Summary of Key OBBB Income Tax Changes (Tax Years 2025-2028)

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The OBBB Act features several new temporary deductions that are subject to specific Modified Adjusted Gross Income (MAGI) phase-out thresholds.

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• Additional Senior Deduction (Age 65+): An extra deduction of up to $6,000 for single filers and $12,000 for joint filers is available.

  • Phase-out: The deduction is reduced by 6% for MAGI over $75,000 (single) or $150,000 (joint), and is fully eliminated at $175,000 (single) or $250,000 (joint)

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• "No Tax on Tips" Deduction: A deduction of up to $25,000 for qualified tips.

  • Phase-out: This deduction is phased out for MAGI over $150,000 (single) or $300,000 (joint).

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• "No Tax on Overtime" Deduction: A deduction of up to $12,500 for qualified overtime pay ($25,000 for joint filers).

  • Phase-out: This deduction is also phased out for MAGI over $150,000 (single) or $300,000 (joint).

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• Auto Loan Interest Deduction: A deduction of up to $10,000 in interest for new, U.S.-assembled vehicle loans.

  • Phase-out: The deduction is phased out for MAGI over $100,000 (single) or $200,000 (joint).

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State and Local Tax (SALT) Deduction (2025-2029)

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The OBBB temporarily raises the SALT deduction cap from the previous $10,000 to $40,000 for most filers through 2029. This applies to itemized deductions for state income taxes, local property taxes, and sales taxes. 

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• Deduction Limit: Up to $40,000 ($20,000 for married individuals filing separately) in 2025. This cap increases by 1% annually through 2029.

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• Income Phase-out: The deduction is reduced for taxpayers with MAGI over $500,000 ($250,000 for married individuals filing separately).

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• Phase-out Mechanics: The maximum deduction is reduced by 30% of the amount your MAGI exceeds the threshold. The deduction cannot be reduced below the original $10,000 cap ($5,000 for married filing separately).

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• Reversion: The cap reverts to a flat $10,000 for all taxpayers in 2030.

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Other Relevant Income-Based Provisions

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• Child Tax Credit (CTC): Permanently increased to $2,200 per child (with a refundable portion of $1,400).

  • Phase-out: The credit begins to phase out for MAGI over $200,000 (single) or $400,000 (joint).

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• Qualified Business Income (QBI) Deduction (Section 199A): This 20% deduction is made permanent, but the income thresholds for limitations based on W-2 wages and unadjusted basis of qualified property were increased.

  • Phase-in Range (2026): Limitations phase in for taxable income between $201,775 and $276,775 (unmarried individuals) and $403,550 and $553,500 (married couples filing jointly).