Your 2025 tax return has new deductions worth thousands of dollars. Most business owners will miss them.

The One Big Beautiful Bill Act, signed July 4, 2025, created a stack of deductions for tips, overtime pay, car loan interest, and a bonus deduction for taxpayers 65 and older. These apply even if you don't itemize. That's the good news.

The problem is that every single one of them phases out based on your modified adjusted gross income — a number that, for business owners with pass-through income, W-2 wages, capital gains, and investment income, is almost never what you think it is. Cross the wrong threshold by a few thousand dollars and the deduction disappears. Most people won't know until April.

The planning moves that change the outcome are still available. But not for long.

Your MAGI Band Determines Everything

Before you assume you qualify, find your MAGI band. Modified adjusted gross income is the number the IRS uses to determine whether you get the full deduction, a partial one, or nothing at all. For business owners, MAGI includes W-2 wages, pass-through business income, capital gains, and investment income — all before the new deductions are applied.

Four thresholds matter in 2025:

• $75,000 / $150,000 — senior add-on deduction begins phasing out
• $100,000 / $200,000 — vehicle loan interest deduction begins phasing out
• $150,000 / $300,000 — tips and overtime deductions begin phasing out
• $500,000+ — expanded SALT cap begins phasing down toward the $10,000 minimum

If you're within range of any of these thresholds, income timing decisions — retirement contributions, bonus deferrals, capital gain recognition — can be the difference between a full deduction and none. Traditional retirement contributions reduce AGI and therefore MAGI, which means they can unlock or enlarge multiple new deductions at once. This is The MAGI Stack: use above-the-line reductions to engineer your MAGI into a lower band, then claim the deductions that band unlocks.

Most taxpayers won't make these moves because they're treating 2025 as a filing event. It's a planning event.

The Bigger Standard Deduction (And Why It's Just the Starting Point)

The OBBBA made the TCJA-era standard deduction permanent and set 2025 amounts:

• Single / Married Filing Separately: $15,750
• Head of Household: $23,625
• Married Filing Jointly / Qualifying Surviving Spouse: $31,500

For most business owners, the standard deduction is a floor, not a ceiling. The real question is whether your itemized deductions — SALT, mortgage interest, charitable contributions — exceed those amounts. If they do, you itemize. If they don't, you take the standard and move on.

The reason this matters in 2025 is the expanded SALT cap. For business owners in high-tax states who were stuck at the old $10,000 cap, itemizing rarely made sense. That math just changed.

The Expanded SALT Cap: The Biggest Win for High-State-Tax Business Owners

For 2025 through 2029, the SALT deduction cap rises to $40,000 for taxpayers with MAGI below $500,000. The cap increases 1% per year — $40,400 in 2026. For MAGI above $500,000, the cap phases down by 30% of every dollar above the threshold, but never falls below $10,000.

Here's what that means for a real business owner profile:

A married couple running an S-Corp in California with $475,000 in business income, $38,000 in state and local taxes, $14,000 in mortgage interest, and $8,000 in charitable contributions:

• Total itemized deductions: $38,000 + $14,000 + $8,000 = $60,000
• Standard deduction (MFJ): $31,500
• Additional benefit from itemizing: $28,500
• At a 32% marginal rate, tax savings from itemizing vs. the standard deduction: $9,120

Under the old $10,000 SALT cap, their itemized deductions would have been $32,000 — barely ahead of the standard deduction and not worth the paperwork. The SALT expansion changed the calculus for this profile entirely.

Two things to flag: SALT remains a Schedule A itemized deduction, so it does not reduce AGI or MAGI. It also remains disallowed for AMT purposes, which can still catch high earners even with a higher cap. 

Business owners with pass-through entity tax elections should coordinate with their entity-level return — PTET paid at the entity level interacts with the individual SALT cap in ways that can cost you if not handled with care.

The $40,000 cap reverts to $10,000 in 2030. The window is real and it is finite.

Tips and Overtime: What to Know If You Also Carry a W-2

These deductions are built for employees — but if you're a business owner who draws a W-2 from your S-Corp, a second venture, or a day job, they may apply to part of your income picture.

