August 1, 2025 · Tax Law Update
The "One Big Beautiful Bill" Is Now Law — 5 Takeaways for 2025
President Trump signed the bill on July 4, 2025. Most individual provisions are retroactive to January 1, 2025, so the changes already apply to income you earned this year.
Here are the five biggest takeaways you need to know right now.
1. No federal income tax on qualified tips
- Applies to cash and credited tips reported to your employer
- Retroactive to January 1, 2025
- The IRS released its first list of qualifying occupations July 29 — servers, bartenders, hair stylists, delivery drivers, and more
Action: Start saving every tip receipt, or write "Tips" on your pay-stub highlights. You'll subtract them on your 2025 return.
2. No federal income tax on overtime pay
- Only the premium portion (time-and-a-half or double-time) qualifies
- Must be labeled as overtime on your pay stub
Action: Circle or highlight the overtime line on every stub starting now.
3. SALT deduction cap jumps from $10,000 to $40,000
- Phases out above $500,000 modified AGI
- Big relief for Alabama homeowners with high property taxes
Action: Itemizers — keep paying 2025 property taxes before year-end; they're now much more valuable.
4. Car-loan interest is deductible again
Personal-use vehicles only.
- Must be a U.S.-assembled vehicle purchased after December 31, 2024
- Up to $20,000 of interest per return
Action: If you bought or refinanced a qualifying truck, SUV, or car this year, save the loan statements.
5. The 2017 TCJA rates and brackets are now permanent
- No "tax cliff" after December 31, 2025
- The standard deduction stays doubled — for good
Action: No rush changes needed — but you can stop worrying about 2026 rates jumping back to 2017 levels.
Quick Bookkeeping Tip
Set up two new categories today
In QuickBooks or Xero, create "Nontaxable Tips – OBBBA" and "Nontaxable Overtime – OBBBA." Everything you put there flows straight to your 2025 tax return as a deduction.
Need help setting this up? →Next month (September 1): A full breakdown of the tip deduction, the IRS occupation list, and a sample pay-stub markup.
Daniel P. Jajeh, CPA
Big Beach Books, LLC · Gulf Shores, Alabama
These newsletters provide general tax and bookkeeping education only and are not personalized advice. Consult your CPA about your specific situation.