One Big Beautiful Bill summary and tax changes

On July 4, One Big Beautiful Bill was signed into law, bringing significant changes to the tax code and beyond. The Bill permanently extends certain provisions from the Tax Cuts and Jobs Act (TCJA) that were set to expire, including an increased state and local tax (SALT) deduction cap, and introduces changes to taxes on tips and overtime for certain workers. Impacts to energy credits, Medicaid, the debt ceiling, and student loans are also included.

Key things you need to know

• Most of the new tax laws under the One Big, Beautiful Bill don’t kick in until tax year 2025 (the taxes your clients file in 2026). A few uncommon provisions are retroactive to tax year 2024, and our ProTax offerings (Intuit® ProConnect™ Tax, Lacerte® Tax, and ProSeries® Tax) will be up to date with those when it’s time for filing.
• Our tax products will be updated in accordance with the new tax laws and IRS guidance when the new tax laws take effect.

Please use this article to familiarize yourself with the latest tax law changes, and feel free to share with your clients as you help them plan ahead. As you follow the news about the One Big Beautiful Bill, you might be wondering about the key tax provisions that have passed, including are tips and overtime now tax-free, what’s happening with SALT, and most importantly, how do the new tax laws impact your clients’ financial situation?

Read this article about the provisions for working Americans and seniors, and here are some of the top questions we’re getting, along with the answers.

What key provisions passed under the One Big Beautiful Bill?

Key provisions of the One Big Beautiful Bill include the following:

• Increases the SALT cap to $40,000 if you earn up to $500,000.
• Qualified tip income deduction.
• Qualified overtime pay deduction for certain workers.
• Deduction for auto loan interest for certain vehicles.
• Child Tax Credit expansion.
• Enhanced deduction for seniors.
• Repeal of energy efficient credits for EVs, hybrids, charging, and energy efficient home improvements beginning in 2025.
• Permanently extends the deduction for qualified business income at 20%.
• Reforms Medicaid.
• Reforms Pell Grants and student loans.

When do the new tax laws go into effect?

The majority of the tax provisions will go in effect in tax year 2025 (the taxes you file for your clients in 2026) and some for 2026. Our tax products will be up-to-date in accordance with these provisions.

What passed from the Tax Cuts and Jobs Act (TCJA) and what does that mean for taxes?

The One Big Beautiful Bill permanently extends certain tax provisions from the 2017 act, including:

• Lower individual tax rates (10%, 12%, 22%, 24%, 32%, 35%, and 37%).
• Nearly doubled the standard deduction.
• Child Tax Credit expansion.
• Elimination of personal and dependent exemptions, and itemized deductions for miscellaneous expenses such as unreimbursed employee expenses.

If your clients do not qualify for new tax benefits, their tax outcome may look similar to last year’s, since many provisions under the TCJA are being made permanent. However, for homeowners who paid property taxes, and state income or sales tax, they may see tax savings due to the increased SALT deduction cap from $10,000 to $40,000, allowing them to claim a larger deduction.

What is the new tax law for no taxes on tips?

In previous years, including tax year 2024, cash and non-cash tips were considered income subject to federal taxes, Social Security, and Medicare taxes, and were required to be reported to your client’s employer if they exceeded $20 a month. The new provision creates a temporary deduction for tips up to $25,000 for tax years 2025 through 2028. This deduction is available regardless of whether clients itemize their deductions.

If they earn tips as a waitress, barista, or in another tipped occupation, and their income is below $150,000, they may be eligible to claim this deduction. However, the tax benefit begins to phase out for income above $150,000. It’s essential to understand that this deduction does not directly reduce their taxes dollar-for-dollar, and the actual tax savings will depend on their tax rate.

For example, if a client earned $5,000 in tips and in the 12% tax bracket, their tax savings would be $600 ($5,000 x 12%).

What is the new tax law for no tax on overtime?

Like the new tax provision for tips, the new provision for overtime introduces a deduction for qualified overtime income up to $12,500 for tax years 2025 through 2028, and phases out for income above $150,000.

Certain workers, such as police officers, firefighters, nurses, and retail workers, may benefit from this deduction. However, while this deduction can lower taxable income, it is not a dollar-for-dollar reduction of taxes and the actual tax savings will depend on the tax rate.

For example, if you have a client who is a nurse with $12,500 in qualified overtime and in the 22% tax rate, then the tax savings would be $2,750 ($12,500 X 22%).

Are there any additional benefits for seniors under the new law?

Yes, there is an enhanced deduction for seniors up to $6,000 for individuals over 65 for tax years 2025 through 2028. The deduction phases out at $75,000 for single filers and at $150,000 if you’re married filing jointly.

How do I get a deduction if I pay a car note?

A new temporary tax deduction allows clients to deduct up to $10,000 in car loan interest per year for qualified auto loans. To qualify, the vehicle must be for personal use and assembled in the United States. This deduction phases out for single filers with incomes above $100,000, and married couples with incomes above $200,000.

What is the new law for parents?

Starting in tax year 2025, the Child Tax Credit will permanently increase to $2,200 per child under 17, with annual adjustments for inflation every year. To claim this credit, taxpayers and children must now have a valid Social Security number.

What has changed for homeowners who pay property taxes?

A significant change relates to the SALT deduction, including local income, sales, and property taxes. Previously, the TCJA capped SALT at $10,000, set to expire in 2025. The new bill increases this cap to $40,000, effective from tax year 2025 through 2029. The deduction begins to phase out for married filing jointly and single filers earning more than $500,000, and married couples filing separately earning more than $250,000.

This change benefits filers in states with high state and property taxes, allowing them to deduct more of their related expenses.

I made energy efficient improvements to my home. Can I still get a credit?

Energy efficient credits for home improvements under the Inflation Reduction Act will end for property placed in service after 2025. Clients can still claim these credits for improvements made in 2025 on their 2025 taxes (the ones you file in 2026), but this will be the last year they are available.

I purchased an electric vehicle, can I still get a credit?

The new bill eliminates the clean vehicle credit for electric vehicles purchased after September 30, 2025. If a taxpayer bought an electric vehicle before this date, they may be eligible for a clean vehicle credit up to $7,500 for a new EV or $4,000 for a used EV.

Will personal and dependent exemptions be reinstated?

No, personal and dependent exemptions are permanently eliminated. Although they were set to return in 2026 if the TCJA expired, the new bill makes the elimination permanent.

I work from home. Can I claim unreimbursed employee expenses again?

The TCJA temporarily eliminated miscellaneous itemized deductions, including unreimbursed employee expenses, from 2018 to 2025, and this elimination is now permanent. However, self-employed individuals can still deduct expenses related to their home office.

I’m self-employed. What are the new tax benefits that I can claim?

If a self-employed taxpayer or a business owner has a partnership or S corporation, they may be eligible for two significant tax deductions: 

1. The 20% Qualified Business Income Deduction allows a taxpayer to deduct up to 20% of their qualified business income. The new tax bill permanently extends this 20% deduction, and increases the phase in ranges to $75,000 single and $150,000 married filing jointly.
2. If a person purchased equipment for their business, the new tax law also permanently allows them to write off 100% of your expenses for purchases such as business equipment in the year they bought them.

We will continue to post additional articles as we learn more details from the government agencies. Stay tuned.