President Donald Trump signed the “One Big Beautiful Bill Act” (OBBBA), a reconciliation bill for fiscal year 2025, into law on July 4. The legislation makes sweeping budget reforms, including tax cuts that permanently increase the child tax credit and expand the standard deduction.
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But some of the new tax cuts are temporary, and they’re scheduled to sunset in 2028. Keep reading to find out which tax cuts are temporary and how to maximize the savings while they last.
4 Trump Tax Cuts Set To Expire in 2028
The OBBBA includes provisions for some temporary federal income tax cuts. All are retroactive to Jan. 1, 2025. While the cuts don’t apply to payroll tax, you can claim them whether you take the standard deduction or itemize.
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No Tax on Tips
The OBBBA lets tipped workers in certain industries deduct up to $25,000 in tips from their taxable income. The deduction phases out for taxpayers who have a modified adjusted gross income of $150,000 ($300,000 for joint filers).
No Tax on Overtime
If you receive qualified overtime pay, you’re allowed to deduct up to $12,500 of it ($25,000 for joint filers) from your taxable income under the OBBBA. This cut phases out at $150,000 ($300,000 for joint filers) in modified adjusted gross income.
No Tax on Car Loan Interest
The OBBBA deduction for car loan interest applies to loans used to purchase a new car, minivan, van, SUV, pickup truck or motorcycle. To qualify, the vehicle’s final assembly must’ve occurred in the U.S. The deduction phases out after $100,000 ($200,000 for joint filers) in modified adjusted gross income.
Deduction for Seniors
Seniors ages 65 and older get up to a $6,000 deduction ($12,000 for joint filers) under the OBBBA. The deduction phases out once your modified adjusted gross income exceeds $75,000 ($150,000 for joint filers).
How To Maximize Your Savings Before the Tax Cuts Expire
While these cuts are not permanent, their tax savings can go a long way if you make good use of the money. Here are a few things you could consider doing with the savings.
- Pay down debt: You can make a nice dent in your credit card balances by using your tax savings to make extra payments each time you get paid. A popular debt payoff strategy is to start with the account that has the highest interest rate.
- Bulk up your emergency savings: An emergency savings account is your best defense against having to use a credit card or high-interest loan to cover an unexpected expense. Fidelity suggests starting with a $1,000 savings goal, then working toward saving enough to cover three to six months’ worth of living expenses.
- Max out retirement account contributions: Start with your 401(k) if your employer matches your contributions. If you don’t have one or already get the full employer match, consider contributing to an individual retirement account — or, if you have an eligible health insurance plan, a health savings account.
- Save for when the tax cuts end: The sudden decrease in take-home pay might throw your budget off. Having a little extra saved will help ease you through the transition. Keep this money separate from your emergency savings.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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This article originally appeared on GOBankingRates.com: 4 of These Trump Tax Cuts Are Short-Lived — Here’s How To Maximize Them Before They Expire
