U.S. President Donald Trump offers a speech on the World Financial Discussion board (WEF) on January 21, 2026 in Davos, Switzerland.
Chip Somodevilla | Getty
As Individuals put together for the beginning of tax season subsequent week, a number of new tax breaks are on the desk as a part of President Donald Trump’s “large lovely invoice.”
“We handed the biggest tax cuts in American historical past, together with no tax on suggestions, no tax on time beyond regulation, no tax on Social Safety for our nice seniors,” Trump stated in a speech on the World Financial Discussion board in Davos, Switzerland, on Wednesday.
Based on the Tax Basis, the One Large Stunning Invoice Act that Trump signed into legislation final summer time represents the nation’s sixth-largest tax reduce, and is predicted to cut back federal tax income by $5 trillion from 2025 by way of 2034.
Specialists count on the brand new legislation to lead to bigger tax refunds for a lot of Individuals this spring.
However regardless of the “no tax on…” framing, the brand new measures typically don’t get rid of the tax obligation totally for suggestions, time beyond regulation, and Social Safety, specialists say.
“Individuals ought to perceive that everytime you hear ‘no tax,’ it is by no means that. There are at all times caveats,” stated licensed public accountant Sheneya Wilson, founder and CEO of Fola Monetary in New York.
Taxpayers should work out a number of particulars first, she stated: “It begins with whether or not it is a deduction or credit score, and whether or not you may be eligible primarily based in your revenue degree.” Deductions scale back taxable revenue, and credit scale back tax due.
The three tax breaks Trump referenced are all momentary and in impact from 2025 by way of 2028. They’re federal breaks; state and native taxes should apply.
Here is how they work, and what taxpayers must find out about them earlier than submitting:
No tax on suggestions
The brand new tax legislation permits sure employees to deduct as much as $25,000 of “certified suggestions” per 12 months on federal returns. The ideas deduction phases out as soon as modified adjusted gross revenue exceeds $150,000 for single filers or $300,000 for married {couples} submitting collectively.
Not all tipped employees are eligible. Some occupations do not qualify for this deduction. Some low-income employees could not profit from this tax break as a result of they will not pay federal revenue tax, given the 2025 normal deduction.
Additionally, this tax break doesn’t embrace suggestions acquired “underneath the desk,” Wilson stated. “Your suggestions have to be reported in your W-2 or 1099, after which you may take the deduction on that revenue. “When you have W-2 revenue — hourly wages plus suggestions — it won’t scale back your regular taxable wages; it should solely scale back the tip portion.”
No tax on time beyond regulation pay
OBBBA permits eligible employees to deduct “certified time beyond regulation pay” on federal returns. The break is capped at $12,500 for single filers or $25,000 for married {couples} submitting collectively. This tax break phases out for larger earners.
It is a tax break just for time beyond regulation pay, not all wages. In a weblog publish, payroll firm ADP affords this instance: If you happen to have been paid $10 an hour for non-overtime earnings, and $15 per hour for time beyond regulation, solely the $5-per-hour premium pay for time beyond regulation is eligible for the tax deduction.
As you put together your 2025 return, “be sure to have your final pay stub and that it reveals how a lot of your pay was correctly calculated as time beyond regulation,” Wilson stated.
This tax break “applies to all revenue you earn by way of time and a half,” she stated. “It’s going to usually be in your last pay stub. The W2 will not explicitly state how a lot of the pay was time beyond regulation.”
Senior ‘bonus’ deduction
The 2025 tax legislation affords a “bonus” deduction of as much as $6,000 for Individuals age 65 and older and as much as $12,000 for married {couples} submitting collectively to cut back the quantity of federal revenue topic to tax. The measure doesn’t have an effect on how Social Safety is taxed, and other people don’t must have claimed Social Safety advantages to qualify for the deduction.
Eligibility for this tax break will depend on revenue. Taxpayers with as much as $75,000 in modified adjusted gross revenue — or as much as $150,000 if married and submitting collectively — could obtain the total deduction. For incomes above these thresholds, the deduction steadily phases out.
Even in the event you did not profit from the break in your 2025 return, specialists say to take steps now to handle your revenue and benefit from the deduction sooner or later.
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