Ever wondered what’s really inside the One Big Beautiful Bill Act (also called the OB3) everyone’s been talking about? Our SEO team sat down with TaxAct experts Jared and Tim to break it all down. In this video, they discuss everything from the Child Tax Credit changes to the new no tax on tips rule and what it all means for taxpayers filing their 2025 taxes.
Below is a transcript of their conversation (lightly edited for clarity and readability).
Note: The One Big Beautiful Bill is now being referred to by lawmakers as the Working Families Tax Cuts. You may see one or both names used in this article, but they refer to the same set of tax changes.
Meet the team
Lindy:
Hey everyone, welcome. I’m Lindy. I’m one of the SEO folks here at Taxwell. That means that I’m not a tax expert, but I am kind of obsessed with what people are searching for as far as taxes go online.
Morgan:
And I’m Morgan. I’m also from the SEO team. Me and Lindy don’t write the tax code or build the tax software, but we do track the trends. For example, hundreds of people are asking, “What is the SALT cap?” and “What is in this One Big Beautiful Bill that everyone’s talking about?”
Lindy:
Exactly. So today we’re going to dig deeper. We know you’ve heard of the One Big Beautiful Bill, but we want to unpack what’s actually in it and how it affects real people when they sit down to file this year.
Morgan:
To help us do that, we’ve brought in the experts. We have Jared here — he’s VP of Government Relations who tracks every twist and turn that comes out of Congress.
Lindy:
And we have Tim, the Director of Product Management. He is the one who turns all this complexity into TaxAct’s easy-to-use software that real people can use every day to file their taxes online.
Welcome, you guys!
Jared:
Thank you.
What’s in the One Big Beautiful Bill (OB3)?
Morgan:
All right, so now that we got introductions out of the way, we can go ahead and get started. So Jared, there’s been a lot of chatter online about this bill — the One Big Beautiful Bill — but we want to go behind the headlines. Can you talk us through the most impactful parts?
Jared:
Oh yeah, absolutely. You know, when we think about the One Big Beautiful Bill, something you guys might hear on social media is the new nickname called OB3. Sometimes it’s a little easier to say than “One Big Beautiful Bill.”
It was passed this past summer, July 4th, and there’s a lot of different callouts in it when we think about tax deductions and savings. Some of the things I want to highlight that are most important to taxpayers are the Child Tax Credit, the refundability of that, and some nuances to being able to claim it.
We’ve [also] got something called the SALT cap, right? I think we’re hearing that a lot. No, the government’s not trying to cap how much salt you intake on your favorite French fries. It actually stands for state and local taxes — the tax that you’re paying your state for things like your property — and those are deductible on your tax return as well.
Then there’s the 1099-K thresholds — what is that form, right? We’re going to talk a little bit more about that today and how you may not get as many forms this year when you think about getting W-2s or 1099s. The threshold for reporting those has changed, so we’ll talk a little more about that later.
And then one that’s one of my favorites out there: no tax on tips and no tax on overtime. I think everybody is wondering what that means, how it impacts them, and how much they can claim. We’ll talk about that too.
And finally, auto loan deductions. So, those who have loans on their vehicles: Which vehicles qualify? How much can I deduct? And how much can I claim? All those things are going to be discussed.
How TaxAct handles new tax rules
Morgan:
Tim, can you go into a little bit about how this new SSN requirement in the Child Tax Credit changes — how that’s impacted in the software?
Tim:
Of course. Not every household will feel this change the same way. So, if you meet the requirement, nothing really changes. You enter your information, and we’ll automatically apply the Child Tax Credit to your return.
But if you don’t meet the new requirements for the new SSN rule, we don’t want you to be caught off guard. Our goal is to make sure you understand what’s changed and how it affects your return.
So, if you add information about yourself, your spouse, or your children, the software will call out the update right away and explain what it means for your situation.
Lindy:
Wow, this is so wild to hear how you get all of this into the product.
The ITIN and this Child Tax Credit specifically are great examples, but from a broader perspective, when legislation like this passes, which happens almost every year, how do you start getting this into the product?
Tim:
Once a bill is finalized, our tax experts jump in right away. They break it down line by line and translate it into plain-language rules. From there, our product and development teams work hand-in-hand to design the experience.
