There are two guarantees in life: death and taxes. Ironically, reading 870 pages about the latter may lead to the former. On July 4th, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBBA), which encompasses a very large number of federal tax provisions for both individuals and businesses.
If you are part of the 1% of the population that is excited to read 870 pages of tax law, then boy, do we have a job for you here at Elevate! Assuming this is not what you consider “a light summer read”, I wanted to share the takeaways that are most prevalent to our clients and how we can help navigate any changes.
Prior to diving into the details, I want to clarify an important topic when it comes to discussing tax deductions. Deductions can either be “above-the-line” or “below-the-line”. Above-the-line deductions are available whether you itemize your tax deductions or opt for the standard deduction. Below-the-line deductions are only relevant to people who itemize and do not take the standard deduction. For tax year 2025, the standard deduction for single filers is $15,750 and $31,500 for joint filers. If you file jointly and the sum of your below-the-line deductions do not exceed $31,500, you will be better off taking the standard deduction, meaning that below-the-line deductions are not relevant to you.
According to the most recent data from the IRS, in 2022, 90% of taxpayers opted for the standard deduction1. A lot of the deductions introduced or adjusted by the OBBBA have their own category, known informally as below-the-below-the-line deductions. These reduce taxable income (not AGI) after accounting for the standard or itemized deductions. Keep in mind, many of the new and increased deductions are subject to income limitations.
We’ll go through a list of some of the changes and additions that have come about from the OBBBA. This list is not comprehensive, but it does include details about a few of the changes that we believe are most likely to affect our clients.
Auto Loan Interest Deduction
- Up to $10,000 per year in interest paid on qualifying auto loans can be deducted.
- The vehicle must be new and assembled in the United States.
- This is a below-the-below-the-line deduction.
Planning Tip: This new deduction could be used to offset all or a portion of other taxable events, like Roth conversions.
Standard Deduction
- As discussed above, most taxpayers will utilize the standard deduction when filing.
- OBBBA has increased the standard deduction (beyond the regular inflation adjustment) to $15,750 for single taxpayers and $31,500 for joint filers.
Planning Tip: Despite the increase, be sure to track potential below-the-line deductible expenses, especially with the expansion of some popular deductions (more on that later).
Additional Standard Deduction for Seniors
- Taxpayers over 65 receive a temporary additional deduction from 2025 through 2028.
- OBBBA has made available an additional $6,000 for single filers and $12,000 for joint filers on top of the regular standard deduction.
Planning Tip: This is a nice bonus for taxpayers over 65, as it is a below-the-below-the-line deduction, meaning you can claim this additional deduction even if you opt for the standard deduction or itemize. It is important to note that while this does not eliminate taxes on social security, it can indirectly lower them since it reduces taxable income, which helps determine how those benefits are taxed.
Charitable Deductions for Non-Itemizers
- Historically, charitable deductions were only allowed as a below-the-line deduction.
- OBBBA introduced a new below-the-below-the-line deduction, allowing for the deduction of charitable contributions up to $1,000 for single filers and $2,000 for joint filers.
Planning Tip: If you are charitably inclined, you can now take advantage of charitable deductions even if you do not itemize. Keep in mind, contributions to a donor-advised fund (DAF) do not qualify for this deduction.
State and Local Tax Deductions (SALT)
- State and local taxes paid are a below-the-line deduction available on your federal tax return.
- OBBBA increased the limit on the deduction from $10,000 to $40,000, with scheduled increases of 1% annually until 2029, after which it reverts back to $10,000.
Planning Tip: This increase is beneficial for taxpayers in states with high property and income taxes. With the limit on SALT deductions now being greater than the standard deduction for joint filers, some taxpayers may find it more beneficial to itemize.
Overtime and Tip Deductions
- Taxpayers can now deduct up to $25,000 in tips and $12,500 ($25,000 for joint filers) in overtime pay.
- This OT deduction is $25,000 for joint filers, meaning that if one spouse earns $25,000 in OT pay and the other earns $0, the couple can still deduct the full $25,000.
- An important caveat is that the deductible portion of overtime pay is only the amount of your pay in excess of your normal pay rate. Example: if you make $50/hour and earn $75/hour in OT pay, only the $25/hour portion of the OT pay is deductible.
- These are both below-the-below-the-line deductions.
- Tips and OT pay are still subject to payroll taxes (Social Security and Medicare).
Planning Tip: It is important to remember that while these deductions can lower your federal tax liability, tips and overtime pay are still subject to payroll and state income taxes.
Qualified Business Income (QBI)
- Qualifying owners of certain pass-through entities (LLCs, partnerships, S Corps) can deduct up to 20% of QBI.
- OBBBA made permanent the 20% Qualified Business Income deduction.
- OBBBA added a minimum deduction of $400, inflation-indexed, for taxpayers with $1,000+ of QBI.
Planning Tip: Business owners should review their entity structure and identify opportunities to maximize QBI.
Conclusion
Navigating the new tax law can feel overwhelming, but you don’t have to do it alone. Whether you’re wondering how the expanded standard deduction impacts your deductions, or how to take advantage of the new SALT cap or QBI changes, the right planning can make a big difference. If you’re unsure how these changes affect your specific situation, or just want a second set of eyes, we’re here to help. Reach out to us anytime; thoughtful, proactive planning today can lead to meaningful savings tomorrow.
If there are any topics you would like us to address in future commentaries, please let us know.
Sources:
https://www.bankrate.com/taxes/standard-or-itemized-tax-deduction/#standard-vs-itemized
Disclosures:
Frontier does not provide tax or legal advice. Please consult with a licensed professional for recommendations pertaining to individual circumstances.
This information has been prepared by Frontier based on data and information provided by internal and external sources. While we believe the information provided by external sources to be reliable, we do not warrant its accuracy or completeness. Nor should their use be construed as an endorsement.
Elevate Wealth Management is the financial planning division of Frontier Asset Management. Frontier Asset Management is a Registered Investment Adviser with the Securities and Exchange Commission. The firm’s ADV Brochure and Form CRS are available at no charge by request at info@frontierasset.com or 307.673.5675 and are available on our website www.frontierasset.com. They include important disclosures and should be read carefully. 20250711.11111