In July 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law—and it brings some seriously beautiful changes for taxpayers like you. Whether you’re clocking in overtime, earning tips, or running your own business, this new legislation introduces major federal tax deductions that could significantly reduce what you owe.
At Martínez Income Tax & Accounting, we’re breaking down the most important updates so you can take full advantage—because taxes shouldn’t be one-size-fits-all.
1. Overtime Pay: What’s Changed?
Before: Overtime was taxed just like regular income—no separate rate, no special break.
Now (2025–2028):
You can deduct up to $12,500 of overtime income from your federal taxes ($25,000 if filing jointly).
But take note:
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This is a deduction, not a tax credit.
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It reduces your taxable income, not your paycheck.
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Payroll taxes (Social Security & Medicare) still apply.
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Deduction phases out at $150,000+ income ($300,000 for joint filers).
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When you work overtime, you usually earn “time-and-a-half” pay (1.5× your regular hourly rate). Under the Big Beautiful Bill, the tax break applies only to the extra “half” portion—not your regular wage.
2. Tips: No Tax (Sort of)
Good news for workers in tip-based jobs (restaurant, salon, rideshare, etc.):
You can deduct up to $25,000 in reported tip income from your federal taxable income for tax years 2025–2028.
Keep in mind:
It applies only to federal income tax, not payroll taxes.
Your paycheck won’t increase, but your tax refund might.
You must still report all tip income on your tax return.
Accurate record-keeping is key. Use a daily log or app.
3. Qualified Business Income (QBI) Deduction: Now Permanent
One of the most valuable deductions for small business owners and freelancers is now here to stay.
The 20% QBI deduction for pass-through entities (sole props, LLCs, S-corps, partnerships) is now permanent.
Example:
If you earn $100,000 in net business income, you’ll only be taxed on $80,000—saving up to $4,400 in federal taxes for a single filer.
4. 100% Bonus Depreciation: Also Permanent
Got business equipment to buy? Now’s the time.
The new law brings back 100% bonus depreciation, allowing businesses to deduct the entire cost of equipment (including qualifying vehicles) in the year of purchase.
No more waiting 5–7 years to recover that cost. It’s all up front—great for cash flow and smarter tax planning.
5. Key Reminders:
Overtime + Tips deductions phase out after $150K ($300K joint).
These benefits only affect federal income taxes—not payroll or state/local taxes.
Set up a meeting to see how these changes apply to your situation. Every taxpayer is different.
Conclusion:
The One Big Beautiful Bill Act brings real relief—but only if you take advantage of it. At Martínez Income Tax, we speak your language and understand your business. Whether you’re a gig worker, business owner, or W-2 employee, we’ll help you deduct smarter, save more, and plan better.
Let’s talk, book your personalized consultation today.
