This information was sent to customers by email. It talks about the One Big Beautiful Bill Act, what we know, and what we are waiting on before changes are made to Connect applications.
On August 7, 2025, the IRS issued IR-2025-82, announcing that in the implementation of the One Big Beautiful Bill Act (OBBBA), there will be no changes to critical payroll information forms or federal withholding tables for Tax Year 2025. The IRS has confirmed that Form W-2, existing Forms 1099, Form 941, and other payroll reporting forms remain unchanged, employers and payroll providers should continue using existing procedures. (IRS)
This decision aims to minimize disruptions during the upcoming tax season and provide ample time for stakeholders to prepare for future changes. (payroll.org)
Looking forward, the IRS is actively developing new guidance and updated tax forms for Tax Year 2026. These updates will include revised reporting requirements for items such as tips and overtime pay, reflecting OBBBA provisions. The IRS plans to coordinate with employers, payroll providers, and tax professionals to ensure a seamless transition. Taxpayers should anticipate additional guidance in the coming months on how to claim OBBBA-related tax benefits when filing. (Current Federal Tax Developments)
Enacted on July 4, 2025, OBBBA is a sweeping over haul of the U.S. tax code, with numerous permanent extensions and new provisions set to impact individual taxpayers beginning Tax Year 2025.
Permanent Tax Cuts & Deductions: TCJA-era tax brackets and enhanced standard deductions are now permanent. For 2025, standard deductions are set at:
$15,750 for single filers
$23,625 for heads of household
$31,500 for married filing jointly
SALT Deduction Cap Boost: The state and local tax (SALT) cap increases from $10,000 to $40,000 ($20,000 for married filing separately), with inflation indexing through 2029. Phaseouts apply above certain income thresholds, but the cap will not fall below $10,000 in high-income cases.
New “No Tax On…” Deductions (2025–2028):
Tips: Up to $25,000 deduction on qualified tips.
Overtime Pay: Deduction on FLSA-mandated overtime premium—up to $12,500 individually.
Both phase out at $150,000 (single) / $300,000 (joint). Employers must report these amounts on W-2s/1099s. (IRS)
Deduction for Car Loan Interest: Up to $10,000 on interest for loans tied to new, U.S.-assembled passenger vehicles purchased after December 31, 2024. Phaseouts apply at $100,000 (single) / $200,000 (joint). Requires detailed reporting, including VIN, on tax returns. (IRS)
Senior Deduction: Individuals aged 65 or older are eligible for an additional $6,000 deduction (per individual) through 2028, with income-based phaseouts. (IRS)
Other Perks & Extensions:
Estate and gift tax exemption increases in 2026;
Expanded 529 plan uses and $20,000 annual limit;
Non-itemizer charitable deductions restored;
Clean energy credits and Opportunity Zone incentives continue—though certain energy credits have devolving or early sunset provisions
For Tax Year 2025:
Payroll reporting and withholding processes remain unchanged—continue as usual.
Stay alert for the coming IRS guidance that will outline how to claim OBBBA tax benefits correctly.
For Tax Year 2026 and Beyond:
Get ready for important shifts: new deductions for tips and overtime; expanded vehicle interest and senior deductions; higher SALT caps; and broader tax planning opportunities.
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