U.S. President Donald Trump gives a speech at the World Economic Forum (WEF) on January 21, 2026 in Davos, Switzerland. <\/p>\n
Chip Somodevilla | Getty Images News | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n
As Americans prepare for the start of tax season<\/a> next week, several new tax breaks are on the table as part of President Donald Trump\u2019s \u201cbig beautiful bill<\/a>.\u201d\u00a0<\/p>\n \u201cWe passed the largest tax cuts in American history, including no tax on tips, no tax on overtime, no tax on Social Security for our great seniors,\u201d Trump said in a speech<\/a> at the World Economic Forum in Davos, Switzerland, on Wednesday.<\/p>\n According to the Tax Foundation<\/a>, the One Big Beautiful Bill Act that Trump signed into law last summer represents the country\u2019s sixth-largest tax cut, and is expected to reduce federal tax revenue by $5 trillion from 2025 through 2034.<\/p>\n Experts expect the new law to result in larger tax refunds for many Americans<\/a> this spring.<\/p>\n<\/div>\n But despite the \u201cno tax on\u2026\u201d framing, the new measures generally do not eliminate the tax obligation entirely for tips, overtime, and Social Security, experts say.<\/p>\n \u201cAmericans should understand that whenever you hear \u2018no tax,\u2019 it\u2019s never that. There are always caveats,\u201d said certified public accountant Sheneya Wilson, founder and CEO of Fola Financial in New York. <\/p>\n Taxpayers must figure out a few details first, she said: \u201cIt starts with whether it\u2019s a deduction or credit, and whether you\u2019ll be eligible based on your income level.\u201d Deductions<\/a> reduce taxable income, and credits<\/a> reduce tax due.\u00a0<\/p>\n The three tax breaks Trump referenced are all temporary and in effect from 2025 through 2028. They are federal breaks; state and local taxes may still apply.<\/p>\n Here\u2019s how they work, and what taxpayers need to know about them before filing:<\/p>\n<\/div>\n The new tax law allows certain workers to deduct up to $25,000 of \u201cqualified tips\u201d <\/a>per year on federal returns. The tips deduction phases out once modified adjusted gross income exceeds $150,000 for single filers or $300,000 for married couples filing jointly.\u00a0\u00a0<\/p>\n Not all tipped workers are eligible.<\/a> Some occupations don\u2019t qualify for this deduction. Some low-income workers may not benefit from this tax break because they won\u2019t pay federal income tax, given the 2025 standard deduction<\/a>.\u00a0<\/p>\n<\/div>\n Also, this tax break does not include tips received \u201cunder the table,\u201d Wilson said. \u201cYour tips must be reported on your W-2 or 1099, and then you can take the deduction on that income. \u201cIf you have W-2 income \u2014 hourly wages plus tips \u2014 it will not reduce your normal taxable wages; it will only reduce the tip portion.\u201d<\/p>\n<\/div>\n OBBBA allows eligible workers to deduct \u201cqualified overtime pay\u201d on federal returns. The break is capped at $12,500 for single filers or $25,000 for married couples filing jointly. This tax break phases out for higher earners.<\/p>\n This is a tax break only for overtime pay, not all wages. In a blog post<\/a>, payroll company ADP offers this example: If you were paid $10 an hour for non-overtime earnings, and $15 per hour for overtime, only the $5-per-hour premium pay for overtime is eligible for the tax deduction.\u00a0<\/p>\n As you prepare your 2025 return, \u201cmake sure you have your last pay stub and that it shows how much of your pay was properly calculated as overtime,\u201d Wilson said. <\/p>\n This tax break \u201capplies to all income you earn via time and a half,\u201d she said. \u201cIt will typically be on your final pay stub. The W2 won\u2019t explicitly state how much of the pay was overtime.\u201d<\/p>\n<\/div>\n The 2025 tax law offers a \u201cbonus\u201d deduction of up to $6,000 for Americans age 65 and\u00a0older and\u00a0up to $12,000 for married couples filing jointly to reduce the amount of federal income subject to tax. The measure does not affect how Social Security is taxed<\/a>, and people do not need to have claimed Social Security benefits to qualify for the deduction.\u00a0<\/p>\n Eligibility for this tax break depends on income. Taxpayers with up to $75,000 in modified adjusted gross income \u2014 or up to $150,000 if married and filing jointly \u2014 may receive the full deduction. For incomes above those thresholds, the deduction gradually phases out.\u00a0<\/p>\n Even if you didn\u2019t make the most of the break on your 2025 return, experts say to take steps now to manage your income and take advantage of the deduction<\/a> in the future.\u00a0<\/p>\n SIGN UP:<\/strong>\u00a0<\/em>Money 101\u00a0<\/em><\/a>is an 8-week learning course on financial freedom, delivered weekly to your inbox. Sign up\u00a0<\/em>here.\u00a0<\/em><\/a>It is also available in\u00a0<\/em>Spanish.<\/em><\/a><\/p>\n<\/div>\n<\/div>\n\nRead more CNBC personal finance coverage<\/h2>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n
No tax on tips<\/h2>\n
No tax on overtime pay<\/h2>\n
Senior \u2018bonus\u2019 deduction<\/h2>\n
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