Congress passed the 2025 Reconciliation Legislation—informally called the One Big Beautiful Bill Act (OBBBA)—with a mix of immediate (2025) and later (2026+) changes. Below is a simplified guide for individuals, with links to official IRS pages.
For workers: overtime and tips deductions (2025–2028)
- Overtime: A new above‑the‑line deduction lets eligible workers deduct the overtime premium portion of pay—generally the “half” in time‑and‑a‑half required under the FLSA—up to $12,500 (single) or $25,000 (MFJ). Phase‑outs start at $150k/$300k MAGI. You’ll use the totals your employer furnishes (2025 transition) and watch for W‑2 reporting updates.
- Tips: Certain tipped workers can deduct up to $25,000 of qualified tips per year, subject to income phase‑outs and occupation rules. See IRS guidance on who “customarily and regularly” receives tips and how to document them.
New additional deduction for seniors (2025–2028)
Individuals age 65+ may claim an additional $6,000 deduction on top of the standard or itemized deduction, with a phase‑out at higher MAGI and a valid SSN requirement. See the IRS OBBBA provisions overview for limits and eligibility.
Higher SALT deduction cap for many households (starting 2025)
For many taxpayers under specified income thresholds, the cap on state and local taxes increases. IRS materials summarize the change and caveats. See Publication 4011 (Rev. 10‑2025) for a plain‑English summary of itemized deduction updates, including the SALT cap.
Online payments: 1099‑K threshold restored (2025 and beyond)
Third‑party platforms (e.g., PayPal, Etsy) return to issuing Form 1099‑K only when payments exceed $20,000 and 200 transactions in a year. See IRS FAQs and the OBBBA provisions page. IRS news on 1099‑K threshold • OBBBA provisions (Sec. 70432)
New car‑loan interest deduction (2025–2028)
A temporary deduction allows up to $10,000 of interest on qualifying new, U.S.‑assembled vehicles purchased with loans originated after Dec. 31, 2024. The benefit phases out at higher incomes and has VIN/return reporting and lender information requirements. See the IRS overview and Schedule 1‑A draft.
529 plan expansions (mostly 2026)
Starting in 2026, the annual K‑12 withdrawal cap rises to $20,000 and the definition of qualified expenses broadens (e.g., books, online materials, tutoring, and some credentialing costs). Confirm state conformity before withdrawing. See IRS and plan‑sponsor summaries.
Timing matters: 2025 vs. 2026 forms—and a shift to electronic refunds
Some 2025 items use “transition” reporting (e.g., W‑2 box 14 statements for overtime/tips totals) before new boxes/codes are finalized for 2026 returns.
IRS newsroom will post the final instructions. Also, under Executive Order 14247, the IRS is phasing out paper refund checks beginning Sept. 30, 2025; set up direct deposit or IRS Direct Pay/EFTPS now.
What to do now
- Verify whether your job qualifies for the tips deduction and track tips accurately.
- Ask payroll to confirm how qualified overtime and tips totals will be furnished for 2025.
- If buying a new car, confirm U.S. final assembly and keep your VIN and loan docs.
- If you itemize, revisit the SALT cap math vs. the standard deduction.
- If you sell online, understand whether you’ll get a 1099‑K (>$20k and >200 transactions per platform).
- Plan 529 withdrawals with state‑specific rules in mind.
How can Archer Lewis help?
Archer Lewis can help you turn these new OBBBA rules into a clear, practical plan—without missing deductions or creating avoidable IRS headaches. We’ll review your 2025–2028 eligibility for the overtime premium and tips deductions, confirm the right documentation (including any employer “transition” reporting for 2025), and model MAGI phaseouts so you know what to expect before you file. For seniors, we’ll verify the new additional deduction requirements and optimize standard vs. itemized strategies—especially with the updated SALT cap rules. If you’re buying a new vehicle, we’ll help you confirm qualifying U.S. final assembly, organize VIN/loan records, and apply the car-loan interest deduction correctly. We also advise online sellers on 1099-K reporting and help families plan 529 withdrawals with state conformity in mind. Finally, we’ll make sure your refund and payment setup is ready as the IRS shifts away from paper checks.
