We recently introduced some important ways the One Big Beautiful Bill Act (OBBBA) impacts business taxes. Now, we’d like to share a few significant changes in individual tax rules that could affect you and your employers.
No tax on tips: For 2025–2028, an above-the-line deduction is created for qualified tips (in certain occupations) subject to income and occupation limitations.
- $25,000 maximum annual deduction, available for both itemizing and non-itemizing taxpayers.
- Deduction phases out for taxpayers with modified adjusted gross income over $150,000 or $300,000 for joint filers.
- Employers and other payors must file information returns with the IRS (or SSA) and furnish statements to taxpayers showing certain cash tips received and the occupation of the tip recipient. For 2025, no changes to withholding tables or information reporting.
- By October 2, 2025, the IRS must publish a list of occupations that “customarily and regularly” received tips on or before December 31, 2024.
No tax on overtime: For 2025–2028, an above-the-line deduction is created for qualified overtime premium pay (pay that exceeds the regular rate of pay).
- $12,500 maximum annual deduction for individuals, $25,000 for joint filers; available for both itemizing and non-itemizing taxpayers.
- Deduction phases out for taxpayers with modified adjusted gross income over $150,000 or $300,000 for joint filers.
- Employers and other payors are required to file information returns with the IRS (or SSA) and furnish statements to taxpayers showing the total amount of qualified overtime compensation paid during the year. For 2025, no changes to withholding tables or information reporting.
Enhanced deduction for seniors: For 2025–2028, a $6,000 deduction is available per eligible individual age 65+. This new deduction is in addition to the current additional standard deduction for seniors under existing law.
- Eligible individuals are 65+ with income below $75,000 or $150,000 for joint filers. Must be a U.S. resident with a Social Security Number (SSN).
- Taxpayer must attain age 65 on or before the last day of the taxable year.
- Available for both itemizing and non-itemizing taxpayers.
Auto loan interest deduction: For 2025–2028, up to $10,000 of interest on loans for U.S.-assembled passenger vehicles may be deducted, subject to income phaseouts.
- Deduction phases out for taxpayers with modified adjusted gross income over $100,000 or $200,000 for joint filers.
- To qualify, interest must be paid on a loan originated after December 31, 2024.
- The purchase / original use must start with the taxpayer (used vehicles do not qualify), with a loan secured by a lien on the vehicle.
- A qualified vehicle is a car, minivan, van, SUV, pick-up truck or motorcycle, with a gross vehicle weight rating of less than 14,000 pounds, that has undergone final assembly in the United States.
- The taxpayer must include the Vehicle Identification Number (VIN) of the qualified vehicle on the tax return for any year in which the deduction is claimed.
- Available for both itemizing and non-itemizing taxpayers.
We anticipate the IRS and other agencies will issue further guidance about these and other OBBBA provisions over the coming months.
AGH CPAs & Advisors will continue to provide updates as more details emerge. Don’t hesitate to reach out to any of our tax professionals if you have questions.
Executive Vice President
Tax Services
Shawn leads the firm’s tax group and serves on AGH’s board of directors. In addition to enhancing business performance to minimize tax consequences, he has extensive experience in mergers and acquisitions, international tax and business structuring. Shawn has public and private experience in the fields of tax and accounting and works frequently with clients in the manufacturing, automotive, wholesale distribution, real estate development and construction industries.
A certified public accountant, Shawn is a member of the American Institute of Certified Public Accountants, the Kansas Society of Certified Public Accountants (KSCPA), and the KSCPA Committee on Taxation.
NOTE: Any advice contained in this material is not intended or written to be tax advice, and cannot be relied upon as such, nor can it be used for the purpose of avoiding tax penalties that may be imposed by the IRS or states, or promoting, marketing or recommending to another party any transaction or matter addressed herein.