Tax season is coming back this year, bringing changes in their policies, and it could have a huge impact on how much money people get to keep or pay, based on their age, income, and spending patterns. The Trump administration’s One Big Beautiful Bill (OBBB)—which passed over the summer—is the reason for many of these updates: increased 401(k) contributions for certain older workers, a new deduction for people older than 65, a new car loan interest deduction, and specific rules for tips and overtime.
New deductions for older adults and car loans
One of the biggest changes will be targeted at people who are 65 or older at the end of 2025. The OBBB may allow them to receive a new federal income tax deduction of up to $6,000. This applies to taxpayers with a modified adjusted gross income over $75,000 if they file as individuals, and over $150,000 if they file jointly.
- Up to $6,000 can be deducted by individual filers.
- The maximum deduction for joint filers is $12,000.
There’s also a second new deduction introduced by the OBBB: a car loan deduction. Interest paid on some auto loans is deductible by taxpayers up to $10,000 annually. But there are conditions. To qualify, a person needs to have:
- A car, van, pick-up truck, minivan, motorcycle, or SUV under 14,000 pounds.
- A loan that started after December 31, 2024.
- A car that’s only used for personal use.
The deduction is limited by income:
- Those who file alone and earn less than $100,000 are qualified.
- Joint filers with incomes under $200,000 are eligible.
This deduction does not apply to used cars.
Bigger 401(k) contributions for ages 60 to 63
According to AARP, the basic contribution cap for workplace retirement accounts like a 401(k) is $23,500. On top of that, workers who are 50 or older can add an extra amount as a “catch-up” contribution of $7,500.
A new rule is going to modify things further for workers who are 60 to 63 years old, the catch-up contribution will be higher: $11,520.
Therefore:
- The regular contribution cap is $23,500.
- Extra “catch-up” for ages 60–63: $11,520.
- For those between the ages of 60 and 63, the maximum contribution is $34,750.
This allows people close to retirement a chance to put more earnings into their employer retirement plan during those years, if they are able to do so.
No tax on tips and overtime: special deductions
Another part of the OBBB brings in a rule defined as “no tax on tips” for some people. Workers who receive eligible tips in the tax years 2025 through 2028 will be entitled to:
- Maximum annual deduction: $25,000.
- Single taxpayers with an adjusted gross income over $150,000.
- Joint taxpayers with an adjusted gross income $300,000.
For the same tax years, “no tax on overtime” is another feature of the OBBB. According to the IRS, employees who received qualified overtime compensation can deduct the amount that exceeds their regular rate of pay.
The numbers for overtime are:
- Individual filers with a MAGI over $150,000 can deduct $12,500.
- Joint filers with a MAGI of $300,000 can deduct $25,000.
Putting it all together
The modifications show how the OBBB will have different effects on different groups. People 65 or older may receive a new deduction that might cut their federal income tax. Some drivers with qualifying auto loans can deduct interest they pay, as long as their salaries and cars match the standards. Workers in their early 60s get an opportunity to add extra “catch-up” money to a 401(k), and some high-income workers who receive tips or overtime have new opportunities to deduct somer funds in the years 2025 through 2028.
For anyone affected by age, car loans, retirement savings, tips, or overtime, these new rules from the One Big Beautiful Bill might be worth paying attention to.