Mike H. from Frederick, MD asks: I was wondering if you could provide just a quick breakdown of some of the tax breaks for individuals. In Maryland, I would benefit from increases to the SALT deduction, but I’m also curious about overtime. Any insight would be appreciated.
Mitch’s Response:
Thanks for writing, Mike. There are too many provisions in the tax bill to review each one here, but I will try to focus my response on the areas you specified, plus some other key provisions for individuals.
As you mentioned in your question, one of the most widely publicized changes is the expansion of the SALT deduction—the itemized write-off for state and local taxes. Since 2017, this deduction has been capped at $10,000. The new bill raises the cap to $40,000 starting this year. That sounds like a big win, but there’s a twist: the expanded deduction phases out completely for filers with modified adjusted gross income (MAGI) above $600,000. That means the highest-earning taxpayers in high-tax states are still shut out.1
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There’s also a marriage penalty. The $40,000 cap applies per tax return, not per person. Two unmarried individuals can potentially deduct up to $80,000 combined, while a married couple filing jointly is stuck at $40,000. For those trying to preserve their eligibility, tax planning can help. Contributing to a 401(k), IRA, HSA, or dependent-care FSA may reduce your MAGI and help keep you under the threshold. Qualified charitable distributions (QCDs) from IRAs could also be helpful for seniors.
As for the overtime portion of your question, the bill also includes targeted deductions for certain types of income and expenses. Starting in 2025, workers will be able to deduct:
- Overtime: The “half” portion of time-and-a-half pay, capped at $12,500 for singles and $25,000 for joint filers. Also phases out at similar income levels.
- Tips: Up to $25,000 in qualified tip income. Phases out between $150,000–$400,000 for single filers.
- Car Loan Interest: Up to $10,000 on new, U.S.-assembled passenger cars. Phases out at $100,000–$150,000 for singles and $200,000–$250,000 for couples.
It’s worth noting that these deductions apply whether you itemize or not which is helpful, since the vast majority of taxpayers now take the standard deduction. But they don’t reduce your adjusted gross income (AGI), meaning they won’t help lower things like the Medicare surtax or IRMAA thresholds.
The headline takeaway is that this new tax package offers a smattering of middle-class relief and a few strategic wins, but with lots of strings attached. Many of the new deductions are temporary, subject to income limits, and impacted by MAGI-related phaseouts or marriage penalties. In other words, they’ll benefit some Americans more than others.
It’s also a reminder that tax law is constantly evolving. What’s permanent today may not be tomorrow, and temporary provisions have a habit of sticking around or disappearing based on political winds. That’s why we always advise keeping an eye on legislative developments, but not building your entire financial plan around them.
Tax policy will continue to evolve, but in the face of market volatility, staying focused on what you can control is key.
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Disclosure
1 MSN. 2025. https://www.msn.com/en-us/money/personalfinance/some-of-the-big-beautiful-tax-breaks-are-smaller-than-you-think/ar-AA1Ip38m
2 Zacks Investment Management reserves the right to amend the terms or rescind our free The Do’s and Don’ts of Stock Market Volatility offer at any time and for any reason at its discretion.
3 Zacks Investment Management reserves the right to amend the terms or rescind our free The Do’s and Don’ts of Stock Market Volatility offer at any time and for any reason at its discretion.
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