One Big Beautiful Bill: Every Tax Change Explained Simply
Congress passed the One Big Beautiful Bill Act in July 2025. It created new deductions, raised the SALT cap, launched Trump Accounts, increased the child tax credit, and replaced the old student loan plans. Here is everything that changed, in plain English.
The One Big Beautiful Bill Act is the biggest tax law since 2017. It affects tipped workers, overtime earners, car buyers, seniors, parents, homeowners in high-tax states, and student loan borrowers. Most of the changes apply to tax years 2025 through 2028. Some are permanent. This page covers every major provision with links to free calculators where they exist.
No tax on tips
Tipped workers can deduct up to $25,000 of tips from their federal taxable income. The tip must be voluntary and your job must be on the IRS list of qualifying occupations. Servers, bartenders, delivery drivers, salon workers, and many more qualify. The deduction phases out above $150,000 income for singles and $300,000 for couples. You claim it on Schedule 1-A. It runs for tax years 2025 through 2028.
Calculate your tips deduction | Which jobs qualify | DoorDash and Uber tips
No tax on overtime
Hourly workers can deduct the premium half of their time and a half pay. If you earn $30 an hour and work overtime at $45, the $15 premium is deductible. The cap is $12,500 for singles and $25,000 for couples filing jointly. Only FLSA required overtime counts. Salaried exempt workers do not qualify. It runs for tax years 2025 through 2028.
Calculate your overtime deduction | Is overtime tax free in 2026 | Nurses and truckers
Car loan interest deduction
You can deduct up to $10,000 of interest on a car loan for a new vehicle assembled in the United States. The car must be new, bought after December 31, 2024, for personal use, and the loan must be secured by the car. The deduction phases out above $100,000 for singles and $200,000 for couples. You must list the VIN on your return. It runs for tax years 2025 through 2028.
Free VIN check and calculator | Which cars qualify | Leases, used cars, refinancing | Form 1098-VLI explained
Senior deduction
Every person age 65 or older gets an extra $6,000 deduction. A married couple where both are 65 or older gets $12,000. It stacks on top of the standard deduction and the existing senior add-on. The phase out starts at $75,000 for singles and $150,000 for couples. It runs for tax years 2025 through 2028. This is not the same as eliminating taxes on Social Security, but for most seniors with moderate incomes the effect is similar.
Calculate your senior deduction | Is Social Security tax free now
SALT cap raised to $40,000
The cap on the state and local tax deduction jumped from $10,000 to $40,000 starting in 2025. For 2026 it is $40,400 with annual increases through 2029. This helps homeowners in high-tax states like New York, New Jersey, California, and Connecticut who pay more than $10,000 in combined state income and property taxes. The cap phases down for incomes above $505,000. You must itemize on Schedule A to claim SALT. After 2029 it reverts to $10,000.
Trump Accounts for kids
A new type of tax deferred investment account for children under 18. Children born 2025 to 2028 get a $1,000 government deposit. Families can contribute up to $5,000 per year. The money is invested in US stock index funds and grows tax deferred. The account is locked until the child turns 18, then it converts to a traditional IRA. Trump Accounts launched July 4, 2026.
Trump Account growth calculator
Child tax credit increased
The child tax credit increased to $2,200 per child for 2025, up from $2,000. Up to $1,700 is refundable. The credit phases out starting at $200,000 for singles and $400,000 for married couples. The amount is now indexed to inflation permanently so it will increase each year going forward.
Student loan plans replaced
The law ended SAVE, PAYE, and ICR for new enrollment and created the Repayment Assistance Plan. RAP charges 1 to 10 percent of your AGI with $50 off per dependent per month. Your balance cannot grow on RAP because unpaid interest is waived. Forgiveness comes after 30 years. Existing borrowers on old plans must switch by 2028. IBR remains available as an alternative.
RAP payment calculator | RAP vs IBR comparison | RAP and PSLF | How to apply for RAP | SAVE plan ended | Parent PLUS loans | Married filing separately
Schedule 1-A: the new form
All four new deductions (tips, overtime, car loan interest, and senior) are claimed on a single new IRS form called Schedule 1-A. You attach it to your Form 1040. These deductions work on top of the standard deduction. You do not need to itemize. Over 53 million Americans have already used it.
Schedule 1-A explained step by step | W-2 codes TP and TT
Other notable changes
The standard deduction increased to $16,100 for singles and $32,200 for married couples for 2026. The EV tax credit expired on September 30, 2025. Charitable deductions got a new 0.5% AGI floor for itemizers and a new $1,000 above-the-line deduction for non-itemizers. Medicaid work requirements were added. The debt ceiling was raised.
2026 standard deduction amounts
What is temporary and what is permanent
The tips, overtime, car loan, and senior deductions all expire after tax year 2028. The SALT cap increase expires after 2029. Trump Account contributions have no expiration but the $1,000 government deposit is only for children born 2025 to 2028. The child tax credit increase and inflation indexing are permanent. The student loan plan changes are permanent.
Frequently asked questions
What is the One Big Beautiful Bill?
The One Big Beautiful Bill Act is a major tax law passed by Congress in July 2025. It created new deductions for tips, overtime, car loan interest, and seniors. It raised the SALT cap, launched Trump Accounts for children, increased the child tax credit, and replaced the old student loan repayment plans with the new RAP plan.
When did the One Big Beautiful Bill pass?
It was signed into law in July 2025. Most provisions apply starting with the 2025 tax year. Trump Accounts launched on July 4, 2026. The new RAP student loan plan opened July 1, 2026.
Do I need to itemize to claim the new deductions?
No. The tips, overtime, car loan interest, and senior deductions go on Schedule 1-A and work on top of the standard deduction. The SALT deduction is separate and does require itemizing on Schedule A.
When do the new deductions expire?
The tips, overtime, car loan interest, and senior deductions expire after tax year 2028. The SALT cap increase expires after 2029. The child tax credit increase is permanent.