What Are the Four OBBBA Deductions?
The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, created four new above-the-line federal deductions for tax years 2025 through 2028: no tax on tips (up to $25,000 of qualified tip income), no tax on overtime (up to $12,500/$25,000 of overtime premium), the $6,000 senior bonus (per person 65+), and car loan interest (up to $10,000 on new US-assembled vehicles). Because they are above-the-line, you can claim them all while still taking the standard deduction.
Many households qualify for more than one. A restaurant worker with overtime and tips can claim both. A retired couple who bought a new US-built car can stack the senior bonus with car loan interest. This calculator combines all four with their separate caps and phase-outs so you see the complete picture.
How to Use This Calculator
Select your filing status and enter your MAGI first — every phase-out depends on them. Then fill in whichever deductions apply: annual reported tips, your annual overtime premium (only the extra 0.5× above your regular rate — use the overtime calculator to find it), car loan interest paid this year (the car loan calculator computes it from your loan terms), and whether you or your spouse are 65+. Leave anything that doesn't apply at zero.
Each Deduction's Rules at a Glance
Tips: $25,000 cap (all statuses), W-2 and self-employed both qualify, phases out $100 per $1,000 of MAGI over $150K/$300K. Overtime: $12,500/$25,000 cap, W-2 only, half-time premium only, phases out proportionally between $150K–$275K / $300K–$550K. Senior: $6,000 per person 65+, phases out at 6% of MAGI over $75K/$150K. Car loan: $10,000 cap, new US-assembled personal vehicles financed after 2024, phases out $200 per $1,000 over $100K/$200K — the fastest phase-out of the four.
Worked example: A married couple (MAGI $95,000): one spouse earns $12,000 in tips and $4,000 of overtime premium; they bought a new US-built SUV with $2,800 first-year interest. Total deductions = $12,000 + $4,000 + $2,800 = $18,800. At their 12% marginal rate, that is about $2,256 of federal tax saved — none of it requiring itemization. A couple in the 22% bracket with the same deductions would save about $4,136.
Common Mistakes When Stacking OBBBA Deductions
First: entering full overtime pay instead of just the half-time premium — only the 0.5× portion counts. Second: forgetting the deductions share one MAGI — a raise can trigger three phase-outs at once, and the car loan deduction dies fastest. Third: assuming FICA savings — all four reduce federal income tax only. Fourth: married couples filing separately — MFS filers are excluded from tips, senior, and overtime deductions. Fifth: missing the 2028 sunset — plan large purchases and income timing while the window is open.
Frequently Asked Questions
Can I claim all four OBBBA deductions in the same year?
Yes, if you meet each deduction's separate eligibility rules. They stack, and all are available alongside the standard deduction for tax years 2025 through 2028.
Do the OBBBA deductions reduce Social Security or Medicare tax?
No. All four reduce federal income tax only. FICA, self-employment tax, and most state income taxes are unchanged.
What income limits apply to the OBBBA deductions?
Each has its own phase-out: tips and overtime start at $150,000 ($300,000 MFJ); the senior bonus at $75,000 ($150,000 MFJ); car loan interest at $100,000 ($200,000 MFJ) with the fastest reduction rate.
Do I need to itemize to claim OBBBA deductions?
No. All four are above-the-line deductions, claimable together with the standard deduction.
When do the OBBBA deductions expire?
All four apply to tax years 2025, 2026, 2027, and 2028 only, unless Congress extends them.
Related Calculators
- No Tax on Tips Calculator — Full detail on the $25,000 tips deduction.
- No Tax on Overtime Calculator — Compute your overtime premium and savings.
- Senior Tax Deduction Calculator — The $6,000 bonus for 65+.
- Car Loan Interest Deduction Calculator — Amortized first-year interest math.