President Trump’s new tax changes were talked about significantly after it was signed and went into effect July 4, 2025. As the year comes to a close, the “One Big Beautiful Bill” is making headlines again as taxpayers start thinking about the 2026 tax season. There has been a lot of discussion about the changes in the new bill and how it will affect taxpayers. Here are just a few of the key points in the tax bill and what it may mean for you next year.
Dedications for Seniors
Effective in 2025, individuals who are age 65 and older may claim an additional deduction of $6,000. This new deduction is in addition to the current additional standard deduction for seniors under existing law. The $6,000 senior deduction is per eligible individual (i.e., $12,000 total for a married couple where both spouses qualify). Taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers) are not eligible.
No Tax on Tips
Also effective in 2025, 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, and that are reported on a Form W-2, Form 1099, or other specified statement furnished to the individual or reported directly by the individual on Form 4137. “Qualified tips” are voluntary cash or charged tips received from customers or through tip sharing. The maximum annual deduction is $25,000. For self-employed, deduction may not exceed an individual’s net income (without regard to this deduction) from the trade or business in which the tips were earned.
No Tax on Overtime
Effective for 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay – such as the “half” portion of “time-and-a-half” compensation. Overtime must be reported on Form W-2, Form 1099, or another specified statement furnished to the individual. The maximum annual deduction is $12,500 ($25,000 for joint filers). The deduction is available for both itemizing and non-itemizing taxpayers. However, taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers) are not eligible for this deduction.
No Tax on Car Loan Interest
In this new deduction effective for 2025, individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria. Lease payments do not qualify. The maximum annual deduction is $10,000. And taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers) are not eligible. To qualify for the deduction, the interest must be paid on a loan originated after December 31, 2024; and used to purchase a vehicle, the original use of which starts with the taxpayer. This means that used vehicles do not qualify. The vehicle must also be for a personal use vehicle (not for business or commercial use) and secured by a lien on the vehicle.
Health Savings Account Expansions
Telehealth and other remote care services can now be received before meeting a high-deductible health plan deductible. Individuals can still contribute to their Health Savings Account (HSA) even after using telehealth before meeting the deductible. Additionally, starting January 1, 2026, bronze and catastrophic health insurance plans are treated as HSA-compatible. This change makes more people eligible to contribute to an HSA, including individuals who previously could not because their plan did not meet the strict HDHP definition. This applies whether the plans are bought through an insurance exchange or not. Also, starting January 1, 2026, people enrolled in certain direct primary care (DPC) service arrangements may contribute to an HSA if they otherwise qualify and use HSA funds tax-free to pay periodic DPC fees.
These points represent only a snapshot of what’s included in the new “One Big Beautiful Bill.” The legislation contains many additional tax provisions and changes beyond those noted here. Business owners and individual taxpayers are encouraged to consult with an experienced California tax attorney to understand how the new law may impact their specific situation.
Allison Soares is a partner and tax attorney at Vanst Law LLP. It doesn’t matter the issue: audits, collections, appeals, international disclosures, grumpy people— Allison enjoys fixing problems. In addition to her legal work, she has worked in accounting and utilizes that knowledge to her advantage while handling cases involving EDD audits from San Francisco to San Diego.
