Americans may be able to save more money on taxes because of Donald Trump’s One Big Beautiful Bill Act (OBBBA). The law introduced several new tax deductions that can lower taxable income and increase refunds. Most of the benefits focus on workers who earn tips, overtime pay, seniors, vehicle owners and homeowners.
Tip income is no longer taxed under the new law. Eligible workers can deduct up to $25,000 of tip income from their taxable income through 2028, as stated in the report by The Sun. Married taxpayers who file separate tax returns cannot claim this deduction.
Overtime pay also gets a tax break
Qualified overtime earnings are also exempt from tax under the OBBBA. Single filers, heads of household and qualifying surviving spouses can deduct up to $12,500 of overtime income. Married couples filing jointly can deduct up to $25,000 in overtime income, as noted by The Sun. This benefit is available over the next two years.
New deduction for many taxpayers
Additional Republican spending measures linked to the bill created a new “above-the-line” deduction. Single taxpayers can claim a $1,000 deduction. Married couples filing jointly can claim a $2,000 deduction.
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The Car buyers get another tax benefit. Americans can deduct up to $10,000 in interest paid on qualified loans for new personal-use vehicles, as noted by The Sun. This deduction applies to eligible new vehicle loans.
Seniors receive one of the biggest benefits
Americans aged 65 and older can deduct an extra $6,000 from their taxable income. Married couples where both spouses qualify can each claim the $6,000 deduction. This means some married seniors could deduct a total of $12,000.
Qualified mortgage interest remains deductible under the law. Property taxes can also be deducted through 2028.
If you come under the high-income earning category then you may not get the full benefit. The deductions are not available in full to everyone. Benefits start to phase out once taxpayers cross certain income limits.
Many Americans already plan their refunds months in advance
A new survey by Talker Research found that many Americans start planning how to use their tax refund about six months before receiving it, according to Talker Research. The survey included 2,000 U.S. taxpayers. Around 79% of respondents said they expect to receive some kind of tax refund this year.
Tax refunds are important for household budgets
More than half of respondents (52%) said their tax refund plays an important role in their yearly budgeting plans. Most people said they plan to use the money for essential expenses. About 77% said they would spend their refund on necessities, as noted by Talker Research.
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Bills, groceries and debt are top spending priorities
Around 52% of respondents said they would use their refund to pay bills such as rent. About 44% planned to spend it on groceries and other essential items. Around 37% intended to use the money to pay off credit card debt. More than half of those paying credit card debt (56%) said they were specifically targeting debt from holiday season spending.
Some Americans plan to spend on non-essential items
About 8% of respondents said they planned to spend their refund on luxuries. Among those making luxury purchases, 37% planned to buy new clothes. Around 28% planned to spend on entertainment. About 26% wanted to buy a new phone.
Average refund expectations remain high
The survey found that the average taxpayer hopes to receive around $1,700 as a refund this year. The study was commissioned by TaxSlayer and conducted by Talker Research.
People have mixed expectations for this year’s refunds
Around 22% believe they will receive a larger refund than last year. About 26% expect to receive less money than they got last year. Roughly 51% think their refund amount will stay about the same, as per the Talker Research cited by The Sun.
About 12% said they received a larger refund than expected last year. Around 20% said their refund was smaller than they had expected.
Why some people expect bigger refunds this year
Many respondents expecting larger refunds said they had more tax withheld from their paychecks through their W-2 forms. Others said they earned more money during the year. Some expected a larger refund because they recently had a newborn child.
Why some people expect smaller refunds this year
Some respondents said losing a job could reduce their refund. Others said owing back taxes may lower the amount they receive. Some pointed to children becoming adults and no longer qualifying for certain tax benefits. Others blamed higher tax rates for expecting a smaller refund.
The OBBBA gives tax breaks for tips, overtime pay, seniors, vehicle loan interest, mortgage interest and property taxes, as per the report by The Sun. These deductions can reduce taxable income and potentially increase tax refunds. At the same time, survey data shows most Americans depend on refunds to cover everyday expenses rather than luxury spending.