Millions of Americans will see changes to their tax bills starting in 2025 under President Donald Trump’s “big beautiful bill.” The legislation includes new deductions for tips, overtime pay, auto loan interest, and seniors, along with a higher SALT deduction. But most of these breaks are temporary and set to expire between 2028 and 2029.
1. SALT Deduction Raised to $40,000
The cap on state and local tax (SALT) deductions rises from $10,000 to $40,000 beginning in 2025. The cap will increase each year for inflation, starting with $40,400 in 2026. After 2029, unless extended by Congress, the cap will drop back to $10,000.
This benefit is most valuable for taxpayers in high-tax states who itemize deductions. However, the higher SALT deduction phases out for individuals with income above $500,000.
2. Tax Break on Tips: Up to $25,000
Workers who rely on tips can deduct up to $25,000 of tip income from their federal taxes starting in 2025. Married couples filing jointly can deduct up to $25,000 if their combined income is under $300,000.
The deduction applies to employees, contractors, and small business owners who receive tips as part of their work. This break will last only through 2028, making it a short-term benefit.
3. Overtime Pay Deduction
Employees who work extra hours may qualify for a new overtime deduction. From 2025 through 2028, single filers can deduct up to $12,500, while married couples filing jointly can deduct up to $25,000.
The deduction is available whether you itemize or take the standard deduction. It phases out for individuals with income above $150,000 and joint filers with income above $300,000.
4. Bonus Deduction for Seniors
Taxpayers age 65 and older can benefit from a special deduction of up to $6,000 from 2025 through 2028. Couples where both spouses qualify can deduct up to $12,000.
To qualify, single filers must have income below $75,000, while married couples must earn under $150,000. This extra deduction can help reduce taxable income for retirees living on fixed budgets.
5. Auto Loan Interest Deduction
Car owners can claim up to $10,000 in auto loan interest deductions from 2025 through 2028. Previously, interest on personal auto loans was not deductible.
To qualify, income must be below $100,000 for single filers and $200,000 for married couples. Eligible vehicles must be under 14,000 pounds, used for personal purposes, and assembled in the United States.
Bottom Line
These tax breaks offer short-term savings on tips, overtime, car loans, and retirement income. However, most provisions will expire after 2028 or 2029 unless Congress acts. Taxpayers should plan now to take advantage of these opportunities while they are available.
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