π New Tax Law Calculator (2025-2028)
Your tax under the One Big Beautiful Bill Act.
Tax under new law
Estimates for planning only, not financial advice.
Single filer, $80,000 in wages plus $10,000 in tips: under the old law the federal tax is $10,970; under the One Big Beautiful Bill Act it is $8,770. The $10,000 tips deduction, taken above the line, saves $2,200. That is the new law's headline promise working exactly as advertised.
How to Use This Calculator
Enter wages, tip income, and overtime pay, plus filing status and whether you are 65 or older. The calculator computes your tax under the new law (2025-2028 provisions) and under the old rules, with the phaseout applied.
Enter each income type separately. Tips and overtime get special deductions; wages do not.
Check the senior box if 65+. The $6,000 senior deduction stacks with the others.
Watch the phaseout: above $150,000 single / $300,000 joint MAGI the new deductions shrink fast.
The New Deductions
All three are above-the-line deductions: they reduce AGI itself, which can also help with credits and phaseouts tied to AGI. Only FLSA-required overtime qualifies, not extra shifts under 40 hours. Tips must be reported tip income in tipped occupations. And all three expire after 2028 unless Congress extends them.
Worked Example
Single, $80,000 wages + $10,000 tips, MAGI $90,000 (no phaseout). Old law: taxable = 90,000 - 16,100 = $73,900; tax = $10,970 (computed in the bracket example). New law: tips deduction $10,000, taxable = $63,900; tax = 1,240 + 4,560 + 2,970 = $8,770. Savings: $2,200, exactly the 22 percent marginal rate times the $10,000 deduction. Add $12,500 of overtime and the savings grow by another $2,750 at the same marginal rate.
The Phaseout Cliff
| Single MAGI | New deductions kept |
|---|---|
| $150,000 | 100% |
| $155,000 | 50% |
| $160,000 | 0% |
The phaseout is brutal by design: $100 of deduction lost per $1,000 of income means a 10 percent haircut per thousand, so the benefit vanishes entirely within $10,000 of income. Earning $160,000 instead of $150,000 costs you the whole deduction plus the regular tax on the extra income. If you are near the cliff, every dollar of 401(k) contribution or HSA contribution that lowers MAGI is worth double.
What Else the OBBBA Changed
The tips/overtime/senior provisions are the visible part. The Act also made the 2017 individual rate structure permanent (no more sunset), raised the standard deduction (2025: $31,500 joint / $15,750 single), set the SALT cap at $40,000 for 2025-2029, created Trump Accounts for children, and expanded the child tax credit. This calculator isolates the three new deductions; for the full bracket picture see our 2026 tax bracket finder, and for the child savings piece the Trump Account calculator.
Planning Moves
The playbook is straightforward: tipped workers should ensure every dollar of tip income is reported (unreported tips cannot be deducted), hourly workers should verify their overtime is FLSA-qualifying, and anyone near $150,000/$300,000 MAGI should max pre-tax contributions to stay under the cliff. The 2028 sunset means there is a use-it window: deductions taken in 2025-2028 are banked regardless of later law changes. And keep records: the IRS will absolutely ask tipped workers to substantiate the deduction.
Adjusting Withholding for 2025-2028
Standard withholding tables do not know about your tips deduction, so tipped workers will be systematically over-withheld from 2025 through 2028 unless they act. The fix is Form W-4: use the deductions worksheet to reflect the expected tips and overtime deductions, reducing withholding to match the actual lower liability. A server expecting a $10,000 tips deduction at a 22 percent marginal rate should reduce withholding by about $2,200 a year, or roughly $85 per biweekly paycheck.
Be conservative in year one. The IRS guidance on substantiation is still developing, and under-withholding triggers penalties if you owe too much at filing. A reasonable approach: adjust for half the expected benefit in the first year, true up at filing, then calibrate fully in year two with actual numbers. Keep tip logs immaculate regardless: the deduction is only as good as your documentation if examined.
