As the tax season approaches, Americans are preparing to file their returns, and several new tax breaks are on the table as part of President Donald Trump’s “big beautiful bill.” In a speech at the World Economic Forum in Davos, Switzerland, Trump highlighted the new measures, which include no tax on tips, no tax on overtime, and no tax on Social Security for seniors.
According to the Tax Foundation, the One Big Beautiful Bill Act that Trump signed into law last summer represents the country’s sixth-largest tax cut, and is expected to reduce federal tax revenue by $5 trillion from 2025 through 2034. Experts expect the new law to result in larger tax refunds for many Americans this spring.
Understanding the New Tax Breaks
While the new measures are often referred to as “no tax” breaks, experts say that’s not entirely accurate. “Americans should understand that whenever you hear ‘no tax,’ it’s never that. There are always caveats,” said certified public accountant Sheneya Wilson, founder and CEO of Fola Financial in New York. Taxpayers must figure out a few details first, she said: “It starts with whether it’s a deduction or credit, and whether you’ll be eligible based on your income level.” Deductions reduce taxable income, and credits reduce tax due.
No Tax on Tips, Overtime, and Senior Benefits
The three tax breaks Trump referenced are all temporary and in effect from 2025 through 2028. They are federal breaks; state and local taxes may still apply. The new tax law allows certain workers to deduct up to $25,000 of “qualified tips” per year on federal returns. The tips deduction phases out once modified adjusted gross income exceeds $150,000 for single filers or $300,000 for married couples filing jointly.
Not all tipped workers are eligible. Some occupations don’t qualify for this deduction. Some low-income workers may not benefit from this tax break because they won’t pay federal income tax, given the 2025 standard deduction. Also, this tax break does not include tips received “under the table,” Wilson said. “Your tips must be reported on your W-2 or 1099, and then you can take the deduction on that income. If you have W-2 income — hourly wages plus tips — it will not reduce your normal taxable wages; it will only reduce the tip portion.”
OBBBA allows eligible workers to deduct “qualified overtime pay” on federal returns. The break is capped at $12,500 for single filers or $25,000 for married couples filing jointly. This tax break phases out for higher earners. This is a tax break only for overtime pay, not all wages. In a blog post, payroll company ADP offers this example: If you were paid $10 an hour for non-overtime earnings, and $15 per hour for overtime, only the $5-per-hour premium pay for overtime is eligible for the tax deduction.
Senior ‘Bonus’ Deduction
The 2025 tax law offers a “bonus” deduction of up to $6,000 for Americans age 65 and older and up to $12,000 for married couples filing jointly to reduce the amount of federal income subject to tax. The measure does not affect how Social Security is taxed, and people do not need to have claimed Social Security benefits to qualify for the deduction. Eligibility for this tax break depends on income. Taxpayers with up to $75,000 in modified adjusted gross income — or up to $150,000 if married and filing jointly — may receive the full deduction. For incomes above those thresholds, the deduction gradually phases out.
Even if you didn’t make the most of the break on your 2025 return, experts say to take steps now to manage your income and take advantage of the deduction in the future. For more information on the new tax breaks, visit Here
Smart Tip for Readers
To make the most of the new tax breaks, keep accurate records of your tips, overtime pay, and income, and consult with a tax professional to ensure you’re eligible and taking advantage of the deductions available to you. By staying organized and informed, you can navigate the new tax laws and maximize your refund.
