4 Major Changes for Business Owners and Employees
The tax landscape is shifting. With the passing of the One Big Beautiful Bill Act (OBBBA), several new provisions have been introduced for the 2025–2028 tax years.
At Beaches Bookkeeping, we prioritize accuracy by following official guidance directly from IRS.gov and SSA.gov. If you’ve heard rumors about “no more taxes,” it’s important to look at the fine print.
Here is what you—and your employees—need to know about the new laws and how to stay compliant.
1. No Tax on Tips (Qualified Occupations Only)
The headline “No Tax on Tips” comes with a specific requirement: the taxpayer must work in an occupation officially authorized by the IRS.
- The Rule: To qualify, the tips must be received in an industry “customarily and regularly” receiving tips (such as hospitality, beauty services, or transportation).
- The Cap: This is an above-the-line deduction capped at $25,000 annually.
- Action for Employers: Ensure your business is correctly categorized and that your payroll systems are capturing tip income distinctly.
2. No Tax on Overtime (The “Extra” Portion)
This is one of the most misunderstood parts of the new bill. It does not mean all overtime hours are tax-free.
- How it works: Only the overtime premium (the “half” in time-and-a-half) is deductible.
- The Math: If an employee makes $20/hour and their overtime rate is $30/hour, only the $10 difference is eligible for the deduction.
- The Cap: Up to $12,500 for single filers ($25,000 for joint).
- The 2025 Challenge: Current W-2 forms do not have a specific box for the “overtime portion.” Employees may need to provide their final paystub of the year (dated 12/31/25) to their tax preparer to prove the year-to-date overtime total.
3. Deduction for Car Loan Interest (Made in the USA)
For the first time in decades, interest on a personal car loan may be deductible—but only if the vehicle supports American manufacturing.
- The Rule: The vehicle must be new and have undergone final assembly in the U.S.
- How to Verify: You must check the VIN (Vehicle Identification Number). Generally, if a VIN starts with 1, 4, or 5, it was built in the U.S. You can also check the doorjamb sticker for the “Final Assembly” location.
- The Limit: Taxpayers can deduct up to $10,000 in interest annually.
4. New Deduction for Seniors (The Social Security Update)
There has been a lot of talk about “No Tax on Social Security.” While the bill does provide relief, it functions as a new $6,000 deduction for individuals age 65 and older.
- Clarification: This is not a total elimination of tax on Social Security benefits, but a significant deduction that reduces the overall taxable income for seniors.
- Income Limits: This deduction begins to phase out for single filers earning over $75,000 (or $150,000 for joint filers).
What Changes Do You Need to Make Now?
- Audit Your Payroll: As an employer, you are not penalized for 2025 if your W-2s aren’t perfect yet (transition relief), but we highly recommend adding a separate line item for “Overtime Premium” in your payroll software now.
- Keep Your Paystubs: Tell your team to save their December 31, 2025, paystub. Since W-2s won’t show the overtime breakdown this year, that stub is their only way to claim the deduction.
- Check Your VINs: If you bought a new vehicle this year, keep your loan interest statements and verify that VIN early.
For the full breakdown of these changes directly from the source, view the official IRS publication here: IRS.gov – One Big Beautiful Bill Provisions