New deductions for seniors, tipped workers and overtime, plus a tax hit on gamblers, have generated confusion, misinformation and outrage.
New deductions for seniors, tipped workers and overtime, plus a tax hit on gamblers, have generated confusion, misinformation and outrage.
Misinformation about the One Big Beautiful Bill Act (OBBBA) was rampant even before President Donald Trump signed it into law on Thursday, July 4, 2025. Taxpayers and TikTokers posted articles mistakenly touting provisions that didn’t make the final cut. (One dropped provision, for example, allowed Medicare Part A beneficiaries to contribute to Health Savings Accounts.) Worse, misinformation was spread by the government itself—Trump falsely claimed the law “eliminates” taxes on Social Security benefits, and a misleading mass email from the Social Security Administration added to the confusion.
The problem is that OBBBA is an 800+ page bill with dozens of complicated tax and other provisions–some permanent and some temporary; some delayed and some retroactive; some familiar and some entirely new. There are phase outs, limits and gotchas that simply can’t be explained in sound bites. Many of these complications are meant to either limit the cost of tax breaks or to prevent anticipated abuses. Warning: There are some answers that even tax lawyers like me can’t be sure of, until the Treasury and IRS issue regulations.
Take the provision that supposedly fulfills Trump’s “no tax on tips” campaign promise. It’s retroactive to the start of the year, but only lasts through 2028. It protects up to $25,000 in tips from income tax (but not Social Security or Medicare taxes), if, that is, you work in a job that is traditionally tipped and don’t earn too much. (Which jobs are covered? That awaits word from the IRS, though presumably servers, casino dealers and delivery drivers will qualify.)
The Joint Committee on Taxation (JCT) estimates that the tax cuts in OBBBA will reduce federal revenues by $4.475 trillion between 2025 and 2034. Some taxpayers assume that means that the cuts will offers lots of benefits to families across the board. Not exactly.
A Tax Policy Center analysis suggests the law distributes most of its benefits to high income households, with households making between $460,000 and $1.1 million getting a 4.4% boost to their after -tax incomes, compared with a 2.3% after-tax gain for middle-income households making between $67,000 and $119,000. Households earning less than $35,000 will get less than a 1% after-tax boost and will end up worse off, after taking into account the law’s cuts to Medicaid, SNAP (food stamps), and Affordable Care Act health insurance subsidies.
One thing is true across the board: The new law contains enough changes and complexity to make planning and compliance in the short run more difficult for both individuals and businesses–and to make a lot of extra work for the IRS.
In addition to issuing guidance, the tax agency will have to revise form W-2 (to allow workers to claim a new break for overtime which lasts from 2025 through 2028) and create new withholding tables (to adjust for the tax breaks for tips and overtime). These administrative changes will coincide with preparations for the run-up to the next tax season, including reworking existing IRS software and tax forms. (Drafts of tax forms for the 2025 tax year, including Form 1040, are already available on the IRS website and will have to be revised.)
And all of that work? It will have to be done by an IRS workforce that has already been reduced by 25% (for more on reductions at the IRS, including a detailed breakdown of employee losses, click here). And it will all be overseen by a new IRS Commissioner who has little to no tax experience.
To help cut through the fog—and separate text from guesses (and occasionally, some truly terrible AI takes), our Forbes team has been combing through the new law to provide you with information you need (or want) to know about the individual tax cuts. The questions below are some of the top ones I’ve gotten on social media, via email, and in a Reddit Ask Me Anything session.The $6,000 Senior Deduction
Q: The SSA email promises that 90% of social security recipients will pay no federal taxes on their Social Security income. Any truth to that?
A: That’s complicated. The email was misleading in that there is no separate provision in the new law that specifically relates to taxes on Social Security. Instead, under OBBBA, seniors aged 65 and older are eligible to claim a new, temporary deduction of $6,000 beginning in 2025—the deduction would expire after 2028. The deduction would be available to taxpayers who itemize and those who claim the standard deduction. This is a stand-in for Trump’s “no tax on Social Security” promise.
The new deduction is per qualifying senior, not per tax return, so a married couple could get an extra $12,000 deduction. It’s also age-dependent, not benefits-dependent, so it’s possible that you could receive Social Security benefits (if you took them at, say, age 62) and not qualify for the deduction. The opposite is also true–if you chose to delay your benefits until, say, age 67, and you are now 65, you would qualify for the deduction. Once you reach retirement age, whether your Social Security benefits are taxable depends on your filing status and how much other income you receive.
