The One Big Beautiful Bill Act (OBBBA) included a number of tax breaks, but many of the most popular new provisions are set to expire at the end of 2028. The expiring tax breaks apply beginning with the 2025 tax year and include many touted by President Trump during his 2024 presidential campaign, including breaks for taxes on overtime, tips, and Social Security.
While Congress could always extend the new provisions beyond 2028, there is some question as to whether it will have the political will to do so. The new tax breaks are expected to cost the federal government billions of dollars in lost revenue, and setting an expiration date helped Congress reduce the OBBBA’s long‑term budget impact. Concerns over cost could lead Congress to simply let them expire at the end of 2028.
Which Tax Breaks Will Expire?
There are 10 temporary tax provisions in the OBBBA, but these six federal income tax benefits that will decrease the tax liability of many Americans are the most notable:
Senior deduction: Often referred to as “no tax on Social Security,” the $6,000 additional senior deduction for single filers ($12,000 for married filing jointly) is available for taxpayers who are 65 and over. The deduction is available to both seniors who itemize and those who claim the standard deduction. The additional senior deduction starts to phase out for taxpayers with modified adjusted gross income (MAGI) over $75,000 and eligibility phases out completely for MAGI above $175,000 ($150,000 and $250,000 for married couples filing jointly).
No tax on overtime: A new deduction for taxpayers who receive overtime pay that qualifies under the Fair Labor Standards Act. The deductible amount for federal tax is the “half” portion of the time-and-a-half required by law. The maximum amount of qualified overtime compensation that can be deducted each year is $12,500 ($25,000 for joint filers). The deduction phases out for taxpayers with MAGI of over $150,000 ($300,000 for joint filers).
No tax on tips: Employees and self-employed individuals may claim a tax deduction for qualified tips if they are in professions the IRS lists as customarily receiving tips. The maximum annual deduction is $25,000 for employees and can’t exceed the annual taxable income of self-employed individuals. The deduction phases out for taxpayers with MAGI over $150,000 ($300,000 for joint filers).
No tax on car loan interest: Individuals can claim an interest deduction of up to $10,000 annually for interest payments on a new vehicle purchased after Dec. 31, 2024, for their personal use. The vehicle must be a new car, minivan, SUV, pickup truck, or motorcycle with a gross weight rating of less than 14,000 pounds and have undergone final assembly in the U.S. The deduction phases out for individuals with MAGI of over $100,000 ($200,000 for joint filers).
Expanded charitable deduction: For tax years beginning in 2026, non-itemizers can claim an additional $1,000 deduction ($2,000 for joint filers) for charitable contributions. Previously, taxpayers claiming the standard deduction could not claim a charitable deduction. The OBBBA put a floor on deductions for taxpayers who itemize and donations below 0.5% of adjusted gross income (AGI) will not be deductible.
Temporary SALT deduction increase: The 2017 Tax Cuts and Jobs Act (TCJA) limited the state and local tax (SALT) deduction to $10,000. The OBBBA temporarily increased the deduction cap to $40,000 for 2025 and then gradually reduces the cap each year by formula until it returns to $10,000 in 2030. The enhanced deduction begins phasing out for taxpayers with MAGI over $500,000, with the phase‑out thresholds adjusted slightly upward each year.
TCJA’s temporary changes made permanent
In addition to providing new tax breaks, the OBBBA made many of the temporary changes to tax law that were included in the TCJA permanent. Many of TCJA provisions in the tax reform bill were set to expire at the end of 2025. The tax changes made permanent include:
- Individual income tax brackets with tax rates 10%, 12%, 22%, 24%, 32%, 35%, and 37% that reduced income tax rates for individuals
- Increased standard income tax deduction
- Increased child tax credit
- Doubling of the gift tax and estate tax exemption
- Increased exemption amounts for the alternative minimum tax (AMT)
- Eliminated the 2% floor for miscellaneous itemized deductions
- Tax benefits for investments in qualified opportunity zones
Energy savings incentives removed
The OBBBA didn’t just add benefits to the tax code, it removed some tax benefits that were implemented with the enactment of the Inflation Reduction Act in 2022. This included the removal of provisions providing clean vehicle credits. It also removed energy tax credits that encouraged taxpayers to update buildings and homes to make them more energy efficient.
Assessing the Impact of the OBBBA Changes
Since some of the tax benefits included in the OBBBA expire at the end of 2028 and 2029, taxpayers may want to talk to a tax attorney about how to structure their finances to take advantage of them before they disappear. A tax attorney can also make sure you are taking advantage of the tax provisions in the TCJA that were made permanent and help in reassessing planned investments in energy efficient vehicles, homes, and buildings in light of the repeal of related tax breaks.
Related Resources
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