The One Big Beautiful Bill Act (OB3): Key Tax Provisions to Know
The One Big Beautiful Bill Act (OB3) was signed into law on July 4, 2025, introducing significant changes to the federal tax landscape. While the legislation contains hundreds of provisions, the IRS has identified four major deductions that will appear on the new Schedule 1-A for Tax Years 2025 through 2028.
Below is a high-level overview of these provisions and how they may impact taxpayers. A link to the IRS’s official OB3 guidance is included for those who want more detail directly from the source.
🔗 IRS Overview of OB3 Provisions:
https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions
No Tax on Tips
Taxpayers who earn tip income may be eligible to deduct a portion of that income from their federal taxable income.
Key highlights:
Maximum deduction: $25,000
Income phaseout begins when MAGI exceeds:
$150,000 (Single / Head of Household)
$300,000 (Married Filing Jointly)
For self-employed individuals, the deduction cannot exceed net income from the trade or business in which the tips were earned
No Tax on Overtime
OB3 provides a new deduction for taxpayers who receive qualified overtime compensation.
Key highlights:
Maximum deduction:
$12,500 (Single / Head of Household)
$25,000 (Married Filing Jointly)
Income phaseout begins when MAGI exceeds:
$150,000 (Single / Head of Household)
$300,000 (Married Filing Jointly)
No Tax on Car Loan Interest
Taxpayers may be able to deduct interest paid on qualifying vehicle loans under OB3.
Key highlights:
Deduction applies to up to $10,000 of car loan interest
Vehicle must be:
For personal use only
Finally assembled in the United States
New (used vehicles do not qualify)
Loan must have originated after December 31, 2024
Phaseout: Deduction is reduced by $200 for every $1,000 of MAGI over:
$100,000 (Single / Head of Household)
$200,000 (Married Filing Jointly)
Enhanced Deduction for Seniors
OB3 includes an expanded deduction for older taxpayers.
Key highlights:
$6,000 deduction per qualified individual
Taxpayer must be 65 or older by the end of the tax year
Income phaseout begins when MAGI exceeds:
$75,000 (Single / Head of Household)
$150,000 (Married Filing Jointly)
What This Means for You
These new deductions may provide meaningful tax savings, but eligibility depends on income levels, filing status, and specific circumstances. Because these provisions are new and complex, working with a tax professional can help ensure they are applied correctly.