Updated for Tax Years 2025–2028
Overview
The One Big Beautiful Bill Act (Public Law 119‑21), signed into law on July 4, 2025, introduced major tax changes aimed at providing relief to individuals, workers, seniors, and families. Below is a simplified, taxpayer‑friendly breakdown of the provisions that may directly impact your personal tax return.
Note: This page focuses only on individual and family‑related provisions. Rules related to businesses, investments, community development, tax‑exempt entities, charitable giving, and other taxes are intentionally excluded.
Individual Tax Provisions
Inflation‑Adjusted Standard Deduction
The standard deduction has been increased and adjusted for inflation:
2025 Tax Year
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Married Filing Jointly: $31,500
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Head of Household: $23,625
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Single / Married Filing Separately: $15,750
2026 Tax Year
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Married Filing Jointly: $32,200
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Head of Household: $24,150
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Single / Married Filing Separately: $16,100
These adjustments may reduce taxable income for most filers.
Additional Deduction for Seniors (Age 65+)
Taxpayers age 65 or older may claim an extra $6,000 deduction on top of the standard deduction.
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Available for tax years 2025 through 2028
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Subject to income phase‑outs for higher‑income taxpayers
No Tax on Tips
Workers who earn tip income may deduct qualified tips up to $25,000 per year.
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Applies to employees and self‑employed individuals
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Available whether you itemize or take the standard deduction
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Income‑based phase‑outs apply
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Effective 2025–2028
This deduction is not automatically applied. The tips must be reported in your Form W-2. Tips not reported in your Form W-2 will not qualify for the deduction.
“No Tax” on Overtime Pay
Taxpayers may deduct the overtime premium portion of their pay (the extra 50%). The deduction is equal to 1/3 of the overtime paid.
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Maximum deduction:
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$12,500 (Single)
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$25,000 (Married Filing Jointly)
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Income phase‑outs apply
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Effective 2025–2028
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This deduction is not automatically applied. You may need to present your last paystub for the tax year if the overtime pay is not reported in the Box 14 of your Form W-2.
No Tax on Car Loan Interest
Interest paid on loans used to purchase qualifying personal vehicles may be deductible.
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Maximum deduction: $10,000 per year
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Vehicle must secure the loan
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Subject to income phase‑outs
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Effective 2025–2028
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This deduction is not automatically applied. You must report the VIN (Vehicle Identification Number) on your return. Your lender will provide a Form 1098 (or similar statement) showing the total interest you paid in 2025. This is critical for reporting the interest on your tax return.
Expanded Health Savings Account (HSA) Rules
The Act expands HSA eligibility and flexibility, including:
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Allowing telehealth and remote care before meeting deductibles
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Expanding which health plans qualify as HDHPs
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Allowing direct primary care arrangements alongside HSAs
These changes make HSAs more accessible and flexible for taxpayers.
Family & Dependent Provisions
Trump Accounts (Working Families Tax Cuts)
The law establishes Trump Accounts, designed to help families save for their children’s future.
Key features:
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$1,000 one‑time federal contribution per eligible child
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Parents, relatives, and employers may contribute
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Employer contributions up to $2,500 are not taxable to employees
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Funds grow tax‑deferred
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Withdrawals generally allowed after age 18
Final Thoughts
These tax changes may significantly reduce taxable income and create new planning opportunities for individuals and families. Proper implementation and documentation are essential to maximize benefits.
Have questions about how these rules apply to you? Contact Pelican Tax to review your situation and plan ahead with confidence.
In the link below you will find a complete list of the 2025 tax changes published by the Internal Revenue Service (IRS):
https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions
Frequently Asked Questions
Do these changes affect my 2024 tax return?
No. Most provisions begin with the 2025 tax year, filed in 2026.
Can I use these deductions if I don’t itemize?
Yes. Many provisions, including tips, overtime, and car loan interest deductions, are available even if you take the standard deduction.
Are these changes permanent?
Most individual and family provisions are temporary and currently scheduled to expire after 2028, unless extended by Congress.
Will income limits apply?
Yes. Several benefits include income‑based phase‑outs, which may limit or eliminate the deduction for higher‑income taxpayers.
This page is for informational purposes only and does not constitute tax advice. Tax laws are subject to change and individual circumstances vary.
