'No Tax On Car Loan Interest, Overtime': Decoding Trump's One, Big, Beautiful Bill —Who Qualifies, Who Doesn't
People with a Social Security number (SSN) who claim itemised or non-itemised deductions qualify for tax benefits on overtime.
US President Donald Trump’s One Big Beautiful Bill will be one of the principal drivers of the US economy in 2026. Many provisions of the bill, signed into law by Trump on Jul. 4, 2025, came into existence on Jan. 1, such as the expiration of the Energy Efficient Home Improvement Credit for properties. The One Big Beautiful Bill puts forward several tax benefits for Americans, in a bid to boost savings. The bill also states that no taxes will have to be paid on overtime and car loan interest.
According to the Internal Revenue Service (IRS), the rule is effective from 2025 to 2028. For the no taxes on overtime clause, the maximum annual deduction is $12,500 for individual taxpayers and $25,000 for joint filers. Here is everything you need to know about the rules.
No Tax On Overtime- Who Qualifies, Who Doesn’t?
The rule states that “individuals may deduct the portion of qualified overtime pay that exceeds their regular rate of pay.” The overtime can be reported using either Form 1099, Form W-2, Form 1099, another statement furnished to the individual, or directly by the taxpayer.
The deduction only applies to wages that are paid in excess of the employee’s normal wage rate. This means if an employee is paid $20 per hour in normal cases, but $30 an hour for overtime, he can deduct $10 per hour in overtime pay.
As per the National Association of Home Builders, not all overtime is eligible for the deduction. The additional wages must be paid in accordance with Section 7 of the Fair Labor Standards Act of 1938 (FLSA), which applies to employees who work over 40 hours per week. Furthermore, overtime paid under state law or contractual agreements does not qualify unless it satisfies the definition of overtime given by the Fair Labor Standards Act of 1938 (FLSA). Overtime wages are still subject to payroll taxes such as Medicare and Social Security.
People with a Social Security number (SSN) who claim itemized or non-itemized deductions qualify for this benefit. The deduction is phased out for taxpayers who have a modified adjusted gross income over $150,000 or $300,000 in the case of joint filers.
No Taxes On Car Loan Interest: Who Qualifies, Who Doesn’t?
Taxpayers may deduct interest paid on a loan used to buy a qualified vehicle for personal use that meets other eligibility criteria. The interest can be paid on a loan that originated after Dec. 31, 2024, and was used to purchase a vehicle originally used by the taxpayer for personal (non-business) use. Loans eligible under the benefit need to be secured by a lien on the vehicle. If the debt is later refinanced, the interest paid on the refinanced amount is usually eligible for the benefit.
Lease payments do not qualify for the benefit. A maximum benefit of $10,000 can be availed by taxpayers. The deductions phase out for taxpayers with a modified adjusted gross income of more than $100,000. For joint filers, the deductions phase out for taxpayers with modified adjusted gross income of over $200,000.
Other Provisions In Trump’s Big Beautiful Bill
The bill also includes a $6,000 additional deduction for taxpayers aged 65 years or older, cuts in Medicaid and Supplemental Nutrition Assistance Program (SNAP), and phases out credits for solar and wind projects, Axios reported. No taxes on tips and state and local tax deduction (SALT) cap increases were also passed into effect under the legislation.
