When President Donald Trump signed the One Big Beautiful Bill Act into law on July 4, the headlines focused on its size and politics. But for everyday Americans — especially seniors, homeowners, families, and workers — the more important question is simple: How does this affect my money?
The answer depends on your age, income, whether you own a home, bought a car, have children, or rely on certain public programs. Here’s a plain-English breakdown of the major tax changes, what they mean, and how they work.
Income Tax Rates: What Didn’t Change
One of the biggest moves in the new law is making permanent the lower income tax rates created in 2017. Those rates were scheduled to expire after 2025, which would have raised taxes for many households.
Instead, the bill locks them in — meaning no increase in income tax rates for most taxpayers simply because the law sunsets.
The law also makes permanent the larger standard deduction, increasing it for 2025 to:
- $15,750 for single filers
- $31,500 for married couples filing jointly
These amounts are indexed for inflation going forward.
A Bigger Tax Break for Older Adults — With an Important Catch
For Americans 65 and older, the law adds a new, temporary tax break — but it sits on top of deductions that already exist, which is where confusion often starts.
What already existed
Before this law, taxpayers age 65 and older already qualified for an extra standard deduction:
- $2,000 for a single filer
- $1,600 per spouse for married couples filing jointly
This is added to the regular standard deduction.
What’s new
The new law adds a $6,000 “senior bonus” deduction per qualifying person for tax years 2025 through 2028.
Important details:
- This is a deduction, not a credit — it reduces taxable income
- You can claim it whether you itemize or take the standard deduction
- Income limits apply:
- You can take the full amount of the deduction with income up to $75,000 (single) or $150,000 (married filing jointly)
- Phases out at higher incomes and disappears entirely above $175,000 (single) or $250,000 (joint)
- You can take the full amount of the deduction with income up to $75,000 (single) or $150,000 (married filing jointly)
Why you may hear the number $46,700
For a married couple filing jointly where both spouses are 65 or older, total deductions in 2025 could look like this:
- Standard deduction: $31,500
- Existing 65+ add-on: $3,200
- New senior bonus: $12,000
That adds up to $46,700 in total deductions.
One more thing seniors need to know
The senior bonus deduction is not automatic. Early guidance suggests it may require an additional form or schedule. Taxpayers should make sure their preparer or software explicitly claims it.
A New Deduction for Auto Loan Interest — With Limits
For the first time, the tax code allows a deduction for interest paid on certain car loans, beginning with vehicles purchased in 2025.
Here’s how it works:
- You can deduct up to $10,000 per year in auto loan interest
- The vehicle must be:
- New (not previously owned) when you purchase it.
- Purchased for personal use (not commercial or fleet use)
- Assembled in the United States
- New (not previously owned) when you purchase it.
- Used vehicles and leased vehicles do not qualify
- Income limits apply:
- You can take the full deduction if your income is up to $100,000 (single) or $200,000 (joint)
- Phases out above that level
- You can take the full deduction if your income is up to $100,000 (single) or $200,000 (joint)
This is an above-the-line deduction, meaning you can claim it even if you take the standard deduction.
At the same time, the law eliminates federal electric vehicle tax credits after September 30, 2025, ending incentives that helped lower the cost of EVs for many buyers.
SALT: What It Is, What You Can Deduct, and Why Itemizing Matters
SALT stands for State And Local Taxes, and this is one of the most misunderstood parts of the tax code.
First, an important rule:
👉 You must itemize deductions to claim SALT.
If you take the standard deduction, SALT does not apply.
What taxes count under SALT
Taxpayers must make choose between whether they plan to take the dedication for state and local income taxes paid or for state and local sales taxes paid. You can take one, not both
Option 1: State and local income taxes paid
If you choose this option, you can can reduce your MAGI, by the amount of
- Income tax withheld from your paycheck
- Any additional state or local income tax you paid when filing
If you received a state tax refund, you must subtract that amount, because you didn’t actually pay it.
OR
Option 2: State and local sales taxes paid
This option – if you select it over state and local income taxes paid, allows you to adjust your MAGI by reducing it by the your state and local sales tax paid – using ont of these calculating methods.
- Using IRS sales-tax tables, or
- Tracking actual sales taxes paid
Taxpayers may also add sales tax paid on major purchases — such as a vehicle — if they can document it.
You cannot deduct both income taxes and sales taxes.
Property taxes are added either way
No matter which option you choose above, you may also deduct:
- Property taxes actually paid on homes or other real estate
HOA fees, utility charges, and special assessments do not count.
The new SALT cap
Starting in 2025, the SALT deduction cap rises from $10,000 to $40,000 for households with MAGI under $500,000. The cap increases slightly through 2029, then drops back to $10,000 in 2030.
Child Tax Credit: Why “Refundable” Matters
The law increases the Child Tax Credit to $2,200 per qualifying child.
Unlike deductions, this is a tax credit, meaning it reduces your tax bill dollar-for-dollar.
Up to $1,700 per child is refundable, which means:
- Even if a family owes little or no federal income tax, they may still receive part of the credit as a refund
This matters most for lower- and middle-income families.
Tips and Overtime: New Deductions for Workers
Two temporary deductions target workers whose income includes extra pay.
Tip income
Workers can deduct up to $25,000 in qualified tip income per year from 2025 through 2028, subject to income limits. Tips must still be reported; the benefit is claimed when filing taxes.
Overtime pay
The law also allows a deduction for overtime pay:
- Up to $12,500 for individuals
- Up to $25,000 for married couples filing jointly
Both deductions reduce taxable income, not taxes owed directly.
The Bottom Line
The One Big Beautiful Bill delivers meaningful tax relief to seniors, homeowners, families, and some workers — largely through deductions that lower taxable income, not direct credits. At the same time, it cuts or eliminates other programs and incentives, reshaping who benefits most.For taxpayers, the key takeaway is this: how much you gain depends on your income, age, and choices at tax time — especially whether you itemize and whether you claim new deductions correctly.