John Hughie
The One Big Beautiful Bill (OBBB)—signed into law in July 2025—brings sweeping tax reforms and new deductions, credits, and savings opportunities for individuals and families.
After years with limited tax planning for standard deduction users, OBBB introduces a range of tax-saving tools designed to benefit middle-income households, seniors, families, and even car buyers.
Key Provisions & Financial Impact
| Provision | Benefit |
|---|---|
| Standard deduction increase (seniors) | Additional $6,000 per senior taxpayer (2025–28) |
| Charitable above‑the‑line deduction | $1,000 single / $2,000 married couples (from 2026) |
| Auto loan interest deduction | Up to $10,000 new, U.S.-assembled vehicles (2025–28) |
| No tax on tips and overtime | Tax deduction for hourly workers (2026–28) |
| Dependent Care FSA increase | Raise max to $7,500 per household (from 2026) |
| Child & Dependent Care Credit enhancements | Credit rate up to 50%, income cap increased to $206k/$103k |
Seniors Enjoy Enhanced Standard Deduction
Seniors aged 65+ get an extra $6,000 standard deduction, nearly doubling their potential benefit. With a phase-out threshold at AGI $75k (single) / $150k (joint), this incentive runs through 2028, offering meaningful relief for those previously paying taxes on Social Security income.
Charitable Giving Rewarded Again
Starting in 2026, individuals who typically take the standard deduction can mini-deduct donations: $1,000 per single filer, or $2,000 per couple, lowering AGI and potentially unlocking other tax breaks.
Auto Loan Interest Deduction Returns
After nearly 40 years, personal auto loan interest becomes deductible again: up to $10k per year for qualifying vehicles purchased between 2025 and 2028. Must be a new, U.S.-assembled vehicle, and phase-outs apply at AGI $100k individual / $200k joint.
Tax Relief for Tips & Overtime
Hourly workers can deduct earned tips or overtime pay—up to $12,500 (single) or $25,000 (joint) annually—from taxable income between 2026–28. That’s a boost many service workers have long advocated for.
Families Get a Boost
- Dependent Care FSA: Contribution cap jumps from $5,000 to $7,500 per household (effective 2026), tax-free.
- Child & Dependent Care Credit: Credit rate increases to 50% of eligible expenses ($3k one child, $6k two+). Income phase-out upper threshold rises to $206k filing jointly ($103k individual), helping 4 million more families.
Example: Families earning ≤$150k with two children could see credit increase from ~$1,200 to ~$2,100.
Why This Matters for You
- Lower AGI & taxes with deductions like FSA, auto interests, overtime, and charitable contributions
- Tailored benefits: seniors and hourly workers gain enhanced deductions
- Family-friendly changes: significant financial support in child care, deductions, and credits
- Encourages car purchases: changes could sway leasing/buy decisions
Tips to Maximize the OBBB Benefits
- Plan charitable giving by year-end to utilize above-the-line deductions from 2026 onward.
- Shop for U.S.-assembled vehicles in 2025–28 to capitalize on the auto interest deduction.
- Boost Dependent Care FSA contributions during 2025 open enrollment to gear up for the 2026 increase.
- Adjust withholding and estimates if expecting lower tax liability due to senior or auto interest deductions.
- Watch AGI thresholds—especially families with incomes near phase-out zones—to ensure full credit qualification.
The One Big Beautiful Bill offers unprecedented tax planning opportunities for a wide range of Americans—seniors, families, hourly workers, and even new car buyers.
With enhanced deductions, expanded credits, and standard deduction boosts, strategic planning now can unlock substantial savings.
Take steps now—review eligibility, adjust payroll elections, plan purchases, and align charitable giving—to make the most of these tax reforms and secure a brighter financial future.
FAQs
Can I deduct charitable donations without itemizing?
Yes—starting 2026, individuals can claim $1,000, married couples $2,000, as above-the-line deductions without itemizing.
Which car loans qualify for the interest deduction?
Only new, U.S.-assembled vehicles purchased between 2025 and 2028, with deductions available up to $10,000, subject to AGI phase-outs ($100k single; $200k joint).
How does the Dependent Care FSA raise help families?
Beginning 2026, households can contribute up to $7,500 tax-free, lowering taxable income while financing eligible daycare or adult-care expenses.
