On Friday, July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBBA). This alert provides a high-level summary of the provisions in the OBBBA impacting individuals.
As described below, the OBBBA made permanent (with some modifications) many provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) otherwise set to expire at the end of this year. We previously described the TCJA in our earlier alert. The OBBBA also includes three new individual tax provisions that originated as campaign promises during the 2024 election—no tax on tips, no tax on overtime, and no tax on car loan interest—as well as other new provisions.
The new individual tax provisions to fulfill campaign promises are:
- No Tax on Tips. Temporary allowance of an above-the-line deduction for up to $25,000 of qualified tip income. The deduction only applies to individuals working “in an occupation which customarily and regularly received tips on or before December 31, 2024,” as to be determined by the IRS. For a married taxpayer, the deduction is only available if the taxpayer and their spouse file a joint return. The deduction is phased out for individuals with modified adjusted gross income above $150,000 ($300,000 for married filing jointly). Other limitations apply, and there are enhanced information reporting requirements. The deduction is scheduled to sunset after 2028.
- No Tax on Overtime. Temporary allowance of an above-the-line deduction for up to $12,500 ($25,000 for married filing jointly) of qualified overtime income. For a married taxpayer, the deduction is only available if the taxpayer and their spouse file a joint return. The deduction is phased out for individuals with modified adjusted gross income above $150,000 ($300,000 for married filing jointly). Other limitations apply. The deduction is scheduled to sunset after 2028.
Visit Ballard Spahr’s website to read the full alert written by our attorneys that includes other notable individual tax provisions in the OBBBA.