The Big Beautiful Bill (BBB) introduces several new tax benefits designed to provide relief for a broad range of taxpayers. The biggest question we are hearing is, "Am I able to take advantage of these benefits?"  The short answer is that it depends. Many of these provisions are either limited or possibly phased out completely based on your modified adjusted gross income (MAGI). MAGI is generally calculated by taking your adjusted gross income (AGI) and adding back certain items such as tax-exempt interest, foreign earned income exclusions, and other specific deductions.  

Our list of key tax provisions in the Big Beautiful Bill, along with the associated income-based limitations, is a valuable resource. However, it's crucial to remember that additional rules, exceptions, or phaseout mechanics may apply, depending on your unique tax situation. Understanding these individual factors is key to making the most of the new tax benefits.  

State and Local Tax (SALT) Deduction Cap Increase  

Provision: The SALT deduction cap will increase from $10,000 to $40,000 ($20,000 for married filing separately) for tax years 2025 through 2029. The cap will be adjusted annually for inflation by 1%. In 2030, the cap is scheduled to revert to $10,000.  

AGI Limitation: The increased cap begins to phase out for taxpayers with modified adjusted gross income (MAGI) over $500,000 (single or married filing jointly) or $250,000 (married filing separately) in 2025. For high-income taxpayers, the SALT cap will be reduced by 30% of the amount by which their MAGI exceeds the threshold. However, the deduction cannot be reduced to less than $10,000.  

Example: Joint filers with a 2025 MAGI of $550,000 and $40,000 in state and local taxes would see their deduction limited to $25,000. Their income exceeds the threshold by $50,000, and 30% of that excess ($15,000) reduces the deduction from $40,000 to $25,000.  

Impact: High-income taxpayers who pay high amounts of real estate and state and local income taxes may see limited or no additional benefit from the increased SALT cap.  

Senior Deduction (Age 65 and Older)  

Provision: A temporary $6,000 deduction is available for taxpayers aged 65 or older for tax years 2025 through 2028. This deduction applies regardless of whether the taxpayer itemizes or claims the standard deduction.  

AGI Limitation: The deduction begins to phase out for single filers with MAGI over $75,000 and joint filers over $150,000, at a rate of 6%. It is fully phased out for single filers with MAGI above $175,000 and joint filers above $250,000.  

Example: A single filer over age 65 with MAGI of $125,000 would have their deduction reduced to $3,000. This represents a 6% reduction due to the $50,000 of MAGI in excess of the $75,000 limit,  

 mpact: Higher-income senior taxpayers may receive limited or no benefit from this provision.  

No Tax on Tips Deduction  

Provision: For tax years 2025 through 2028, taxpayers working in customarily tipped industries may deduct up to $25,000 of tip income. The deduction is available regardless of whether the taxpayer chooses to itemize or take the standard deduction.  

AGI Limitation: The deduction phases out for single filers with MAGI above $150,000 and joint filers above $300,000. The deduction is reduced by $100 for every $1,000 of MAGI above the threshold.  

Example: A single filer with $25,000 in tip income and MAGI of $200,000 would see their deduction reduced by $5,000, leaving a $20,000 deduction.  

Impact: Tipped workers with higher income levels may experience a partial or complete phaseout of this benefit.  

No Tax on Overtime Pay Deduction  

Provision: For tax years 2025 through 2028, a deduction is available for overtime pay, up to $12,500 for single filers and $25,000 for joint filers. Only the portion of wages earned above the employee's regular hourly rate qualifies.  

AGI Limitation: This benefit phases out by $100 for every $1,000 of MAGI above $150,000 (single) or $300,000 (joint).  

Example: A single filer's normal hourly rate is $30, and overtime is paid at a rate of $45. Only the $15 overtime premium qualifies for the deduction.  If MAGI is under $150,000 when the taxpayer files the tax return, that individual will be able to deduct overtime premiums of up to $12,500.  

Impact: Workers with higher income levels and those who work overtime may experience a partial or complete phaseout of this benefit.  

No Tax on Car Loan Interest  

Provision: For tax years 2025 through 2025, individuals can deduct up to $10,000 of car loan interest per year, regardless of whether they itemize or not. The debt must have been incurred after December 31, 2024, on the purchase of a new vehicle. The vehicle must be for personal (not business) use, have at least two wheels, weigh less than 14,000 pounds, and the final assembly of the vehicle must have taken place in the U.S.   

AGI Limitation: This benefit begins to phase out for single filers with MAGI greater than $100,000 and $200,000 for joint filers. This deduction is phased out by $200 for every $1,000 of MAGI over the limit.  

Example: A single filer with MAGI of $150,000 would not benefit from this deduction, because the $50,000 MAGI over the limit would reduce the benefit to $0.  

Impact: Those with higher incomes may receive little to no benefit from this provision.  

Our dedicated tax team has closely followed all changes throughout the legislative process and is fully prepared to assist you during the upcoming tax season. We understand that these are complex changes, and we're here to answer any questions you may have about how this new policy affects you and your business. Please don't hesitate to reach out to your bhm tax contact for more information and guidance.