OBBBA Deduction Limits, 2025–2028
Every cap, phase-out threshold, and phase-out rate for the three deductions created by the One Big Beautiful Bill Act, in one table, pulled straight from the same data this site's calculators run on.
Reviewed by Saurabh Sharma and Ashay Saraswat · last verified August 30, 2026 against IRS Schedule 1-A (Form 1040) instructions.
| Deduction | Cap (single/HoH) | Cap (MFJ) | Phase-out starts | Rate per $1,000 | MFS status |
|---|---|---|---|---|---|
| Qualified overtime | $12,500 | $25,000 | $150,000 / $300,000 | $100 | Ineligible |
| Qualified tips | $25,000 | $25,000 | $150,000 / $300,000 | $100 | Ineligible |
| Car loan interest | $10,000 | $10,000 | $100,000 / $200,000 | $200 | Eligible ($10,000 cap per return) |
Years covered: 2025–2028. Threshold column reads single/head of household figure, then married filing jointly figure. Car loan interest thresholds are $100,000 single and $200,000 joint, half of the overtime/tips thresholds; the table above lists overtime/tips thresholds in the shared column for scannability, see the row-specific note below for car loan figures.
How the phase-out actually works
Each deduction has a cap and a modified adjusted gross income (MAGI) threshold above which that cap starts shrinking. For overtime and tips, the reduction is $100 for every $1,000 (or part of $1,000) your MAGI sits above the threshold, rounded down to the nearest $1,000 of excess before applying the rate. Car loan interest uses a steeper $200-per-$1,000 rate, rounded up instead of down, on a lower starting threshold. None of the three deductions can go below zero; once the phase-out consumes the full cap, the deduction is simply unavailable at that income level.
The car loan interest deduction's thresholds, $100,000 single and $200,000 married filing jointly, are exactly half of the overtime and tips thresholds. That's a real distinction in the law, not a typo, so don't assume all three deductions share one income ceiling.
What stays fixed, and what to watch
Unlike the standard deduction and federal tax brackets, which the IRS adjusts for inflation every year, these three OBBBA caps and thresholds are fixed dollar amounts written directly into the statute. The same numbers on this page apply in 2025 and in 2028, with no annual inflation bump in between. The one figure worth re-checking before you rely on it for a car purchase decision is the car loan interest phase-out rate itself: it's confirmed against the actual Schedule 1-A worksheet, but the underlying Treasury regulation was still in proposed (not final) form as of this page's last-verified date.
All three deductions are above-the-line, meaning they reduce your adjusted gross income whether you itemize or take the standard deduction, and all three are claimed on the same new form, Schedule 1-A, attached to Form 1040. For the mechanics of filing, seehow to claim Schedule 1-A.
This is general information, not tax advice. Figures are based on published IRS guidance for tax years 2025–2028. Confirm your own numbers with a tax professional or the IRS before filing. Every calculator linked from this page runs entirely in your browser.
Frequently asked questions
What are the OBBBA deduction limits for 2026?
Three above-the-line deductions came out of the One Big Beautiful Bill Act: qualified overtime, capped at $12,500 single or $25,000 married filing jointly; qualified tips, capped at $25,000 regardless of filing status; and car loan interest, capped at $10,000. All three phase out at higher incomes and are available for tax years 2025 through 2028.
What income disqualifies you from the no tax on overtime and tips deductions?
Both deductions start phasing out once modified adjusted gross income passes $150,000 (single or head of household) or $300,000 (married filing jointly), reduced by $100 for every $1,000 of MAGI over that threshold. The overtime deduction reaches zero at $275,000 single or $550,000 joint; the tips deduction phases out the same way since it shares the same threshold and rate.
Is the car loan interest deduction phase-out rate different from overtime and tips?
Yes, and it's a common point of confusion. Overtime and tips phase out at $100 per $1,000 of MAGI over the threshold. Car loan interest phases out at $200 per $1,000, twice the rate, starting at a lower threshold of $100,000 single or $200,000 joint.
Can married couples filing separately claim these deductions?
It depends which one. Married filing separately makes you ineligible for both the overtime and tips deductions entirely, no partial amount, no exceptions. The car loan interest deduction is different: MFS filers can still claim it, capped at $10,000 per return.
Do these deduction limits change every year through 2028?
No. The caps, thresholds, and phase-out rates on this page are fixed for the life of the provision, tax years 2025 through 2028. They aren't adjusted for inflation each year the way standard deduction and bracket figures are. Barring a new law from Congress, the same numbers apply in 2028 as they did in 2025.
What happens to these deductions after 2028?
They're scheduled to expire after the 2028 tax year unless Congress passes new legislation extending them. There's no automatic renewal built into the law as written.
Are these deductions available whether I itemize or take the standard deduction?
Yes. All three are above-the-line deductions claimed on Schedule 1-A (Form 1040), which means they reduce your adjusted gross income before the standard-deduction-versus-itemizing decision even comes into play. You don't have to give up the standard deduction to claim any of them.