The passage of the Big Beautiful Tax Bill has extended many tax provisions, created new ones and has eliminated others. Combined these changes will affect virtually all taxpayers and everyone should have at least some knowledge of these changes whether they hire a professional or plan on preparing their own returns.  Below is an overview of the most significant changes you should be aware of as you plan your finances for the coming years.

New tax deduction for tax year 2025 – Auto Loan Interest

In the past, deducting auto loan interest used to be exclusive to business owners, however with this act vehicles used solely for personal purposes will be able to take this deduction when filing next year for 2025.  Starting January 1, 2025, taxpayers can deduct up to $10,000 per year in qualified auto loan interest on a primary vehicle used for personal purposes, as long as the loan is originated on or after that date. Unlike most similar deductions, you don’t have to itemize to claim this one—it’s available even if you take the standard deduction.  There are some requirements and limitations to this deduction which include the following:

• • It is a vehicle in which “The original use of which commences with the taxpayer” which I am interpreting as the vehicle must be under the taxpayers’ name.  This may cause issues if you plan on gifting a vehicle.  If possible, try to ensure that the person operating the vehicle is on the title and is paying any interest.

• • The loan and purchase of vehicle must have originated after December 31^st 2024.  No taking this deduction if you’ve had your vehicle before 2025 and it doesn’t appear that refinancing it will make it eligible.

• • The deduction will start phasing once MAGI (essentially your income before deductions) hits $100,000 ($200,000 if filing joint) and will always be fully phased-out after $150,000 MAGI ($250,000 if filing joint).

• • Final assembly of the applicable vehicle must have incurred in the US.  The IRS will likely sponsor a website that confirms if the vehicle qualifies.

• • Possibly able to deduct multiple vehicle loans?  Based off the current wording I can see this being the case, but will look for any guidance confirming this stance.

It’s unclear if there will be a dedicated tax form regarding auto loan interest, so in order to best prepare for the 2025 tax season make sure to retrieve a year-end auto loan in January 2026.  This should show the auto interest paid in 2025.  Finally, please note that this deduction is currently slated to end in 2028, although future provisions could extend this.

New tax deduction for tax year 2025 – “No” Tax on Tips

Misleading but still significant, many tipped workers will be eligible for a tax deduction of up to $25,000 on tipped income.  This even applies to self-employed taxpayers.  As with all of these, there are requirements and limitations with this deduction:

• • The deduction starts this tax year and is currently set to end in 2028.  This will likely be a debate topic in 2028 and/or 2029 about extending this deduction

• • The occupation in question must have “customarily and regularly received tips on or before December 31^st 2024” so you’re out of luck if your industry suddenly decides to start receiving tips.  The stated occupations include providing, delivering and/or serving food, barbering and hair care, nail care, esthetics, and body and spa treatment.
    • • The Department of the Treasury has released proposed guidance on the industries that qualify.  It would include more industries involved in entertainment, non-food related hospitality, home services, personal services, wellness, recreation and transportation industry.  See the source below for the proposed guidance.

• • The deduction will start phasing out after MAGI of $150,000 ($300,000 if filing joint) and will be fully phased-out after $400,000 MAGI ($550,000 if filing joint).

• • The bill sets the deduction limit at $25,000 and makes no provision to increase it if both the taxpayer and spouse are tipped workers. In addition, taxpayers who are married and file separate returns cannot claim this deduction.

Waged tipped workers likely won’t need to do much to claim this deduction as W-2s currently have a section on tipped wages.  For non-employee tipped workers, Form 1099-NEC will require a new box for tipped earnings, but do know what many businesses tend not to be as prudent with 1099 forms.  These workers should contact their payers in January to ensure their tipped earnings are included before the forms are reported to the IRS.

New tax deduction for tax year 2025 – “No” Tax on Overtime

Also misleading but impactful, overtime workers will be eligible for a tax deduction of up to $12,500 on overtime income, $25,000 if filing jointly.  Details include the following:

• • Like with the tip deduction, this deduction starts this tax year and is currently set to end in 2028.  This could be extended depending on future legislation.
  • Only the premium portion of overtime pay is deductible.  For example, if your base pay is normally $30/hour and your overtime pay is time and a half of $45/hour then you’ll only receive a deduction of $15/hour for overtime pay.

• • The deduction will start phasing out at MAGI of $150,000 ($300,000 if filing joint) and will be fully phased-out after $400,000 MAGI ($550,000 if filing joint).

• • If the taxpayer is married, then the deduction can only apply when filing a joint return.  No deduction when filing separately.
    • • Based off the verbiage, this appears to apply to individuals that are married and file as Head of Household.

