Last week, Congress passed a new tax bill (OBBBA) — a major package of tax and spending reforms backed by the current administration. While the bill covers a lot, its biggest focus is preventing a tax hike that would’ve hit millions of Americans when parts of the 2017 Tax Cuts and Jobs Act (TCJA) were set to expire at the end of this year.
Here’s what you need to know in plain English about how this new law could affect you, especially if you’re middle class, working hourly jobs, or retired.
Under the TCJA, most tax brackets were lowered but those cuts were temporary. Without action, they were set to expire at year end, which would have raised taxes for many.
The OBBBA locks in those lower tax brackets permanently, so here’s how it breaks down:
• 10% (no change)
• 12% instead of going back up to 15%
• 22% instead of 25%
• 24% instead of 28%
• 32% instead of 35%
That means more money stays in your paycheck each year.
The standard deduction — the amount most people subtract from their income before calculating taxes was doubled under the TCJA. OBBBA makes that permanent, and adds a little extra starting in 2025:
• +$750 for individuals
• +$1,500 for married couples
• +$1,125 for heads of household
About 90% of taxpayers take the standard deduction, so this is a big deal for most.
New Deductions for Tipped and Hourly Workers this part delivers on campaign promises aimed at working Americans. Through 2028, workers in tipped jobs (like servers, barbers, and rideshare drivers) can deduct up to $25,000 of reported tips from their income. Hourly employees working overtime can deduct up to $12,500 in overtime pay as well. These are above-the-line deductions, meaning they reduce your adjusted gross income — and that could lead to even more savings or credits.
You Can Now Deduct Car Loan Interest If you’re buying a vehicle that’s assembled in the U.S. — including cars, SUVs, trucks, and motorcycles — you can deduct up to $10,000 in interest on your auto loan. Individuals earning up to $100,000, Married couples earning up to $200,000. This benefit also ends after 2028.
Tax Relief for Retirees -While the bill didn’t fully eliminate taxes on Social Security income, it adds a new $6,000 bonus deduction for seniors 65 and older, on top of the regular standard deduction. You can still also claim:
• +$2,000 (if single and over 65)
• +$1,600 per person (if filing jointly and both are 65+)
The new $6,000 bonus phases out for high-income retirees:
• Phases out starting at $75,000 for singles and $150,000 for couples
• Completely disappears at $175,000 for individuals and $250,000 for couples
The New tax Bill is designed to protect middle-class wallets, support working families, and help seniors keep more of their money. While not all provisions are permanent, they provide meaningful relief especially for those focused on boosting cash flow and making the most of every dollar. If you’re a homeowner, hourly worker, retiree, or planning to buy a car this bill likely puts more money back in your pocket.
Want to learn how these changes could impact your mortgage strategy or borrowing plans? Reach out let’s talk about borrowing smart and repaying smarter.
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