President Donald Trump made some big promises to Americans when he ran in the 2024 election. One of the biggest was to cut taxes in key areas so Americans could keep more of their hard-earned money. Now, nearly five months into his second term, he hopes to make good on this promise with his One, Big, Beautiful Bill.
The sweeping bill, which recently passed the House, now sits in the Senate, awaiting changes and a vote that will determine whether it makes it to the president's desk. We don't yet know what that final version will look like, but as it stands now, it would spell an end to taxes on the following three things.
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1. Tips
One of President Trump's key campaign promises was to end taxes on tips, and the new bill includes this. Specifically, it will allow you to deduct "qualified tips" that meet the following criteria:
- The person paying the tip does so voluntarily.
- The tip isn't subject to negotiation.
- The person paying the tip determines how much it is.
In addition, you must work in an industry that traditionally and customarily receives tips as defined by the Secretary of the Treasury, and you must have a work-eligible Social Security number. Highly compensated employees (HCEs) are not eligible to claim this tax deduction, even if they meet the other criteria. These are employees who either own 5% or more of the company they work for or who earn more than $160,000 in 2025 and are in the company's top 20% by compensation.
2. Overtime pay
The One, Big, Beautiful Bill also creates a tax deduction for overtime pay that's in excess of the regular rate the employee receives for their job. As with tips, you'll need a work-eligible Social Security number to take advantage of this deduction, and you won't be able to claim it if you're a highly compensated employee at your company. There is no limit to how much overtime pay you can deduct under this proposal.
3. Car loan interest
If the bill becomes law, you'll be able to deduct up to $10,000 in car loan interest from your taxable income. There are income phaseouts for those with adjusted gross incomes (AGIs) exceeding $100,000 for single adults and $200,000 for married couples.
To qualify, your vehicle must:
- Be manufactured primarily for use on public streets, roads, and highways.
- Have at least two wheels.
- Be a car, minivan, van, SUV, pickup truck, motorcycle, ATV, or UTV.
- Have its final assembly take place in the U.S.
Check with your vehicle's manufacturer if you're not sure whether it was assembled in the U.S.
It's worth noting that some or all of these tax deductions could change between now and the bill's final approval, assuming it even passes the Senate. You should also keep in mind that the bill only calls for these deductions to occur in tax years 2025 through 2028. The government would then have to vote on whether to extend those deductions into the future.
House Speaker Mike Johnson believes the Senate could vote on the bill by July 4, though there isn't an official vote scheduled yet. Once this happens and we see what, if any, changes the Senate makes to these proposals, you'll be able to better plan for how they'll affect your 2025 taxes.
