The Internal Revenue Service (IRS) has rolled out new tax deduction rules that reshape how Americans, families, and businesses can save money this year. These updates follow the passing of the One, Big, Beautiful Bill Act (OBBB), signed into law on July 4, 2025.
The goal is clear, reduce the tax load for working individuals, seniors, and business owners while encouraging smarter financial growth.
This reform brings one of the most comprehensive overhauls in years. It touches nearly every corner of the U.S. tax system. The changes cover areas from wages and car loans to senior benefits and business investments.
As a result, millions of taxpayers are expected to benefit directly. The new deductions make filing simpler, fairer, and more supportive of everyday financial needs.
Key Highlights of the New Deduction Rules
Freepik | Taxpayers can fully deduct qualified property costs in year one starting Jan. 20, 2025.
Permanent 100% Bonus Depreciation
Under the updated law, taxpayers acquiring qualified depreciable property after January 19, 2025, can now write off the entire cost in the first year. This is a major shift from the previous multi-year depreciation model.
The rule also extends to certain sound recording productions, boosting creative industries. Also, the IRS allows elections for partial deductions, such as 40% or 60%, in specific cases.
Higher Standard Deduction
For 2026, the standard deduction rises sharply:
1. $32,200 for married couples filing jointly
2. $16,100 for singles or married filing separately
3. $24,150 for heads of households
This increase means more people will see lower taxable income, keeping more earnings in their pockets.
‘No Tax on Tips’
Workers in tipped industries, from restaurants to salons, can now deduct up to $25,000 per year in qualified tips between 2025 and 2028. The benefit phases out for individuals earning over $150,000 or $300,000 for joint filers.
This update offers meaningful relief to service industry workers who often rely on tips as a large part of their income.
‘No Tax on Overtime’
A new rule allows taxpayers to deduct the portion of overtime pay exceeding their regular rate, up to $12,500 for individuals or $25,000 for joint filers. The same income limits apply. Both itemizing and standard deduction filers qualify, adding flexibility for many households.
‘No Tax on Car Loan Interest’
Interest paid on new American-made vehicle loans, issued after December 31, 2024, can be deducted up to $10,000 a year. The rule applies to personal-use vehicles under 14,000 pounds, encouraging consumers to support domestic manufacturing while saving on financing costs.
Deductions for Seniors
From 2025 through 2028, seniors aged 65 and older can claim an extra $6,000 deduction, or $12,000 if married and filing jointly. The deduction provides targeted assistance to people on fixed budgets as it phases off for higher salaries.
Additional Benefits Under OBBB
Another noteworthy provision includes extended adoption credits, improved earned income credits, new dependent family accounts called “Trump Accounts,” and more corporate incentives for opportunity zones and depreciation. Together, they reflect a broad approach to stimulating financial stability and family well-being.
What Officials Are Saying
Freepik | Taxpayers can now reference IRS rules for 100% depreciation under the new legislation.
According to the IRS, the new guidance “offers taxpayers clear direction on claiming the 100 percent first-year depreciation deduction for qualifying property acquired after January 19, 2025, under the One, Big, Beautiful Bill.”
The agency also noted that the inclusion of sound recording productions broadens eligibility and supports creative enterprises.
The IRS and Treasury Department plan to release further guidance detailing reporting and compliance for employers, lenders, and tax filers. While the changes may take time to adjust to, they signal a future where filing taxes feels more transparent and rewarding.
These new rules redefine how Americans save, spend, and invest. With broader deductions, simpler reporting, and stronger incentives, the updates promise a fairer system that values hard work and financial responsibility. Taxpayers can expect a more balanced approach that rewards both effort and planning.