The goal is really that when you’re entering your information, the product guides you step by step, and the calculations update automatically to your tax return so that it reflects the new law. Before anything goes live, we test with real tax situations and real taxpayers to make sure it’s not only accurate but also easy to understand.
Morgan:
So for something in the One Big Beautiful Bill, like a new car deduction — how would that show up in TaxAct’s filing software?
Tim:
That’s a great example. The deduction requires the car to be assembled in the U.S., but honestly, how is anyone going to know that for sure?
That’s where we come in. Your car’s VIN, for instance, contains indicators about where it was built. The software will point you exactly where to find that, ask you to enter it, and then take care of the rest — checking eligibility and applying the deduction if you qualify.
Morgan.
Sounds great. Sounds like we’ve got it covered.
When will the IRS open for tax season?
Morgan.
So, there’s obviously a ton of tax reform changes, like the new car deduction and the Child Tax Credit, that are coming out of this One Big Beautiful Bill … That brings me to my next question that we see getting asked a lot: When does tax season officially start this year?
Jared:
That’s the big question I think many people are looking for. Usually, tax season starts around the third or fourth week of January. That’s when the IRS opens up and starts receiving and processing tax returns.
I know many taxpayers are worried about how a government shutdown might impact the start of filing season, in addition to the implementation of OB3 changes that the IRS needs to implement into their systems.
What I can say about that is both the IRS and Treasury understand the importance of a timely start to the filing season and how it impacts taxpayers. They’re very focused on delivering a normal start. Employees tasked with filing season readiness and OB3 implementations are actually not part of the furlough during any government shutdown.
We’ve seen shutdowns before. The IRS has plans in place [that define] who is an essential employee, and those essential employees are responsible for making sure tax season starts on time and that mission-critical work continues.
We’ve also seen members of Congress request information from the IRS on when the start of filing season will be for 2026, so we should expect a date to be announced sometime before 2026. But at this point, I would say rely on a normal start to filing season until we hear differently.
Filing early with TaxAct
Lindy:
And then, Tim, is it possible for people to file on TaxAct at the normal time, even if the IRS isn’t officially open yet? What happens if someone goes to file early with TaxAct?
Tim:
That’s a great question, and believe it or not, you don’t have to wait for the IRS to open. You can go ahead and complete your return in early January, even if the IRS hasn’t officially opened for filing yet.
Here’s how it works: Once you’re done, we’ll hold your return securely. The moment the IRS starts accepting [returns], we transmit it right away. That way, you’re first in line — no extra steps, no delays. It’s all about giving you peace of mind and helping you get your refund as quickly as possible.
Lindy:
Okay, makes sense!
And then, in the product … If updates are still happening, how would you know what you’re getting back or what you owe?
Tim:
So, if you’ve already filed and we’re holding [your return], we’ll communicate to you that changes need to be made. You can come back in, make those changes, and we’ll submit it to the IRS once they’ve opened.
Otherwise, if you haven’t filed yet and you’ve started early — say, in early January before the IRS has opened — any updates to the software or tax law that come out in-season will automatically apply to your return once you come back in. So, you’ll be taken care of regardless of the situation.
Common questions about tax filing season
Lindy:
Guess what, guys? Time for rapid fire! This is my favorite part of any podcast or interview that I ever listen to.
For us, these are going to be real questions that people are actually Googling right now. Obviously, Morgan and I are obsessed with Google. So, Morgan and I are going to take turns asking, while …
Morgan:
… Jared and Tim give us the fast facts! And then we’ll jump in with more details when needed. Let’s get into it!
Lindy:
All right, first one up: Do I need to file if I made under $12,000?
Jared:
Okay, that’s a great question. The government gives everyone an automatic deduction each and every year, and it’s known as the standard deduction.
For single individuals, that starts at $14,600 [for tax year 2024]. So, if you made less than the standard deduction, you might not have to file. That means that they deduct that amount of money, and it puts you at a zero balance of tax due.
But you probably want to take a look to see if there are some refundable credits that you can claim to get money back.
