Trump’s Tax Proposals: One Big Beautiful Bill Summary & Tax Changes

WASHINGTON, D.C. (TIP): The passing of the One Big Beautiful Bill brings 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 (i.e. the taxes you file in 2026) and some for tax year 2026. A few uncommon provisions are retroactive to tax year 2024, and TurboTax will be up-to-date with those when it’s time for you to file.

TurboTax will be updated in accordance with the new tax laws and IRS guidance when the new tax laws take effect.

As you follow the news about the One Big Beautiful Bill, you might be wondering about the key tax provisions that have passed. Questions like: Are tips and overtime now tax-free? What’s happening with SALT? And most importantly, how do the new tax laws impact your financial situation?

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:

• Raises SALT cap to $40,000 if you earn up to $500,000
• Above-the-line deduction for tip income
• Above-the-line deduction for overtime pay for certain workers
• Above-the-line 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 (i.e. the taxes you file in 2026) and some for tax year 2026. A few uncommon provisions are retroactive to tax year 2024. TurboTax will be up-to-date in accordance with these provisions, including our done for you experiences, tax experts, and tools.

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

The One Big Beautiful Bill permanently extends certain tax provisions from the 2017 Tax Cuts and Jobs Act, including:

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

If you don’t qualify for new tax benefits, your tax outcome may look similar to last year’s since many provisions under the TCJA are being made permanent. However, if you’re a homeowner who paid property taxes and state income or sales tax, you may see tax savings due to the increased SALT deduction cap from $10,000 to $40,000, allowing you 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 employer if they exceeded $20 a month. The new provision creates a temporary above-the-line deduction for tips up to $25,000 for tax years 2025 through 2028. This deduction is available regardless of whether you itemize your deductions or not.

If you earn tips as a waitress, barista, or in another tipped occupation and your income is below $150,000, you 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 doesn’t directly reduce your taxes dollar-for-dollar, and your actual tax savings will depend on your tax rate.

For example, if you earned $5,000 in tips and are in the 12% tax bracket, your 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 an above-the-line 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 your taxable income, it is not a dollar-for-dollar reduction of your taxes and the actual tax savings will depend on your tax rate.

For example, if you’re a nurse with $12,500 in qualified overtime and 22% tax rate, then your tax savings would be $2,750 ($12,500 X 22%).

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

Yes, there’s 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 you 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, both 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 state and local tax (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 single and married filing joint 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. You can still claim these credits for improvements made in 2025 on your 2025 taxes (i.e. the ones you file in 2026), but this will be the last year they’re 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 you bought an electric vehicle before this date, you 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, if you’re self-employed, you can still deduct expenses related to your home office.

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

If you’re self-employed or a business owner has a partnership or S-corp, you may be eligible for two significant tax deductions.

First, the 20% Qualified Business Income Deduction allows you to deduct up to 20% of your 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.

Second, if you purchased equipment for your business, the new tax law also permanently allows you to write off 100% of your expenses for purchases like business equipment in the year you bought them.

Navigating the new tax laws can be complex, but we’re here to help you get the best outcome for your taxes. TurboTax will be up-to-date with the latest changes and guide your through the filing process, whether you want to do your taxes yourself or have a TurboTax Live expert do them for you.

(Lisa has over 20 years of experience in tax preparation. Her success is attributed to being able to interpret tax laws and help clients better understand them. She has held positions as a public auditor, controller, and operations manager. Lisa has appeared on the Steve Harvey Show, the Ellen Show, and major news broadcast to break down tax laws and help taxpayers understand what tax laws mean to them. For Lisa, getting timely and accurate information out to taxpayers to help them keep more of their money is paramount. More from Lisa Greene-Lewis)

(Source: Turbo Tax)