Politicians have some significant differences, but they all seem to have one thing in common – most of what they say isn’t true, or isn’t quite true. What you think “no taxes on tips,” “no taxes on Social Security benefits” and “no taxes on overtime” mean might not be what those things mean in the Big Beautiful Bill. So, what exactly is in the BBB?
“No taxes on Social Security”
Benefits will continue to be taxed as they were before the BBB. If your combined income is greater than $25,000 for an individual or $32,000 for a married couple filing jointly, you could pay income tax on up to 85% of your social security benefits. However, the BBB gives a new deduction of $6,000 to taxpayers who are least 65 years of age. Taxpayers receive the deduction whether or not they are collecting Social Security benefits. The deduction expires in 2028.
“No taxes on tips and no taxes on overtime”
Like Social Security benefits, tips and overtime will not be excluded from income, but the BBB provides a new above-the-line deduction of up to $25,000 for tip income reported on a tax return. This deduction begins to phase out when a taxpayer’s modified adjusted gross income exceeds $150,000 for single taxpayers ($300,000 for married filing jointly). It applies only to tips in industries where tipping is customary and does not apply to those earned in specific service trades or businesses (e.g., accounting, law, health).
Both deductions are available starting in 2025, regardless of whether the taxpayer itemizes deductions.
Change to other individual deductions include:
•Miscellaneous itemized deductions are eliminated.
•State and local taxes, which had been limited to $10,000 (whether married or single) are increased to $40,000 for five years and then revert to $10,000. That amount will be indexed for inflation. The increase is phased out for taxpayers with adjusted gross income over $500,000 but not below $10,000.
•The mortgage interest deduction is limited to loans of up to $750,000. This amount will not be indexed for inflation.
•Interest of up to $10,000 on a loan for a new car with final assembly in the U.S. is now deductible. This deduction is phased out starting at adjusted gross income of $100,000 for a single filer and $200,000 for married filing jointly.
•Beginning in 2026, there is a charitable deduction up to $1,000 for single filers ($2,000 for joint) even if the taxpayer does not itemize deductions.
The estate and gift tax exemption amount put in place in 2016 has been made permanent. For 2026, the estate tax exemption will be $15,000,000, indexed for inflation.
Generous deductions for businesses:
•A new 100% bonus depreciation for “qualified production property” if construction begins after Dec. 31, 2024, and the property is placed in service before Jan. 1, 2034. “Qualified production property” is nonresidential real property used the in the manufacturing, production or refining of tangible personal property.
•The BBB permanently reinstates the 100% bonus depreciation provisions by allowing the 100% first-year depreciation deduction for qualified property acquired or placed in service on or after Jan. 19, 2025.
•The Section 199A qualified business income deduction is expanded. The 20% qualified business income deduction is made permanent.
•The maximum Section 179 deduction for small businesses increases to $2.5 million, with a phase-out threshold increased to $4 million.
•The BBB allows a partial exclusion from gross income for gains on qualified small business stock acquired after July 4, 2025. The exclusion applies to 50% of the gain for stock held at least three years, 75% for stock held at least four years and 100% for stock held at least five years. The maximum gain exclusion per shareholder is increased to the greater of $15 million or 10 times the shareholder’s basis and the gross asset limit increases to $75 million. Both limits are indexed for inflation starting in 2027.
Other provisions include:
•“Trump accounts,” which are individual retirement accounts for minors and a pilot program where the government will contribute $1,000 to this account for each child with a valid Social Security number born between Dec. 1, 2025, and Dec. 31, 2028. Like a Section 529 plan, the earnings grow tax-deferred. Each year, the account may receive up to $5,000 in contributions (increasing annually for inflation). Contributions to the accounts are not tax deductible by the donor. An employer may contribute up to $2,500 to its employees’ children’s Trump accounts, but those contributions count towards the $5,000 contribution limit. The account must be invested in a stock index fund. No distributions may be made before the child turns 18. After 18, the child can withdraw the funds for “qualified purposes” including paying for college, starting a business or buying a first home. Distributions are taxable.
•Capital gains tax on the sale of qualified farmland can be paid over four years.
•Beginning in 2026, 1099-MISC forms will only be required on payment of $2,000 or more, which will be indexed for inflation.
There are many more provisions in the BBB. You should consult a tax adviser to determine if there are any provisions that you can use to reduce your personal or business taxes.
This article is for informational and educational purposes only and does not constitute legal advice.
This article appears in SBJ September 2025.