual enrollment in an institution of higher education.
Educational therapies for students with disabilities by licensed practitioners.
Car Loan Interest
Effective 2025 to 2028, there will be a deduction of $10,000 on personal car loan interest. The deduction will be reduced once your gross income exceeds $100,000 ($200,000 if married). The final assembly of the car must be in the US. Lenders will need to furnish tax forms to you and the IRS to report total interest paid.
Interest must have originated in 2025
Must be a new vehicle, not used
A qualified vehicle is a car, minivan, van, SUV, pick-up truck or motorcycle.
Obviously we cannot go over every aspect of the new bill but I would encourage you to reach out to me if you would like to know how your finances will be impacted.