One Big Beautiful Bill: Your Top Questions Answered

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.

The passing of the One Big Beautiful Bill brings significant changes to the tax code and beyond. The bill permanently extended 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 introduced changes to taxes on tips and overtime for certain workers. Impacts to energy credits, Medicaid, the debt ceiling, and student loans are also included.

What key provisions passed under the One Big Beautiful Bill?

Key provisions of the One Big Beautiful Bill include:

• New federal student loan repayment plans options and lower borrowing limits, effective July 1, 2026
• Increase of the SALT cap to $40,000 if you earn up to $500,000 in 2025 (cap indexed for inflation and set to be $40,400 for tax year 2026) 
• 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 qualifying seniors
• Repeal of energy-efficient credits for EVs, hybrids, charging stations, and energy-efficient home improvements beginning in 2025
• Permanently extending the deduction for qualified business income at 20%
• Above the line deduction for charitable contributions effective for tax year 2026

When do the new tax laws go into effect?

The majority of the tax provisions went into effect in tax year 2025 (i.e., the taxes you file in 2026) while some are changes for tax year 2026. A few uncommon provisions are retroactive to tax year 2024..

To better understand how the new tax laws affect your taxes, you can use our interactive Tax Reform Calculator.

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 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 starting in tax year 2025, 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 deduction to federal income tax for tips up to $12,500 per individual on the return ($25,000 joint filers) for tax years 2025 through 2028. This deduction is available regardless of whether you itemize your deductions or not. 

Note that this deduction only applies to federal income tax. Tips remain subject to Social Security, Medicare, and potentially state income taxes without change. Also, if you are a worker who earns below the standard deduction ($15,750 for individual filers and $31,500 for joint filers in 2025 or $16,100 for single/$32,200 for joint filers in 2026), you won’t benefit from this deduction since you won’t owe federal income taxes to begin with.

If you earn tips as a waitress, stylist, or in another qualifying occupation, you may be eligible to claim this deduction. For individual filers, the tax benefit begins to phase out for income above $150,000. Married couples filing jointly have a higher phase-out threshold of $300,000.  

For example, if you are an individual filer and earned $5,000 in tips and are in the 12% tax bracket, your tax savings would be $600 ($5,000 x 12%).

It’s essential to understand that these deductions don’t directly reduce your taxes dollar-for-dollar, and your actual tax savings will depend on your tax rate.

Qualifying occupations

In April 2026, the IRS released the final regulations that include the formal list of 70 occupations that receive qualified tips, across 8 categories: 

• Beverage and food service
• Entertainment and events
• Hospitality and guest services
• Home services
• Personal services
• Personal appearance and wellness
• Recreation and instruction
• Transportation and delivery

What counts as a qualifying tip

A qualifying tip must be cash or cash-equivalent, voluntary, and received directly from customers or through tip pools. Automatic service charges do not qualify. Additionally, managers and supervisors who pool tips with employees cannot deduct those pooled amounts.

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 premium up to $12,500 for individual filers and $25,000 for a joint return for tax years 2025 through 2028 and phases out for income above $150,000 for individual filers and $300,00 for joint filers. 

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%).  

You can calculate your eligible premium portion using our Overtime Calculator.

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 65 and over for tax years 2025 through 2028. The deduction begins to phase out at income greater than $75,000 and $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 purchased new, for personal use, and assembled in the United States. This deduction phases out when income is 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, a valid Social Security number is required for the children and the taxpayer claiming the Child Tax credit (married filing joint returns only one spouse is required to 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 tax year 2025. The cap increases to $40,400 in 2026 and increases by 1% through 2029. The deduction begins to phase out when income is more than $500,000 ($250,000 for married couples filing separately).

This change benefits filers in states with high state and property taxes, allowing them to deduct more of their related expenses.  Some individuals who don’t own homes, but pay significant state income taxes may also see a benefit from this increased allowance.

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 ($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 of qualifying business equipment placed into service after January 19, 2025.

What’s changing with federal student loans?

Starting July 1, 2026, federal student loan rules change for undergrad and grad borrowers. Two things to know:

• You now have to pick a repayment plan. For any new loans taken moving forward, you cannot choose any of the older plans. Instead, you must pick between the two new options:  Repayment Assistance Plan (RAP) and the Tiered Standard Plan, which adjust  depending on your income and balance. Skip the choice, and you’re defaulted into one automatically.
• Grad borrowing is now capped. Grad students can no longer borrow up to their full cost of attendance — it’s now $20,500/year, with up to $50,000/year for  professional students enrolled in certain defined programs.
• All borrowers are subject to a lifetime loan limit of $257,500. This cap includes any federal student loan ever taken, excluding Parent PLUS loans. Limit applies even if some of the loans were paid off or cancelled. 

Explore more about how to pay off student loans and deducting interest.

Can charitable deductions be taken for taxpayers who don’t itemize?

Starting with tax year 2026, taxpayers can claim an above the line tax deduction of up to $1,000 ($2,000 for those filing jointly) on their tax returns. You can take the standard deduction and also benefit from making donations to qualified charities.

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 you through the filing process, whether you want to do your taxes yourself or have  TurboTax Experts do them for you.