The One Big Beautiful Bill (OBBB), signed into law last July, brings real changes to how Americans file taxes. For the average taxpayer, you could be keeping more of your income, whether from tips, overtime, family expenses, or retirement. Here’s how the OBBB is changing taxes.

Tax-Free Tips

If you collect tips as part of your income, the OBBB lets you deduct up to $25,000 in qualified tips from your taxable income through 2028. For most service workers earning under the phase-out thresholds ($150,000 for single filers and $300,000 for joint filers), it means little to no federal income tax on those tips. Employers are still required to report tips, payroll taxes still apply, and you may still be taxed at the state and local levels, but your take-home pay will be greater without federal withholding.

Tax-Free Overtime Pay

Another major change pertains to overtime pay. Up to $12,5000 ($25,000 for joint filers) per year in overtime earnings are tax-free under the OBBB through 2028. This applies to most W-2 earners as long as they don’t cross the $150,000 income threshold ($300,000 for joint filers). The deduction phases out past those income limits. This could save workers hundreds or even thousands in taxes.

Bigger Deduction for Seniors

Effective through 2028, seniors 65 and older now have an extra $6,000 deduction (up to $12,000 for married couples filing jointly). This is on top of the standard deduction. The deduction phases out at 6% for single filers with income over $75,000 and for married couples filing jointly with income over $150,000. It is fully phased out at $175,000 for single filers and $250,000 for joint filers.

Car Loan Benefit

The OBBB brought back the car loan interest deduction. Through 2028, up to $10,000 in interest on loans for qualified personal vehicles is deductible. A majority of U.S. households rely on cars for transportation, and with rising auto loan rates, this deduction could help offset some of that financial burden.

Child Tax Credit Expansion

The child tax credit also gets a bump under the OBBB. The credit increases from $2,000 to $2,200 per qualifying child. Starting in 2026, the credit will be adjusted annually for inflation. Phaseout thresholds are $200,000 for single filers and $400,000 for married couples filing jointly.

The changes noted above provide targeted relief for the average American taxpayer, but results will vary. A server dependent on tips might pocket thousands more, while a senior on fixed income could get some breathing room. Note that the IRS will begin accepting 2025 tax returns on January 26, 2026, and the last day to file taxes (unless requesting an extension) is April 15, 2026.