The One Big Beautiful Bill: 8 Tax Changes Every Indiana Family and Business Owner Should Know

The One Big Beautiful Bill Act was signed into law on July 4, 2025 — and it's already changing how you file your 2025 return. The new deductions were never built into your withholding, which means many taxpayers overpaid throughout the year and are now seeing larger refunds. 

Here are the 8 provisions that matter most to our Indiana clients, what you need to do about them, and a few traps to avoid. 

One important note before we start: The new deductions for overtime, tips, car loan interest, and seniors all require you to file as single, head of household, or married filing jointly. If you file married filing separately, you cannot claim any of them. 

1. No Tax on Overtime (But It's Not What You Think) 

You've probably heard the phrase "no tax on overtime." It's a bit misleading. Overtime pay is still included in your income and still subject to FICA tax. What you actually get is a new deduction on your return — and it only covers the premium portion of your overtime. 

Example: Your regular rate is $25/hour. Your overtime rate is $37.50/hour. Only the $12.50 premium qualifies — not the full $37.50. 

Who qualifies: Nonexempt W-2 employees covered by the Fair Labor Standards Act — this includes hourly workers and salaried employees who are entitled to overtime under the FLSA. Salaried exempt employees, independent contractors, and gig workers do not qualify. 

The cap: $12,500 per person ($25,000 on a joint return). The deduction phases out starting at $150,000 of income for single filers and $300,000 for joint filers. 

How to claim it: Use the new Schedule 1-A, Part III, with your 2025 return. Your employer was required to report qualified overtime on your 2025 W-2, but a transition rule allows them to approximate the amount using any reasonable method. If the amount isn't broken out clearly on your W-2, keep your own pay stubs as backup. 

2. No Tax on Tips 

Similar to overtime, this is a deduction — not an exclusion — for people who work in occupations that customarily receive tips. Tips are still subject to FICA tax. The IRS published a list of roughly 70 qualifying jobs: servers, bartenders, hairdressers, rideshare drivers, hotel housekeepers, casino dealers, and more. Both employees and self-employed workers can claim it (though self-employed individuals can only deduct tips up to their net business income). 

A few rules people miss: The tip must be voluntary — mandatory service charges don't count. And if your employer is a "specified service trade or business" (think law firms, medical practices, accounting firms), tips earned there may not qualify. 

The cap: $25,000 per year, regardless of filing status. Same income phaseouts as the overtime provision ($150K single / $300K joint). 

Claim it on: Schedule 1-A, Part II. 

3. Car Loan Interest Deduction 

If you financed a brand-new, U.S.-assembled vehicle after December 31, 2024, you can deduct up to $10,000 of loan interest per year through 2028. The vehicle must be for personal use (not business), the loan can't be from a related party, and you'll need to include the VIN on your return. Lease payments do not qualify — this is for financed purchases only. 

How to check if your car qualifies: You can check the vehicle's plant of manufacture through its VIN or the vehicle information label on the dealer's lot. Generally, VINs starting with 1, 4, 5, or 7 indicate U.S. assembly, but verify through official sources to be sure. 

Watch the income limits — they're tighter than the other provisions. Phaseouts begin at $100,000 single / $200,000 joint and the deduction is fully eliminated at $150,000 single / $250,000 joint. 

Claim it on: Schedule 1-A, Part IV. 

4. Seniors Get a New $6,000 Deduction 

If you're 65 or older, you get a new $6,000 deduction ($12,000 if both spouses are 65+) that stacks on top of your standard deduction. For a married couple both over 65 who take the standard deduction, combined deductions can reach $46,700. If you itemize and your itemized deductions exceed $31,500, the total could be even higher — your itemized amount plus the age-related deductions plus the new $12,000 senior deduction. 

Important clarification: Social Security is not tax-free under this law. The existing rules that tax up to 85% of your benefits are still in place. However, with deductions this large, many Social Security recipients below the phaseout thresholds will effectively owe little or no federal tax on those benefits. 

Phaseouts begin at: $75,000 single / $150,000 joint. 

Claim it on: Schedule 1-A, Part V. 

5. Trump Accounts for Kids Born 2025–2028 

If you had a baby in 2025 (or are expecting through 2028), your child is eligible for a Trump Account — a new tax-advantaged savings account that comes with a $1,000 government deposit for U.S. citizens at birth. You can contribute up to $5,000/year, and employers can kick in up to $2,500 (tax-free to you). The money must be invested in low-cost index funds until the child turns 18. 

