Key Tax Changes for Individuals and Business Owners

 

Published: July 2026
Category: Federal Tax Update

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Executive Summary

 

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduced significant changes to federal tax law affecting individuals, employees, retirees, and business owners. The legislation created several new temporary deductions, made certain tax provisions permanent, and modified others to provide additional tax planning opportunities.

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Many of the new deductions apply only for tax years 2025 through 2028, unless extended by future legislation. Eligibility requirements, income limitations, reporting rules, and IRS guidance apply to many of these provisions.

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Below is a summary of several of the most significant changes.

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Key Tax Law Changes

 

New Deduction for Qualified Tips

 

Beginning in 2025, eligible employees and self-employed individuals working in occupations that customarily and regularly received tips on or before December 31, 2024, may qualify for a federal income tax deduction of up to $25,000 for qualified tip income.

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The deduction is subject to income phase-outs and other eligibility requirements established by law. Qualified tips generally must be properly reported, and the deduction does not eliminate payroll tax or tip reporting requirements.

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The IRS provides guidance regarding the occupations and activities that may qualify under this provision.

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New Deduction for Qualified Overtime Compensation

 

Eligible taxpayers may deduct certain qualified overtime compensation received under the Fair Labor Standards Act (FLSA).

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The deduction generally applies only to the overtime premium portion of qualifying compensation, is subject to annual deduction limits and income phase-outs, and remains available regardless of whether a taxpayer claims the standard deduction or itemizes deductions.

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Car Loan Interest Deduction

 

Beginning in 2025, individuals may qualify for a deduction of up to $10,000 for interest paid on loans used to purchase certain qualifying new personal-use vehicles.

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The deduction is subject to income limitations and several statutory requirements, including vehicle eligibility, loan requirements, and reporting obligations. Lease payments do not qualify.

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Among other requirements, qualifying vehicles generally must undergo final assembly in the United States.

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Additional Deduction for Seniors

 

Individuals who are 65 years of age or older may qualify for an additional federal income tax deduction of up to $6,000 per eligible taxpayer, subject to income limitations.

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This deduction is available in addition to the existing age-based additional standard deduction under current law and is currently scheduled to apply through 2028.

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Permanent Individual Tax Provisions

 

The legislation permanently extends several provisions originally enacted under the Tax Cuts and Jobs Act (TCJA), including current individual income tax rates and an increased standard deduction.

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Making these provisions permanent provides greater certainty for long-term tax planning.

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Expanded State and Local Tax (SALT) Deduction

 

The Act increases the limitation on the federal deduction for state and local taxes (SALT) for many taxpayers, although the increased deduction is subject to income-based limitations and phase-out provisions.

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Taxpayers should evaluate how these changes affect their individual circumstances.

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Business Tax Provisions

 

The legislation also includes several provisions intended to encourage business investment and economic growth. Depending on the business and its circumstances, these changes may create valuable tax planning opportunities.

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Key provisions include:

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• Permanent extension of the Qualified Business Income (QBI) deduction, subject to applicable eligibility rules

• Restoration of 100% bonus depreciation

• Expanded Section 179 expensing opportunities

• Changes affecting domestic research and development expenditures

• Additional incentives supporting capital investment and business growth

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Business owners should review these provisions carefully to determine how they may affect future tax planning.

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What This Means for Taxpayers

 

While many provisions of the One Big Beautiful Bill Act are intended to reduce federal income taxes, the availability of these benefits depends on numerous eligibility requirements, income thresholds, reporting rules, and IRS guidance.

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Many of the new deductions are also temporary provisions currently scheduled to expire after 2028, unless Congress extends them.

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The impact of tax legislation varies based on each taxpayer's individual circumstances. Evaluating how the legislation applies to your financial situation can help identify appropriate year-end tax planning opportunities before filing your return.

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Key Takeaways

 

The One Big Beautiful Bill Act represents one of the most significant federal tax law changes in recent years. The legislation introduces new deductions for certain taxpayers, permanently extends several existing tax provisions, and creates additional planning opportunities for both individuals and businesses.

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Because many provisions contain detailed eligibility requirements and implementation rules, understanding the law is just as important as knowing the headlines. As the IRS continues issuing guidance, proactive tax planning can help taxpayers identify available deductions, comply with reporting requirements, and make more informed financial decisions.

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Schedule a consultation to discuss how these tax law changes may affect your situation.

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This article is provided for general informational purposes only and should not be considered tax, legal, or financial advice.

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Professional advice should be obtained based on your individual circumstances.

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