Tips, overtime, car interest, seniors: the four 2025–2028 deductions and who gets each
The One, Big, Beautiful Bill created four temporary deductions. Each has a cap, an income phase-out and a definition that decides who qualifies. All four expire after tax year 2028.
The tax law signed on July 4, 2025 added four deductions that apply to tax years 2025 through 2028 and then end. They are available whether or not the filer itemizes. Each has a cap and an income limit, and each has a definition that is narrower than its name.
| Deduction | Maximum per year | Phases out above (MAGI) | Who |
|---|---|---|---|
| Qualified tips | $25,000 | $150,000 single / $300,000 joint | Workers in occupations that customarily received tips before 2025 |
| Qualified overtime | $12,500 single / $25,000 joint | $150,000 / $300,000 | Employees paid overtime under the Fair Labor Standards Act |
| Seniors | $6,000 per person 65+ | $75,000 / $150,000 | Filers aged 65 or older by year end |
| Car loan interest | $10,000 | $100,000 / $200,000 | New, U.S.-assembled personal vehicles bought from 2025 |
What "no tax on tips" actually means
Tips remain income. They are reported, they are subject to Social Security and Medicare tax, and they are on the W-2. What the law adds is a deduction of up to $25,000 of qualified tips — voluntary, cash or card, in an occupation the Treasury lists as customarily tipped. A mandatory service charge is not a tip. A tip received in an occupation not on the list does not qualify.
Deduction $18,000 × 12% = $2,160 of income tax. Payroll tax at 7.65% on the same $18,000 is $1,377, unchanged. The phrase in the law's title describes the income tax only.
Overtime
The deduction covers the premium part of overtime pay — the extra half in time-and-a-half — not the whole overtime wage, and only overtime required by federal law. A worker paid $30 an hour who works 200 hours of overtime at $45 has $3,000 of premium pay to deduct, not $9,000. Employers report the figure separately from 2026.
Seniors
The $6,000 is per person, so a married couple both over 65 has $12,000. It is in addition to the existing extra standard deduction for age. It phases out by 6% of income above the threshold, reaching zero at $175,000 for a single filer. It sits alongside the taxation of Social Security benefits, which the law did not change — the campaign phrase about that was delivered through this deduction instead.
Car loan interest
Covered in the car guide: interest on a loan taken from 2025 to buy a new vehicle for personal use whose final assembly was in the United States. Used cars, leases and loans from a family member do not qualify. The lender reports the interest, and the vehicle identification number goes on the return.
Each ends after tax year 2028 unless extended. Anyone planning around them — a tipped worker choosing hours, a retiree timing withdrawals, a car buyer — is planning around a rule with a known end date. That is not a reason to ignore them; it is a reason to date the assumption.
Sources
- Working Families Tax Cuts — individuals and workersInternal Revenue Service · checked Sep 24, 2026
- New and enhanced deductions for individualsInternal Revenue Service · checked Sep 24, 2026