Important: Your contributions are not tax-deductible (unlike a traditional IRA). The tax benefit is tax-deferred growth — you don't pay tax on gains until funds are withdrawn. 

The catch: No withdrawals before age 18 without a 10% penalty. After 18, the account's contribution and distribution rules follow traditional IRA rules, but it remains a separate account — it doesn't merge into your IRA. 

What to do now: File Form 4547 with your 2025 return or visit trumpaccounts.gov to get started. Accounts officially open July 4–5, 2026. Final regulations are still being issued, so details on contributions and distributions may change — give us a call before making decisions. 

6. Business Owners: 100% Bonus Depreciation Is Back 

The bonus depreciation phasedown — which dropped to 60% in 2024 — has been permanently restored to 100% for assets acquired and placed in service after January 19, 2025. This applies to equipment, machinery, vehicles, computers, and qualified improvement property. 

Indiana note: Indiana still decouples from federal bonus depreciation. However, the Section 179 expensing limit more than doubled to $2,500,000 (up from $1,220,000 in 2024), and Indiana does conform to Section 179. For Indiana tax purposes, Section 179 is your better path. 

If you purchased a heavy SUV or truck (6,001+ lbs GVW) for business use in 2025, you can likely write off 100% of the cost on your federal return. (This is the same strategy from our year-end newsletter — it just got significantly more powerful.) 

7. The 20% Pass-Through Deduction Is Now Permanent 

The Section 199A deduction — which gives most small businesses and rental owners a 20% deduction on their qualified business income — was set to expire after 2025. The new law makes it permanent. 

If your taxable income is under $394,600 (married filing jointly), you generally get the full 20% deduction with no limitations. Above that amount, the deduction may be limited depending on your type of business and whether you pay W-2 wages. 

For S-Corp owners: This permanence gives you more certainty when setting your reasonable compensation. If you need help calibrating your S-Corp wage, reach out — this is one of the highest-impact planning conversations we have with clients every year. 

8. SALT Cap Increased to $40,000 

The state and local tax deduction cap increased from $10,000 to $40,000 ($20,000 for married filing separately) for 2025 through 2029. This only matters if you itemize, and with the standard deduction at $31,500 for joint filers, most Hoosier families will still come out ahead with the standard deduction. 

Watch out if your income is above $500,000. The $40,000 cap is reduced by 30 cents for every dollar your modified AGI exceeds $500,000 ($250,000 for MFS). At $600,000 of income, your SALT deduction drops all the way back to $10,000 — the same as the old cap. This is easy to miss. 

If you have high property taxes and significant state income tax, this is worth running the numbers. Indiana's pass-through entity tax (PTET) election also remains available and is still valuable for business owners with income above $500,000. 

What's Happening in Indiana 

Indiana enacted Senate Bill 243 on March 5, 2026, conforming to the federal overtime, tip, and car loan deductions for tax year 2026 (returns filed in 2027). The state income tax rate also dropped to 2.95% effective January 1, 2026. 

On the property tax side, Senate Bill 1 delivers over $1.3 billion in relief. Look for a new 10% homestead credit (up to $300) on your 2026 property tax bill, plus additional credits for seniors and disabled veterans. The business personal property tax exemption jumped from $80,000 to $2 million. 

The Indiana 529 CollegeChoice credit remains at $1,500 for a $7,500 contribution — still one of the best state tax credits available to Indiana families. 

What You Should Do Now 

1. Check your 2025 return for the new Schedule 1-A deductions (overtime, tips, car loan interest, senior deduction). If you've already filed without them, we can amend. 

2. If you had a baby in 2025 or plan to by 2028, file Form 4547 to set up a Trump Account. 

3. Business owners: Take advantage of the restored 100% bonus depreciation and the doubled Section 179 limit before year-end. Use Section 179 for Indiana purposes. 

4. Seniors: Make sure you're claiming the new $6,000 deduction — it's easy to miss. 

5. Update your withholding. The IRS updated its withholding tables in September 2025, but your employer may not have adjusted yet. Use the IRS Tax Withholding Estimator to make sure you're not over- or under-withholding for the rest of 2026. 

If any of these ideas seem applicable, please reach out to us so that we can sort through the details with you. These rules are new, guidance is still evolving, and the devil is in the details. Call us at 317.867.5427. 

IRS Circular 230 Disclosure: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing, or recommending to another person any tax-related matter. Please contact us if you wish to have formal advice on these matters.