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OBBBA Tax Information

Congress passed the OBBBA in 2025 that impacted certain tax items and added some new tax deductions.   Below is a summary of the main points that may impact you, so you are aware before 2025 ends and as you look ahead to 2026.   The below is not meant to cover all OBBBA tax items, but the ones that typically may affect our clients.

If you have any questions regarding the OBBBA or need any tax planning before year end, please contact your tax preparer at Seibel & Katz CPAs.

  • Deduction for seniors
    • A taxpayer that is 65 or older may get a deduction of up to $6,000.    This is per eligible person, not per tax return, so your tax return may deduct up to $12,000.  This deduction applies for 2025 – 2028.
    • The deduction may also be limited based on your income level as there is a phaseout for this.   The phaseout begins if your Adjusted Gross Income (AGI) is over $150,000 for joint filers and $75,000 for all other filers.
  • Tip income deduction
    • If you work in an occupation that is traditionally tipped and part of the list of qualified jobs, then you may be eligible to deduct up to $25,000 of qualified tip income per tax return.   This deduction applies for 2025 – 2028.
    • The deduction is limited to voluntary tips you earned that were reported on a form provided by your employer (such as a W-2) as the tips are still subject to employment taxes.
    • The deduction may also be limited based on your income level as there is a phaseout for this.   The phaseout range is if your AGI is between $300,000 - $550,000 for joint filers and $150,000 - $400,000 for all other filers.
  • Overtime income deduction
    • If you receive additional pay above your standard rate for overtime hours, you may be eligible for a deduction up to $25,000 for joint filers or $12,500 for all other filers.  This deduction applies for 2025 – 2028.
    • The deduction is limited to only the portion of pay above your standard rate and it must be reported by your employer and provided to you (such as a W-2).  It is still subject to employment taxes.
    • The deduction may also be limited based on your income level as there is a phaseout for this.   The phaseout range is if your AGI is between $300,000 - $550,000 for joint filers and $150,000 - $400,000 for all other filers.
  • Auto loan interest deduction
    • You may be eligible to deduct up to $10,000 per tax return in interest on a loan used to purchase a qualifying vehicle.  This deduction applies for 2025 – 2028.
    • The car must be purchased (not leased) between 2025 and 2028, must be under 14,000 pounds, must be for personal use, and final assembly of the car must have occurred in the US.
    • If you have qualifying interest payments of more than $600, then you should receive a Form 1098 from your loan provider.
    • The deduction may also be limited based on your income level as there is a phaseout for this.   The phaseout range is if your AGI is between $200,000 - $250,000 for joint filers and $100,000 - $150,000 for all other filers.
  • Bonus depreciation at 100%
    • The cost of qualified property used in your business and placed in service after January 19, 2025 can be deducted at 100% of the cost, rather than the reduced percentages that had applied in some recent years.
  • State and local tax deduction increase
    • The limit of deductible state and local taxes increased from $10,000 to $40,000 for 2025.   This will increase by 1% each year through 2029, but will revert to $10,000 in 2030.
    • There are phaseouts based on your income level that may cause you to be able to deduct less than $40,000.   The maximum deduction may decrease to as low as the original $10,000 if your AGI exceeds $600,000 or $350,000 if married and file separately.
  • Private mortgage insurance deduction
    • Beginning in 2026, the itemized deduction for private mortgage insurance returns.   The deductibility of this will depend on your income level though.
  • Charitable donation deduction
    • Beginning in 2026, joint filers may receive a deduction of up to $2,000 that can be taken without taking itemized deductions.    The limit is $1,000 for all other filers.
      • This only applies to cash gifts and cannot be gifts made to a private foundation or donor advised fund.
    • Beginning in 2026, taxpayers who itemize will only be able to deduct donations that exceed 0.5% of your AGI.
    • Beginning in 2027, there is a new tax credit of up to $1,700 for cash donations made to scholarship granting organizations that meet required standards.
      • This credit is reduced for any amount allowed as a state credit.
    • Beginning in 2026, C Corporations will not be able to deduct donations equal to the first 1% of their taxable income.   C Corporations continue to be limited to a deduction that does not exceed 10% of their taxable income.
  • Itemized deduction limitation
    • Beginning in 2026, taxpayers in the top 37% tax bracket who take itemized deductions will have a cap on their deductions.   They would only receive a benefit for 35% rather than their 37% tax bracket.
  • Child tax credit increase
    • The maximum credit per child has increased from $2,000 to $2,200.   Inflation adjustments will apply beginning in 2026.
  • Child and dependent care expense credit
    • The maximum tax credit for working parents increased from 35% to 50% for expenses that qualify.  The maximum for the credit remains unchanged at $3,000 for one qualifying individual and up to $6,000 for multiple.
    • The amount of the credit may also be limited based on your income level as there is a phaseout for this.   The percent of expenses eligible for the credit can decrease down to 20% if your AGI exceeds $210,000 for joint filers and $105,000 for single filers.
  • Various green energy credits
    • Many of the green energy credits (including clean vehicle credits and energy efficient home improvement credit) are now ending in 2025.
  • Alternative Minimum Tax (AMT)
    • Beginning in 2026, the income phaseout that impacts the exemption applied for AMT has reset to the level from 2018.  This lower threshold may cause you to be subject to AMT when you haven’t in the past few years.
    • Joint filers that have AMT income over $1 million and all other filers over $500,000 may owe this additional tax as the exemption will begin a phaseout at those income levels.
  • Form 1099 Reporting
    • Beginning in 2026, the threshold that requires a business to file a Form 1099 increases from $600 to $2,000 with inflation adjustments applying in years after.
  • Lifetime gift and estate tax exemption
    • Beginning in 2026, the exemption is set at $15 million per taxpayer (was to revert to $7 million) with inflation adjustments applying in years after.
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