Tax law changes rarely feel personal — but the One Big Beautiful Bill (OBBBA) is one of the few recent tax laws that directly affects how everyday people file their returns.
In 2026, most taxpayers are filing 2025 tax returns while also making income and financial decisions that will affect 2026 taxes. The deductions and credits introduced under OBBBA are now active, claimable, and already reducing federal tax bills for millions of people.
At SCL Tax Services in the Bronx, NY, we work closely with individuals, families, retirees, and small business owners who want clear answers — not IRS jargon. This guide explains the most important OBBBA tax changes in a practical, easy-to-understand way.
What Is the One Big Beautiful Bill (OBBBA)?
The One Big Beautiful Bill is a federal tax law that introduced several temporary but powerful tax deductions and credits, most of which apply from 2025 through 2028.
Unlike past tax changes that mainly benefited corporations or very high earners, OBBBA focuses on:
- Workers who earn tips or overtime
- Families raising children
- Seniors on fixed incomes
- Taxpayers in high-tax states like New York
- Individuals with large personal expenses, such as vehicle loans or adoption costs
Understanding how these rules work — and how income phase-outs apply — is critical to using them correctly.
No Tax on Tips Deduction (Currently Available Through 2028)
One of the most talked-about OBBBA provisions is the no tax on tips deduction, which is already being claimed on returns filed in 2026.
What the deduction actually does
This rule allows eligible workers to deduct a portion of their reported tip income from federal taxable income. It does not eliminate the need to report tips. Instead, it reduces how much of that income is ultimately taxed.
Who benefits most
This deduction is especially relevant for people working in:
- Restaurants and bars
- Salons and beauty services
- Hospitality and hotels
- Delivery and service-based roles
Key details to know
Here are the key details you should know:
- Available for tax years 2025–2028
- Deduction limit of up to $25,000 per year
- Applies whether you use the standard deduction or itemize
- Begins to phase out at higher income levels
How do I claim the tip deduction?
You claim it on your federal return using properly reported tip income from your W-2, 1099, or official tip reporting forms. Clean records matter — estimates and cash guesses can cause issues later.
Overtime Deduction (2025–2028): Extra Hours, Real Savings
If you work overtime, the OBBBA includes a temporary overtime deduction that is already active in 2026.
How it works
The deduction applies to the overtime premium portion of your pay — the extra amount earned above your regular hourly rate.
For example, if you earn time-and-a-half, the “half” portion may qualify.
What you should know
- Available through 2028
- Maximum deduction:
- $12,500 per individual
- $25,000 for married couples filing jointly
- Subject to income phase-out thresholds
- Overtime must meet federal wage law definitions
Not all overtime qualifies automatically. How your employer reports your pay matters, which is why a professional review is important.
Car Loan Interest Deduction: A Brand-New Personal Write-Off
One of the most overlooked OBBBA tax changes is the car loan interest deduction — because most people don’t expect personal auto loans to be deductible.
What changed under OBBBA
If you purchased a qualifying personal vehicle with a loan issued after 2024, you may now deduct interest paid on that loan, even if the car is not used for business.
Important requirements
- Deduction limit of up to $10,000 per year
- Vehicle must meet U.S. manufacturing and assembly rules
- The loan must be secured by the vehicle
- Leased vehicles do not qualify
- Income phase-outs apply
For many Bronx residents who rely on a personal vehicle for work or family needs, this deduction can make a noticeable difference.
Senior Bonus Deduction: Extra Relief for Taxpayers 65+
The senior bonus deduction is another OBBBA provision currently available in 2026.
What it provides
- $6,000 deduction per eligible taxpayer
- $12,000 if both spouses qualify
- Available even when taking the standard deduction
- Phases out at higher income levels
This deduction is especially helpful for retirees whose income comes from a mix of Social Security, pensions, and withdrawals.
SALT Deduction Cap Increased to $40,000
For New York taxpayers, the SALT deduction is one of the most important items on a tax return.
What’s new
- The SALT deduction cap is now $40,000
- $20,000 if married filing separately
- Applies only if you itemize deductions
Why this matters in the Bronx
Property taxes and state income taxes are high in NYC. For many homeowners, itemizing now makes more sense — but not always. Comparing itemized deductions against the standard deduction is critical before assuming SALT will help.
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New Child Tax Credit Amount: Expanded Family Support
Families will see changes to the child tax credit under OBBBA, which is already in effect for returns filed in 2026.
What families should know
- Credit increased to up to $2,200 per qualifying child
- A portion remains refundable
- Income-based phase-outs still apply
Family situations vary, especially with shared custody or blended households. Claiming this credit correctly avoids delays and audits.
Adoption Credit Refund: A Major Improvement
One of the most meaningful updates under OBBBA is the expansion of the adoption credit refund.
What changed
Previously, many families couldn’t fully use the adoption credit because it wasn’t refundable. Under OBBBA:
- A portion of the credit is now refundable
- This means you may receive money back even if you owe no tax
- Credit limits are indexed for inflation
Adoption is expensive. This change makes the credit more accessible to middle-income families, not just high earners.
Understanding Phase-Out Thresholds (And Why Planning Matters)
Almost every OBBBA deduction includes income phase-out thresholds.
That means:
- The higher your income, the smaller the benefit
- Timing income and deductions matters
- Filing status matters
This is especially important for:
- Self-employed individuals
- Dual-income households
- Small business owners
- People receiving bonuses or variable income
Strategic tax preparation and planning in 2026 can determine whether you receive the full benefit or only part of it.
How SCL Tax Services Helps Bronx Taxpayers in 2026
OBBBA created opportunity — but also confusion.
At SCL Tax Services in the Bronx, NY, we help clients:
- Properly claim the no tax on tips deduction
- Use the overtime deduction (2025–2028) safely
- Qualify for the car loan interest deduction
- Apply the senior bonus deduction
- Decide whether itemizing makes sense under the SALT deduction cap of $40k
- Maximize family benefits like the new child tax credit amount and adoption credit refund
Most importantly, our professional tax services in Bronx, NY, help clients avoid mistakes that can delay refunds or trigger IRS notices.
Final Thoughts
The One Big Beautiful Bill is already reshaping how people file their taxes in 2026. These deductions are real, valuable, and temporary — and missing them can cost you thousands.
If you want to make sure you’re taking advantage of every tax break you legally qualify for, SCL Tax Services in the Bronx is here to help. Contact us today!
What is the One Big Beautiful Bill (OBBBA)?
The One Big Beautiful Bill (OBBBA) is a federal tax law that introduced several new deductions and expanded credits starting in the 2025 tax year. In 2026, these rules are fully in effect and are being used on current tax returns. Most provisions are temporary and scheduled to run through 2028, making proper planning especially important.
How does the no tax on tips deduction work?
The no tax on tips deduction allows eligible workers to deduct up to $25,000 per year of qualified, reported tip income from their federal taxable income.
This deduction:
- Is available for 2025–2028
- Applies whether you itemize or take the standard deduction
- Begins to phase out at higher income levels
Tips must still be fully reported. The tax benefit comes from the deduction, not from skipping reporting.
How do I claim the tip deduction?
To claim the tip deduction, your tips must be properly reported on your W-2, 1099, or official tip reporting forms. The deduction is then claimed directly on your federal tax return. Keeping accurate records is essential. Claiming unreported or estimated tips can lead to problems with the IRS.
Can salaried employees claim the overtime deduction?
In some cases, yes — but only if the overtime pay meets the legal definition of qualified overtime compensation and is reported correctly. Simply working extra hours does not automatically qualify. This is an area where professional review is strongly recommended.