And there are situations where if you had any tax withheld — let’s say you made less than [the standard deduction], but the job you worked at withheld income — or maybe if you’re retired and there was some withholding done for part of the year, that money could be given back to you.
So, you’ll want to go ahead and enter your information into the software, because there could be some refundability and credits you’re eligible for.
Tim:
Exactly. Our software will walk you through that decision. If you’re under the filing threshold but could still get money back, we’ll let you know.
Morgan:
Okay, interesting. So even if you’re not required to file a tax return, you could still get money back?
Tim:
That’s right — especially if you had any taxes withheld from a paycheck or qualify for certain credits like the Child Tax Credit.
Form 1099-K and selling items online
Morgan:
Got it. Question two: What if I got a 1099-K just to sell stuff on eBay?
Jared:
Oh yeah, the 1099-K is an interesting one because sometimes you get it in the mail and you’re like, “What in the world is this?” You’ve heard of W-2s, right? But what’s this form?
You may get a Form 1099-K for personal or business items that you sold through a payment app or an online marketplace like eBay.
A personal item is something that you owned for personal use, such as a car, refrigerator, furniture, stereo, jewelry — you name it. Anything that you had personally and decided to sell.
How you report these payments on your tax return depends on whether you sold the item at a loss or a gain. If you sold a mix of personal items at losses and gains, reporting those separately is important when you do your tax return.
Now, OB3 — the tax bill that just passed — raised the reporting thresholds for marketplaces such as eBay, so fewer people will get those Form 1099-Ks this year. However, that doesn’t eliminate the need to report your income. That still remains the same whether you get a 1099-K or not.
The government still asks that you report any income earned during the year using these marketplaces. That is important.
Tim:
Right. And that’s where our software helps out. If you’re not sure whether your 1099-K income is taxable, we’ll ask you a few clarifying questions and make sure it’s reported the right way on your return.
Lindy:
Interesting. So, does the IRS know if you’ve made money? Like, do they still get the form even if you didn’t get a 1099-K?
Jared:
Yeah. So, if a 1099-K is required, [the IRS] will receive it. Those payment processors (like eBay or other marketplaces) are required to submit those forms.
That’s what a 1099-K really is: a receipt that the marketplace sent the IRS a copy of what you made this year, and they’re sending you a copy too, to say, “Hey, we reported this income to the IRS. You should also report it.”
That’s how they can match up your income when you file your tax return. Otherwise, if you don’t report it, the IRS could send you a letter or notice saying, “We didn’t see you report this amount that was given to us by a marketplace.”
So it’s important, if you received one of those, to make sure you determine [whether it’s taxable], which our software can help you do.
Lindy:
Okay, thank you.
Gig work, DoorDash®, and side income
Lindy:
I use DoorDash a lot. I don’t know if you guys do, but how do DoorDash taxes work?
Jared:
Ooh, DoorDash taxes! That’s a fun one.
You know, we think about gig economy workers — that’s the technical term you’ll see when you start Googling “how to report my income.”
So, what will happen is, you’re going to be what’s called a “W-2 employee” in DoorDash. Which means that you’re going to get a W-2 from them, but you are also a self-employed individual, so you might get a 1099-NEC for nonemployee compensation.
Depending on the form you get, if it’s a W-2, you’re a W-2 employee. If you get a 1099-NEC, you’re self-employed, and that income gets reported on a Schedule C. The nice thing about that is it allows you to have more deductions. Whereas W-2 employees don’t get to claim as many deductions. [If you’re self-employed and report income on a Schedule C, you can deduct expenses related to your business.]
Tim:
Yeah, this situation can feel intimidating for DoorDash drivers. It’s a lot of information that Jared just went through, and you may be surprised that the IRS treats you as self-employed, as Jared mentioned.
But you don’t have to worry about that — [our software] walks you through it step by step, from reporting your income to tracking expenses, mileage, and deductions. It’s all built into the product, so nothing gets missed.
Morgan:
Sounds like most gig workers just need to keep track of everything.
Jared:
Yeah, any type documentation is important.
Lindy:
I just want to clarify — so you would get the 1099-NEC, like the 1099-NEC isn’t what you would fill out?