The law adds a reporting requirement for overtime to be reported on W-2 compensation, however the courts have deferred this requirement for 2025.  If not reported on the W-2 (likely in Box 14) then you may need to look at your year-end paystub to determine your overtime compensation.  Make sure you keep this for your records in case of audit.  I’m sure this will be a high audit target in the IRS’ eyes due to how misleading it can be.

Gambling losses limited to 90% for tax year 2026

Big loss for professional gamblers.  You will no longer be able to claim all gambling losses and can only claim up to 90% of the losses.  For nonprofessional gamblers this may not be as impactful as losses tend to exceed winnings by a large amount.  For example, if you had $100,000 in winnings in 2026 and $150,000 then you will still be able to claim up to $135,000 of the losses (90% of the losses) and wash out the $100,000.  If instead you only wagered $100,000 and won $100,000 then you’d only be able to deduct $90,000 and have to report $10,000 in taxable income.

The verbiage seems to suggest that professional gamblers are also subject to this limitation which could make this already risky profession even less viable.  I have a feeling future legislation will change this stance due to the severity it imposes, but only time will tell.

Trump Accounts and increase Child Tax Credit – Free $1,000 for children born 2025-2028

New parents are in luck this year.  The law introduced a new type of IRA called a Trump account.  If the child was born between 2025-2028 and meets other requirement, the government will fund the first $1,000 when set up.  Parents can contribute up to $5,000/year into this account until the child turns 18.

Please note that this is only a tax deferred account.  There is currently no deduction when contributing into this account and qualified withdrawals will be taxable as long-term gains.  Qualified withdrawals include for education tuition, business start-up expenses and purchasing their first home.  Nonqualified withdrawals appear to be subject to ordinary income tax and a 10% penalty.

For these reasons, contributing to a 529 plan will likely offer more benefits, especially considering current law allows you to roll unused funds into a Roth IRA if your child doesn’t pursue college or university. Still, there’s no reason not to take the free $1,000!

In addition, for 2025 the maximum Child Tax Credit has been increased from $2,000 to $2,200.  This is a huge win for parents as the credit would’ve been reduced to $1,000 if the 2017 tax provisions were not renewed.  Finally, in 2026 there is an increase of the Child and Dependent Care Tax Credit which is typically taken when the child attends a daycare.  The credit is 35% on up to $3,000 in daycare expenses, but with a quick phase-out starting at $15,000 AGI.  The phase-out currently ends at $43,000 in which the taxpayer will be reduced to 20% of daycare expenses.  The new phase-out will end at $75,000 or $150,000 if filing joint which could make a difference to many family.

Bonus Depreciation back to 100% – Section 179 limits increase

Business owners will be glad to know that bonus depreciation is back at 100% and now permanently in place. Originally set at 100% under the 2017 Tax Cuts and Jobs Act, bonus depreciation has been phased down by 20% each year since 2022.  Do note that the 100% only applies to equipment placed into service after January 19^th 2025 so equipment on or before this date is only eligible for a 20% bonus depreciation deduction.

Meanwhile, the maximum Section 179 deduction has increased from $1,220,000 to $2,500,000, and the phase-out threshold has risen from $3,050,000 to $4,000,000. Because 100% bonus depreciation won’t be reinstated until January 20, 2025, business owners who made large purchases in early January may want to consider using Section 179.

Other significant tax changes/extensions

• • QBI deduction made permanent.
    • • There were talks of raising this to 23%, but it never made it passed the Senate.

• • Higher standard deduction and elimination of personal exemptions made permanent.
    • • Additional standard deduction for individuals over 64 increased from $2,000 to $6,000.  This appears to be in lieu of directly lowering social security income and is currently set to expire in tax year 2029.

• • Tax bracket changes from the 2017 Tax Cuts and Jobs Act made permanent.

• • Mortgage interest deduction limitation on the first $750,000 of mortgage made permanent.

• • State and Local Tax cap increased from $10,000 to $40,000.
    • • There were talks of eliminating Pass-through Entity Tax which is a workaround to this limitation, but it never made it to the final bill.

• • Increase in Estate Tax Exemption made permanent.

• • Excess Business Loss limitation made permanent.  Carryback of losses still disallowed and losses still carried forward indefinitely.

• • Easements of Qualified Small Business Stock.  Previously had to wait five years to get a full exclusion of $10,000,000.  Now business owners can receive a 50% exclusion after three years and 75% exclusion after four years.  Exclusion has been increased to $15,000,000.

Sources:

https://www.congress.gov/bill/119th-congress/house-bill/1/text

https://www.federalregister.gov/documents/2025/09/22/2025-18278/occupations-that-customarily-and-regularly-received-tips-definition-of-qualified-tips