TAX · OBBBA

OBBBA Tax Savings Calculator

Estimate your tax savings under the One Big Beautiful Bill Act (OBBBA). Covers the no-tax-on-tips provision (up to $25,000), no-tax-on-overtime, and the $6,000 senior deduction.

LAST REVIEWED · APR 10, 2026 · BY M. REYES, CPA
You need
$3,213
Est. cost
$0
OBBBA SavingsReset
Regular IncomeW-2 base wages
$45,000
$0$200K
Tip IncomeExempt up to $25K
$15,000
$0$50K
Overtime IncomeAll overtime exempt
$8,000
$0$50K
Filing Status
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What is the OBBBA?

The One Big Beautiful Bill Act, signed into law in 2025, introduced three major individual tax provisions: no federal income tax on tips (capped at $25,000/year), no federal income tax on overtime pay, and a $6,000 additional standard deduction for seniors (age 65+).

Who benefits most?

Workers in tipped industries (restaurants, hospitality, rideshare) and hourly workers who regularly earn overtime see the biggest savings. A server earning $20,000 in tips could save $2,400-$4,400 in federal tax depending on their bracket. A senior on a fixed income saves $720-$2,220 from the additional deduction.

Important limitations

The tip exclusion only applies to federal income tax — not FICA (Social Security and Medicare). Tips above $25,000 are still taxable. And the overtime exclusion applies only to hours worked beyond 40/week as defined by the Fair Labor Standards Act.

Methodology. Computes federal tax with and without OBBBA provisions. Tip deduction: excludes tip income up to $25,000 from taxable income. Overtime deduction: excludes overtime pay from taxable income. Senior deduction: additional $6,000 deduction for taxpayers 65+. All deductions applied after the standard deduction.

Sources

  • One Big Beautiful Bill Act (H.R. 1, 2025) — enacted provisions
  • IRS Notice 2025-XX (implementation guidance)
  • Joint Committee on Taxation revenue estimates
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Frequently asked questions

Are tips still subject to Social Security and Medicare tax? +
Yes. The OBBBA only exempts tips from federal income tax. You still owe the 6.2% Social Security and 1.45% Medicare on all tip income.
Does the no-tax-on-overtime apply to salaried workers? +
No. The provision applies only to overtime pay as defined by the FLSA — hours over 40/week for non-exempt (typically hourly) employees. Salaried-exempt workers don't earn overtime and don't qualify.
Can I claim the senior deduction and the regular standard deduction? +
Yes. The $6,000 OBBBA senior deduction stacks on top of the regular standard deduction and the existing additional standard deduction for those 65+.
Is the $25,000 tip cap per person or per household? +
Per person. Each qualifying worker can exclude up to $25,000 in tip income from federal income tax, regardless of filing status.
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