The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, has introduced a major wave of tax changes that are likely to impact your tax bill in the coming years. While some updates extend existing provisions from the 2017 Tax Cuts and Jobs Act (TCJA), others introduce brand-new opportunities to potentially reduce your taxable income.
In fact, the Council of Economic Advisors estimates that over the long term, these changes will increase average employee wages by between $6,100 and $11,600, and bump take-home pay by up to $13,300 for a family of four. [1]
Below, we’ve highlighted eight deductions that could make a meaningful impact on your bottom line starting in 2025.
1. Increased Standard Deduction
The TCJA nearly doubled the standard deduction between the 2018 and 2025 tax years, but it was originally set to end in 2026. The OBBBA has permanently extended the TCJA-era deductions and raised them slightly to $15,750 for single filers and $31,500 for married couples filing jointly for the 2025 tax year. The standard deduction will continue to be indexed for inflation each year.
2. Senior “Super” Deduction
If you’re 65 or older and decide to stick with the standard deduction when filing, you could be in for an extra boost between now and 2028.
Dubbed the senior “super” deduction, those 65 and older will now be able to deduct an extra $6,000 from their taxable income, or $12,000 if both spouses are over 65. For joint filers over 65, this brings the 2025 standard deduction up to $43,500.
This deduction is currently available for those with a modified adjusted gross income (MAGI) below $75,000, or $150,000 for joint filers. This provision does phase out at income levels exceeding the cap, and it’s currently scheduled to sunset entirely after the 2028 tax year.
3. Expanded State and Local Taxes (SALT) Deduction
The TCJA implemented a $10,000 cap for taxpayers who itemized and deducted state and local taxes (SALT). Prior to the TCJA, there was no limit.
Starting in 2025, the SALT deduction limit will be $40,000, representing a significant increase and potential savings boost, particularly for those living in states with high taxes, like New York. The cap is set to rise by 1% each year through 2029. High earners with a MAGI above $500,000 will be subject to a phase-out limit, but the deduction will not drop below $10,000.
4. Tip Deduction
For service industry professionals, the OBBBA introduces a potentially valuable new deduction. Starting this year, qualifying workers can deduct up to $25,000 in reported cash tips. Considered an above-the-line deduction, employees can take advantage whether they choose to itemize or take the standard deduction.
This deduction phases out for individuals earning more than $150,000, or $300,000 for joint filers, and is currently set to expire after 2028.
5. Overtime Income Deduction
In addition to cash tip deductions, you may now be able to deduct up to $12,500 in qualifying overtime pay (or $25,000 for couples filing jointly). Like the tip deduction, this benefit begins in the 2025 tax year and is currently scheduled to sunset after 2028. Again, it is subject to a phase-out range for those earning $150,000 or more (or $300,000 for joint filers).
6. Auto Loan Interest Deduction
In a first-of-its-kind move, the OBBBA allows eligible taxpayers to take an above-the-line deduction up to $10,000 in qualifying car loan interest.
To qualify, the car or passenger vehicle must have been assembled in the United States and used for personal purposes (commercial vehicles aren’t eligible).
This deduction is available for taxpayers with a MAGI up to $100,000 (or $200,000 for couples), with phaseouts extending to $150,000 and $250,000, respectively. It will be available starting this year and remain in place through the end of 2028.
7. Mortgage Interest Deduction
While not new, it’s worth noting that the mortgage interest deduction remains applicable only to those with up to $750,000 in mortgage debt. This continues a cap reduction originally introduced by the TCJA. Prior to 2017, the mortgage interest deduction limit was $1 million. Unlike the auto loan deduction, you will need to itemize in order to take advantage of the mortgage interest deduction.
8. Above-the-Line Charitable Deductions
Starting in 2026, taxpayers can deduct up to $1,000 per person (or $2,000 for joint filers) for charitable contributions made to qualifying charities and organizations—even without itemizing. This above-the-line deduction makes it easier to receive tax benefits for smaller charitable donations.
If you do itemize, you will only be able to deduct donations exceeding 0.5% of your adjusted gross income (AGI). Unused contributions can, however, be carried forward to future tax years.
Prepare for These Big Tax Changes in 2025 and Beyond
The OBBBA opens the door to a wide range of new and extended tax deductions. No matter your income level, expected expenses, and prior tax planning decisions, it’s worth checking in on your tax strategy and finding opportunities to take advantage based on these recent updates.
Whether you’re maximizing deductions now or planning ahead for the next few years, working with a financial advisor or tax professional can help ensure you're not leaving money on the table.
The Hatlestad Group is an independent wealth management firm based in Edina, Minnesota, primarily serving successful head-of-household women, late-career executives, and pre-retirees. With a tailored approach to fee-only comprehensive wealth management, they empower clients to live out their next chapter with vision, wisdom, and resources, creating a purposeful and meaningful future. They can be reached by phone at (763) 259-3637, via email at info@thehatlestadgroup.com, or by visiting their website at thehatlestadgroup.com.
This material has been prepared in collaboration with Crystal Marketing Solutions, LLC, and has been edited with the assistance of artificial intelligence tools. The information presented is based on sources believed to be reliable and accurate at the time of publication. This material is for educational purposes only and does not necessarily reflect the views of the author, presenter, or affiliated organizations. It should not be construed as investment, tax, legal, or other professional advice. Always consult a qualified professional regarding your specific situation before making any decisions.