Trump's Temporary Tax Breaks: 5 'Big Beautiful Bill' Provisions at Risk

Understanding the Temporary Tax Breaks in the New Legislation

Millions of Americans are set to experience significant changes in their tax bills due to a new piece of legislation known as the “big beautiful bill.” This sweeping tax reform includes several key benefits that could offer relief to various groups of taxpayers. However, it's important to note that many of these provisions come with an expiration date, meaning they will not be available indefinitely.

Key Tax Breaks and Their Implications

1. Increased State and Local Tax (SALT) Deduction

One of the most notable changes is the increase in the cap on the state and local tax (SALT) deduction from $10,000 to $40,000 for a period of five years. This adjustment was a point of contention during the negotiations of the bill, with some Republican lawmakers insisting on the increase to support residents in high-tax states. The SALT deduction is set to adjust annually for inflation starting in 2026, but it will revert to the original $10,000 limit after 2029 unless Congress extends it.

The enhanced SALT deduction also phases out for taxpayers with modified adjusted gross income (MAGI) of $500,000 or more in 2025. If this provision expires, individuals in high-tax states could lose a significant deduction, making it crucial to plan accordingly.

2. Elimination of Taxes on Tips

A major campaign promise by President Trump has now become law: the temporary elimination of taxes on tips for some workers. Starting in 2025, eligible taxpayers can deduct up to $25,000 of tip income when filing their federal income tax return. This benefit applies to both employees and independent contractors, provided their gross income exceeds their business expenses, excluding the tip deduction itself.

To qualify, a taxpayer’s MAGI must not exceed $150,000 for single filers or $300,000 for married couples filing jointly. This provision is in effect from 2025 through 2028.

3. Overtime Pay Deduction

Workers who take on extra shifts may now qualify for a temporary tax break on their overtime pay. From 2025 through 2028, single filers can deduct up to $12,500 of overtime pay, while married couples filing jointly can deduct up to $25,000. Like the tip deduction, this benefit is available regardless of whether a taxpayer itemizes or takes the standard deduction.

To qualify, taxpayers must provide a valid Social Security number, and their MAGI must remain below the specified thresholds. These deductions will phase out for those exceeding these limits.

4. Bonus Deduction for Seniors

Taxpayers aged 65 or older can benefit from a temporary tax break of up to $6,000 from 2025 through 2028. This bonus deduction aims to ease the financial burden on older Americans. To qualify, seniors must meet specific income requirements, with single filers needing to have income below $75,000 and married couples filing jointly needing to have income below $150,000.

For married couples where both spouses are 65 or older and meet the income thresholds, the deduction doubles to $12,000. This deduction can be claimed whether taxpayers itemize or take the standard deduction.

5. Auto Loan Interest Deduction

Car owners can now claim a temporary deduction allowing up to $10,000 in interest paid on qualified auto loans to be deducted on their tax return. This provision applies to tax years 2025 through 2028, after which it will no longer be available unless Congress extends it.

To qualify, the vehicle must be used for personal purposes, weigh less than 14,000 pounds, and be assembled in the United States. Taxpayers must also meet income requirements, with MAGI not exceeding $100,000 for single filers or $200,000 for married couples filing jointly.

Final Thoughts

While these tax breaks offer valuable relief, it's essential to remember that they are temporary. Many of these provisions are scheduled to expire in 2028 unless Congress acts to extend them. Taxpayers should take full advantage of these opportunities before the window closes, ensuring they make the most of the available benefits. Planning ahead can help individuals and families maximize their savings and navigate the complexities of the tax code effectively.