In our May blog post, we discussed the proposed "Big, Beautiful Bill" that was making its way through Congress. Well, the wait is over – the One Big Beautiful Bill Act 2025 was signed into law on July 4, 2025, as Public Law 119-21. Now we have concrete details about how these new provisions will work in practice, along with official IRS guidance on implementation.
What's Actually Law Now vs. What Was Proposed
While our May post covered the broad strokes of what was being discussed, we now have the final details of what actually became law under the One Big Beautiful Bill Act 2025. Here are the key updates:
One Big Beautiful Bill Act 2025: New Tax Deductions Now Available (2025-2028)
Tips Deduction - Now Official: Employees and self-employed individuals may deduct qualified tips received in occupations that are listed by the IRS as customarily and regularly receiving tips on or before December 31, 2024. What's new since May is that the IRS must publish a list of occupations that "customarily and regularly" received tips by October 2, 2025.
Overtime Pay Deduction - Specific Details: The law now specifically allows workers to deduct the pay that exceeds their regular rate of pay – such as the "half" portion of "time-and-a-half" compensation that is required by the Fair Labor Standards Act (FLSA). This is more specific than what was initially proposed.
Senior Deduction - Exact Amounts Confirmed: Individuals who are age 65 and older may claim an additional deduction of $6,000, with $12,000 total for a married couple where both spouses qualify. The deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers).
Car Loan Interest Deduction - Final Requirements: The final law includes a provision we didn't have in May: the vehicle must have "Final assembly in the United States" to qualify for the deduction. The maximum annual deduction is $10,000 and phases out for higher earners.
IRS Implementation of One Big Beautiful Bill Act 2025 and Transition Relief
One of the biggest updates since our May post is the official IRS response to implementation challenges. The IRS will provide transition relief for tax year 2025 for taxpayers claiming the deduction and for employers and payors subject to the new reporting requirements.
What this means for you:
- If you qualify for these deductions but don't have perfect documentation for 2025, the IRS will be more lenient during this transition year
- Employers who need to report tip and overtime information have some flexibility in how they implement the new reporting requirements
- The IRS recognizes these are brand-new provisions and is allowing time for everyone to adjust
New Reporting Requirements for Employers
Something that wasn't fully detailed in our May post is the new burden on employers. Employers and other payors must file information returns with the IRS (or SSA) and furnish statements to taxpayers showing certain cash tips received and the occupation of the tip recipient.
This means if you're an employer in a tip-receiving industry, you'll need to:
- Track and report employee tips more comprehensively
- Provide specific occupation information to the IRS
- Furnish detailed statements to employees about their tip income
Action Steps Now That the Law is Final
For Individuals:
- Start documenting immediately - If you receive tips, work overtime, or have a qualifying car loan, begin keeping detailed records now
- Verify vehicle eligibility - If you're considering the car loan interest deduction, confirm your vehicle was assembled in the United States
- Calculate income limits - Determine if you fall within the MAGI thresholds for the various deductions
For Businesses:
- Review payroll systems - Ensure you can track and report the new tip and overtime information required
- Update employee communications - Workers need to know about these new deductions and what documentation they'll receive
- Consult with your tax professional - The reporting requirements are complex and professional guidance is essential
What Hasn't Changed from Our May Predictions
Several of the provisions we discussed in May remain largely as expected:
- The enhanced Child Tax Credit increase to $2,500 per child for 2025-2028
- Making the QBI deduction permanent and increasing it to 23%
- Extensions of TCJA provisions that were set to expire
- Modifications to the SALT deduction cap
Bottom Line for One Big Beautiful Bill Act 2025 Taxpayers
The One Big Beautiful Bill Act 2025 is no longer a proposal – it's the law. The new deductions could provide significant tax savings, but proper planning and documentation are essential. With the IRS providing transition relief for 2025, this is an excellent time to get organized and ensure you're maximizing these new opportunities.
If you think you might qualify for any of these new deductions under the One Big Beautiful Bill Act 2025, or if you're an employer trying to understand the new reporting requirements, don't wait. The sooner you start planning and implementing these changes, the better positioned you'll be to benefit from this significant tax reform.
Next Steps
If you find yourself with tax problems of any kind, don't hesitate to contact us for help and guidance. That's what my team and I are here for.
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