Plan for the Law as Written, Not as Promised
Tax planning under the 2025 provisions rewards one habit above all: acting on enacted law while ignoring proposed changes. The tips and overtime deductions, the senior bonus deduction, and the extended individual rates are real through 2028; proposals beyond that are speculation. Adjust withholding now to match the new law, harvest the new deductions while they exist, and revisit every provision at its sunset date. Congress writes tax law in pencil after 2028. Plan in ink only through the current statute.
Keep perspective on magnitude. For most households, the new deductions are worth hundreds, not thousands; the big dollars remain in classic moves like maximizing pre-tax retirement contributions, harvesting capital losses, and bunching charitable deductions. Do not let a $500 new deduction distract from a $5,000 missed 401(k) contribution. Work the big levers first, then optimize the new ones.
Estimates for planning only, not financial advice.
Frequently Asked Questions
What is the One Big Beautiful Bill Act tax law?
The 2025 tax legislation (Public Law 119-21) that made the 2017 individual tax rates permanent, raised the standard deduction, set the SALT cap at $40,000 for 2025-2029, and added temporary 2025-2028 deductions for tips, overtime, and seniors 65+. It also created Trump Accounts for children and expanded the child tax credit, making it the biggest tax rewrite since 2017.
Is there really no tax on tips now?
Not exactly: up to $25,000 of tip income per year is deductible from income for 2025-2028, phasing out above $150,000 single / $300,000 joint MAGI. You still pay tax on tips above $25,000 and on the income itself for FICA purposes; the deduction just removes it from income tax.
How does the no-tax-on-overtime deduction work?
Up to $12,500 single ($25,000 joint) of FLSA-required overtime pay is deductible for 2025-2028. Only overtime required by the Fair Labor Standards Act (hours over 40/week) qualifies; extra shifts under 40 hours do not. Same MAGI phaseout as tips. State-law daily overtime (like California's) does not count unless it also satisfies the federal 40-hour rule.
What is the $6,000 senior deduction?
Filers 65 and older get an additional $6,000 deduction for 2025-2028, on top of the standard deduction and the existing age-65 extra amount. It phases out over the same $150k/$300k MAGI thresholds. It stacks with the tips and overtime deductions.
How does the phaseout work?
Above $150,000 single or $300,000 joint MAGI, each $1,000 of additional income reduces the new deductions by $100 (10%). The benefit hits zero $10,000 above the threshold. Married filing separately is generally excluded from these deductions. Near the cliff, a $1,000 401(k) contribution can preserve $100 of deduction plus save regular tax: double value per dollar.
Do the new deductions expire?
Yes, after 2028 unless Congress extends them. The rate-structure permanence and standard deduction changes are permanent, but tips, overtime, and senior deductions are temporary. Plan as a 2025-2028 window. Deductions you claim during the window are banked regardless of what later Congresses do, so there is no reason to wait.
Do I need to itemize to claim them?
No. All three are above-the-line deductions, claimed whether you itemize or take the standard deduction. They reduce AGI itself, which can also help with AGI-linked credits and phaseouts. Lower AGI can even pull you under other thresholds, like the student loan interest deduction phaseout, creating stacked benefits.
Are tips still subject to Social Security tax?
Yes. The deduction applies to income tax only; FICA taxes on tip income still apply. This is a common misunderstanding: 'no tax on tips' means no federal income tax on up to $25,000, not zero taxes entirely. Your W-2 will still show Social Security and Medicare tax on the full tip amount; only the income tax line shrinks.
What records do I need for the tips deduction?
Report all tip income as required (Form 4137 for unreported tips), keep daily tip logs, and ensure the tips are from a tipped occupation. The IRS is expected to scrutinize these deductions, so documentation matters more than usual. A simple daily log, date, shift, tips received, takes two minutes and is the difference between a clean deduction and a disallowed one.
Should I change my withholding?
Probably, if the deductions apply to you: your actual tax will be lower than standard withholding tables assume. Adjust Form W-4 to avoid over-withholding, but conservatively in year one until the IRS issues detailed guidance and your situation is clear.