On July 4, 2025, Congress signed into law the One Big Beautiful Bill Act (Public Law 119-21) — a sweeping package of tax relief measures aimed at working Americans and seniors.

The IRS released its official guidance this week, and here at Dovermont, we’ve summarized the key deductions you need to know in plain English. Whether you’re a tipped worker, a salaried employee, a car buyer, or a retiree, these new deductions may impact your 2025 tax return.

No Tax on Tips — Deduct Up to $25,000

  1. Employees and self-employed individuals in industries that customarily receive tips (as defined by the IRS) may deduct up to $25,000 of reported tip income annually from 2025 through 2028
  2. Applies whether you itemize or not
  3. Income phase-out starts at $150,000 (single) or $300,000 (joint filers)The

    IRS will release a list of eligible occupations by October 2, 2025

No Tax on Overtime Pay — Deduct Up to $12,500

  1. If you earn overtime pay that exceeds your regular rate, you may deduct the “extra half” portion — up to $12,500 annually ($25,000 if married filing jointly)

  2. Also applies whether you itemize or not

  3. Same income limits as the tip deduction apply

Car Loan Interest Deduction — Up to $10,000 Annually

  1. Starting with loans originated after December 31, 2024, you may deduct up to $10,000 of interest paid on a personal-use vehicle loan

  2. Only applies to new vehicles (not used), assembled in the U.S., for personal—not business—use

  3. Income phase-out starts at $100,000 (single) or $200,000 (joint).

  4.  You must include the Vehicle Identification Number (VIN) on your tax return

Extra Deduction for Seniors (Age 65+) — $6,000 Per Person

  1. An additional $6,000 deduction per person age 65 or older — in addition to existing senior deductions

  2. Phased out at $75,000 (single) or $150,000 (joint)

  3. Applies whether you itemize or not

Important: IRS Transition Guidance Coming October 2025

The IRS has committed to releasing transition relief and specific reporting guidelines before October 2, 2025, especially regarding eligible occupations, employer reporting, and lender disclosures.

Dovermont’s Take:

These new deductions offer meaningful tax savings — but also bring reporting complexities that taxpayers should prepare for now. At Dovermont Wealth & Tax Solutions, we help clients understand how these changes affect their tax planning and make informed decisions for their financial future.