Core Insights - The One Big Beautiful Bill Act (OBBBA) introduces permanent changes to the tax code along with temporary tax breaks that have strict limits and phaseouts, available until 2028 or 2029 [1] Group 1: Itemized Deductions - The OBBBA raises the state and local tax deduction cap (SALT) from $10,000 to $40,000 for married couples filing jointly and single filers, applicable from 2025 through 2029 [2] - For 2025, the standard deduction is set at $31,500 for married couples and $15,750 for singles, making itemization beneficial if total itemized deductions exceed these amounts [3] - The new $40,000 SALT cap phases out for modified adjusted gross income (MAGI) over $500,000, reverting to the original $10,000 limit at a MAGI of $600,000 [4] Group 2: Targeted Deductions - The OBBBA introduces temporary above-the-line deductions aimed at middle-income workers, but these come with strict income and benefit limits [5] - The qualified overtime pay deduction allows up to $25,000 for married couples and $12,500 for singles, phasing out at a MAGI of $300,000 for married couples and $550,000 overall [6] - The qualified tips income deduction permits writing off up to $25,000 of reported tip income, with phaseouts starting at a MAGI of $300,000 for married couples and $150,000 for singles, fully eliminated at $550,000 and $400,000 respectively [7] - The auto loan interest deduction allows up to $10,000 for interest on loans for new personal-use vehicles assembled in the US, phasing out at $200,000 for married couples and $100,000 for singles, completely gone by $250,000 and $150,000 [8] Group 3: Senior Deductions - For seniors aged 65 or older, the OBBBA provides a temporary deduction of up to $12,000 for married couples ($6,000 per eligible spouse) and $6,000 for single filers, although this deduction is fragile [9]

Core Points - The Working Families Tax Cuts Act represents the most significant tax overhaul in years, with changes effective from January 1, 2026, impacting 2027 tax filings [1] - Some provisions of the Act are retroactive for 2025, potentially increasing tax refunds for the current filing season [2] Group 1: Tax Deductions and Withholding - Individuals earning tips or overtime should update their W-4 forms, as the new law allows deductions of up to $25,000 for tips and $12,500 for overtime from taxable income, resulting in lower withholding [3][4] - The deduction limits for tips and overtime begin to phase out for incomes over $150,000 (or $300,000 for married couples filing jointly), but many individuals earning tips and overtime are likely below this threshold [4] Group 2: Filing Considerations - Taxpayers should review their 2025 pay stubs to accurately report tip income and overtime pay, as employers were not required to separate these figures on W-2 forms last year [5][6] - Only the premium portion of overtime pay is deductible, meaning if an individual earns $20 per hour and $30 for overtime, only the additional $10 per hour is eligible for deduction [6] Group 3: Vehicle Purchase Incentives - The new tax law allows a deduction of up to $10,000 in auto loan interest per year for new vehicles financed through 2028, provided they are assembled in the United States [7] - Eligible vehicles must weigh under 14,000 pounds and be for personal use, with the deduction phasing out for incomes over $100,000 for single filers or $200,000 for joint filers [8]