U.S. President Donald Trump provides a speech on the World Financial Discussion board (WEF) on January 21, 2026 in Davos, Switzerland.
Chip Somodevilla | Getty
As People put together for the start of tax season subsequent week, a number of new tax breaks are on the desk as a part of President Donald Trump’s “big beautiful bill.”
“We handed the biggest tax cuts in American historical past, together with no tax on ideas, no tax on extra time, 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 Foundation, the One Huge Stunning Invoice Act that Trump signed into legislation final summer season represents the nation’s sixth-largest tax minimize, and is predicted to cut back federal tax income by $5 trillion from 2025 by way of 2034.
Consultants count on the brand new legislation to result in larger tax refunds for many Americans this spring.
However regardless of the “no tax on…” framing, the brand new measures typically don’t remove the tax obligation completely for ideas, extra time, and Social Safety, specialists say.
“People 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 determine 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 based mostly in your revenue degree.” Deductions scale back taxable revenue, and credits scale back tax due.
The three tax breaks Trump referenced are all short-term 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 have to find out about them earlier than submitting:
No tax on ideas
The brand new tax legislation permits sure staff to deduct as much as $25,000 of “certified ideas” per yr on federal returns. The guidelines 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 workers are eligible. Some occupations do not qualify for this deduction. Some low-income staff could not profit from this tax break as a result of they will not pay federal revenue tax, given the 2025 standard deduction.
Additionally, this tax break doesn’t embrace ideas acquired “beneath the desk,” Wilson stated. “Your ideas have to be reported in your W-2 or 1099, after which you may take the deduction on that revenue. “When you’ve got W-2 revenue — hourly wages plus ideas — it is not going to scale back your regular taxable wages; it would solely scale back the tip portion.”
No tax on extra time pay
OBBBA permits eligible staff to deduct “certified extra time 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.
This can be a tax break just for extra time pay, not all wages. In a blog post, payroll firm ADP provides this instance: For those who have been paid $10 an hour for non-overtime earnings, and $15 per hour for extra time, solely the $5-per-hour premium pay for extra time is eligible for the tax deduction.
As you put together your 2025 return, “be sure you have your final pay stub and that it exhibits how a lot of your pay was correctly calculated as extra time,” Wilson stated.
This tax break “applies to all revenue you earn through time and a half,” she stated. “It should sometimes be in your last pay stub. The W2 will not explicitly state how a lot of the pay was extra time.”
Senior ‘bonus’ deduction
The 2025 tax legislation provides a “bonus” deduction of as much as $6,000 for People 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 Security is taxed, and other people don’t have to 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 progressively phases out.
Even for those who did not take advantage of the break in your 2025 return, specialists say to take steps now to manage your income and take advantage of the deduction sooner or later.
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