The basics

• Qualified tips: deduct up to $25,000 per year (2025–2028)
• Overtime premium: deduct the "half" in time-and-a-half, up to $12,500 single / $25,000 MFJ
• Both reduce AGI above-the-line and phase out at $150,000 / $300,000 MAGI

The hard stops for business owners

• If your W-2 income comes from a Specified Service Trade or Business (SSTB) — law, medicine, consulting, financial services — the tips deduction is disallowed regardless of income level
• If combined pass-through profit and W-2 wages push MAGI above the phase-out thresholds, both deductions shrink fast

Where this gets worth modeling: a W-2 spouse with significant overtime pay. The household MAGI calculation — including the impact of your retirement contributions and pass-through deductions — determines whether any benefit survives.

Vehicle Loan Interest: When Financing Beats Paying Cash

For 2025 through 2028, you can deduct up to $10,000 of interest on a loan used to purchase a qualifying personal-use vehicle. The deduction reduces AGI and is available whether you itemize or not.

To qualify

• Vehicle must have final U.S. assembly, verified by VIN
• Loan must originate after December 31, 2024
• Vehicle must be personal-use — business-use vehicle interest remains a separate deduction on your business return
• Phase-out begins at $100,000 MAGI single / $200,000 MFJ

For business owners who were going to buy a car anyway, financing a qualifying vehicle instead of paying cash generates a meaningful above-the-line deduction. At a 32% marginal rate, $10,000 of deductible interest is worth $3,200 in tax savings. On its own, that's not a business-altering number. As part of The MAGI Stack, it moves the needle.

Documentation required

• Loan agreement and lender interest statement
• VIN and proof of U.S. final assembly (window sticker or NHTSA VIN decoder printout)

Without the VIN on your return, the deduction is disallowed.

The MAGI Stack in Practice

Here's where the real money is for business owners.

The scenario: A business owner starts the year at $510,000 in MAGI — just above the $500,000 SALT phase-out threshold. By stacking three moves:

• Solo 401(k) employee deferral: −$23,500
• Vehicle loan interest deduction: −$8,400
• Pass-through income timing adjustment: −$9,100
• New MAGI: ~$469,000 — below the $500,000 threshold

The result: The full $40,000 SALT cap is preserved instead of phasing down toward $10,000. At a 35% marginal rate, that's approximately $10,500 in federal tax savings compared to a taxpayer who crosses the threshold without planning.

That's no coincidence. That's a tax plan.

What works against you

Roth conversions increase MAGI and can push you into phase-out territory across multiple provisions at once. The new deductions don't change the fundamental case for or against a Roth conversion — but they raise the cost of getting the MAGI math wrong. Model it before you convert.

Two business owners with identical gross income can have meaningfully different tax bills based on how income is structured, when deductions are taken, and what documentation exists. 

Filing captures what happened. Planning determines what happens.

What to Gather Before You File

SALT / Itemizing: Property tax bills, state income tax returns and payment records, proof of payment dates. If you made PTET elections, coordinate with your entity-level return before touching your individual return.

Vehicle loan interest: Loan agreement, lender interest statement, VIN, proof of U.S. final assembly (window sticker or NHTSA VIN decoder printout).

Tips or overtime (if applicable): W-2 with income designated, paystubs showing regular vs. overtime rate, employer statements, tip logs.

Senior add-on (age 65+): SSA-1099, 1099-R, brokerage statements, tax-exempt interest documentation.

2025 is an IRS-designated transition year for tip and overtime reporting. Penalty relief is available — but it does not protect against disallowance of the deduction itself if your records are thin.

2025–2028 Is a Window. Use It.

Every new deduction in the OBBBA carries a sunset. Tips, overtime, vehicle interest, and the senior add-on all expire after 2028. The $40,000 SALT cap reverts to $10,000 in 2030.

Good tax planning doesn't optimize one year in a vacuum. It keeps the full picture in view — what you owe now, what you'll owe later, and whether the moves you make today create problems down the road. The goal is to keep more of what you earn over time, not just this April.

That said, the 2025–2028 window is real. Business owners who have the right systems in place — accurate books, clean MAGI tracking, proactive planning before year-end — will capture these deductions. Those who don't will file correctly and still leave thousands behind.

Build the System That Captures These Deductions

At Better Bookkeeping, we work with business owners who don't want to piece this together on their own. We model MAGI thresholds, review documentation before it becomes a problem, and make sure the deductions you qualify for are claimed.

If you're not sure where you stand on any of these provisions, that's exactly where to start. Book a tax planning call and we'll walk through your 2025 picture together.