The One Big Beautiful Bill Act (OBBBA) has caused significant confusion, misinformation, and frustration since its announcement. Even before President Donald Trump signed the OBBBA into law on Thursday, July 4, 2025, widespread confusion about the bill’s contents had already taken root. Many online articles and social media posts mistakenly cited provisions that didn’t make it into the final bill. For instance, one provision, which would have allowed Medicare Part A beneficiaries to contribute to Health Savings Accounts, was dropped. In addition, misinformation was spread by the government itself—Trump incorrectly claimed the law "eliminates" taxes on Social Security benefits, and a misleading mass email from the Social Security Administration added to the public confusion. The core issue lies in the bill itself—OBBBA is an 800+ page document with numerous tax provisions and other complicated measures. Some are permanent, some are temporary, some are retroactive, and some are delayed. With phase-outs, limits, and exceptions, it is simply impossible to summarize the bill in short sound bites. These provisions, some designed to limit tax benefits, others aimed at preventing abuses, require careful interpretation. Even tax professionals are uncertain about certain details until the Treasury and IRS issue further regulations. Take the provision intended to fulfill Trump’s "no tax on tips" campaign promise. This measure is retroactive to the start of 2025 but will only last until 2028. It provides up to $25,000 in tip income protection from federal income taxes, though Social Security and Medicare taxes still apply. This exemption is available for workers in traditionally tipped jobs, provided their earnings are not too high. While we await final guidance from the IRS, it’s safe to assume jobs like waitstaff, casino dealers, and delivery drivers will likely qualify. The Joint Committee on Taxation (JCT) estimates that OBBBA’s tax cuts will reduce federal revenue by $4.475 trillion between 2025 and 2034. Many taxpayers might assume this means widespread benefits across all households, but that’s not the case. An analysis from the Tax Policy Center suggests that the majority of tax cuts will benefit high-income households. Those earning between $460,000 and $1.1 million will see a 4.4% increase in after-tax income, while middle-income households making between $67,000 and $119,000 will experience a 2.3% increase. Households earning less than $35,000 will receive less than a 1% boost in after-tax income, and when considering cuts to Medicaid, food stamps, and Affordable Care Act subsidies, these households may actually end up worse off. One thing is clear: OBBBA’s changes introduce enough complexity that short-term tax planning and compliance will be more challenging for both individuals and businesses. This will undoubtedly create more work for the IRS. In addition to issuing guidelines, the IRS will need to revise the W-2 form to allow workers to claim the new overtime deduction, applicable from 2025 through 2028. New withholding tables will also be necessary to adjust for tax breaks on tips and overtime. These administrative changes will coincide with the IRS's preparations for the upcoming tax season, including the reworking of tax forms and software. Drafts for the 2025 tax year forms, including Form 1040, are already available on the IRS website and will need updates. This work will be done by an IRS workforce that has already been reduced by 25% (for details on IRS staffing reductions, click here). It will all be overseen by a new IRS Commissioner who has little experience with tax law. To cut through the confusion, our team at Forbes has been reviewing OBBBA to provide you with the most relevant information on the individual tax cuts.‍

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Is the SALT Cap Raised to $40,000 for Single Filers or Just for Married Filers?

Under OBBBA, taxpayers who itemize deductions can deduct state and local income taxes, sales taxes, and property taxes up to a total of $40,000, a provision often referred to as the SALT cap. This is the same amount for both single and married taxpayers filing jointly, meaning married couples do not receive a larger deduction. However, for married taxpayers filing separately, the deduction is halved to $20,000 per return. This provision introduces a marriage penalty, as two single taxpayers living together will receive a larger tax break than a married couple filing jointly. The $40,000 deduction starts phasing out at the same $500,000 income level for both single filers and married couples.

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What Do I Need to Know About "No Tax on Overtime and Tips"?

There are many details to consider:

• Tips: Tip income is temporarily deductible for tax years 2025 through 2028, but only for workers in traditionally tipped industries. The deduction applies whether or not you itemize and is limited to $25,000 in reported tips.
  
  
• Overtime: Workers receiving overtime pay will be eligible for a deduction on overtime pay up to $12,500 ($25,000 for married couples filing jointly). This deduction is also temporary, available only for the years 2025 through 2028.
  

Both tips and overtime deductions apply to federal income taxes but not to payroll taxes like Social Security and Medicare. Further clarification is expected from the IRS on which jobs qualify, and the overtime deduction phases out for incomes exceeding $150,000 ($300,000 for married couples filing jointly).

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Final Thoughts

OBBBA introduces numerous tax changes that will require patience and careful planning for individuals and businesses alike. With new IRS forms and regulations on the horizon, taxpayers should avoid making hasty changes to their withholding and consider filing early in 2026 to receive any potential refunds.