By Steve Dinnen
The “One Big Beautiful Bill Act” brought a lot of changes to tax law. Many of them addressed looming sunsets on tax provisions implemented by way of the 2017 Tax Cut and Jobs Act. Many more were new.
“It made some significant changes, at least for the next few tax seasons,” said Joe Kristan (pictured), a partner at the public accounting firm Eide Bailey.
The time limitation Kristan referenced comes from the temporary nature of many of the new tax breaks. The much-ballyhooed deductions for tips and overtime pay phase out over time. Ditto for SALT, the State and Local Tax deduction, which has bounced around in recent years but will stay at an enhanced level through 2030.
The new law allows a SALT deduction of up to $40,000 to qualifying taxpayers who itemize their deductions. SALT begins to phase out once modified adjusted gross income hits $500,000 (for singles or married couples filing jointly), so Kristan said some taxpayers are planning now to limit their 2025 income so they can take full advantage of this tax break. (This is why we’re running this story in October, so you can plan ahead.)
No advanced planning is needed for the temporary boost in the standard deduction for seniors. If you don’t itemize (those SALT chasers) you can claim a standard deduction of $15,750 for a single person or $31,500 for a married couple filing jointly. And those of us over 65 get a boost of $2,000. But wait, there’s more! New this year is a temporary senior bonus of $6,000, which runs through 2028.
Now back to overtime and tip income. Through 2028, you can deduct up to $25,000 of overtime pay ($12,500 for a single). The Fair Labor Standards Act of 1938 lays out the rules for what constitutes overtime.
Tipped workers can exclude up to $25,000 per year. But who is a tipped worker? The U.S. Treasury has a published lengthy list of who qualifies. Here’s a partial rundown: barbers, manicurists, pizza delivery drivers, caddies, valets, casino dealers, hotel housekeepers, tutors and dancers. What about exotic dancers? The Treasury explicitly rules out tipped income for pornography (and prostitution), but sometimes beauty is in the eye of the beholder. Kristan envisions more time and expense being spent on ensuring compliance.
You’ll be able to deduct interest payments on newly built automobiles that have their final assembly in the United States. At the same time, the law is repealing subsidies for electric vehicle purchases, as well as installation of residential energy efficiency devices. Those deals popped up under the Inflation Reduction Act, which came to taxpayers during the previous administration.