Jared:
No, the 1099-NEC is an income document, like a W-2. It’s the self-employed version of it. A W-2 is [treated] as an employee. If I work for a company as an employee, I get a W-2 to report my income. If I’m not an employee but considered a contractor — meaning they’re not paying for your insurance or benefits and oftentimes not withholding taxes from your income — then they’ll put that on a 1099-NEC.
Therefore, you’re responsible for reporting it on a Schedule C. And there’s form called Schedule SE for self-employed income tax, and you’ll have to pay those taxes in your tax return.
So W-2, it gets withheld by your employer. As a self-employed [individual], you have to pay those at the time of filing.
Lindy:
Okay. And then, Tim — in the product, [TaxAct] takes the information you have on the 1099-NEC and in the background puts it into [Schedule] C and SE. Like, we’re not having to worry about that, but [the software] knows that’s where those go?
Tim:
Yeah, that’s exactly right. If you have a 1099-NEC, we’ll ask you to enter that information as it appears. In the backend, we’re attaching what we refer to as Schedule C, and that’s what the IRS needs to report this income. We take care of all that, and when it’s time to submit your return, we send it over to the IRS.
Child Tax Credit changes explained
Morgan:
All right, we got a double whammy here. To start off — one, what is the Child Tax Credit? And two, how much is the Child Tax Credit for 2025?
Jared:
All right. So the Child Tax Credit — if you have a child in the United States, the One Big Beautiful Bill expanded the credit that you’re allowed to take.
Now, there’s two parts to it, which is kind of interesting. Last year, the Child Tax Credit was $2,000. This year it is $2,200. So there’s an additional $200 per child available to you.
Now, not all of it’s refundable. What I mean by that is a portion of the credit (up to $1,700 per child) is [refundable]. So, no matter what your tax situation is, $1,700 could be refunded to you.
If you had zero tax or balance due — right, you paid all your taxes and got to zero — $1,700 could be refunded to you. The other portion, the difference between $2,200 and $1,700, will reduce the amount of tax that you owe but is not refundable.
So if I owed $2,200, right, it could reduce it all the way down to zero. But if I owed less than that, some of it could come back to me. That’s the beauty of the Child Tax Credit — some of it’s refundable.
And like we talked about earlier, you know, if you don’t have a filing requirement, there is a significant amount of money that could come back to you in a refund because of the $1,700 that’s refundable in the Child Tax Credit.
Tim:
Yeah, and the good news is you really don’t have to worry about any of that. Just enter the information as you normally would.
So early on in the process, we’ll ask for information about you, your spouse, and your children. Go ahead and enter the information [in TaxAct] — your Social Security number, for example. Enter that, and then we’ll apply all the math in the backend to make sure your refund is accurately reported.
Lindy:
That’s great. Glad you have us covered.
How Form W-4 and life changes impact refund amounts
Lindy:
And then everyone wants to know: Will I get a bigger tax refund this year?
Jared:
I like this one. The answer — and it’s so specific — it’s maybe, maybe not. I know that’s what everyone loves to hear, right?
You might owe less taxes this year, which is good, but that doesn’t always mean your refund goes up.
So setting expectations is really what I like to talk to people about. Withholding from your paycheck is a big one — it comes from an election that you made when you started working with your employer on your Form W-4.
That just tells the government how many people are in your household and how much withholding from each paycheck you’d like to have done for you. Depending on that withholding level you elected on that form, it will directly impact how much your refund or balance due is each year.
Some people need to withhold more, and some people say, “I don’t want to withhold much, I need my whole paycheck to be able to get by.” So therefore, you may end up getting [a smaller refund] at the end of the year.
That’s something to think about — I see a lot of differences from year to year for taxpayers who keep generally the same jobs and not a lot of changes happen there, but they have life changes, right?
Maybe they got married, maybe they’ve had kids, or they’ve gotten second jobs, or they’ve decided to do side work or gig work. Accounting for life changes is important and is probably the biggest impact to someone’s refund each and every year.
So for me, I would say understanding the W-4 is important.
Tim:
Yeah. And whether you’re getting a larger refund or not, as Jared said, tax laws will impact it, but also your life situation and changes that may happen.
Whether you get married, have a child — all of those things play a role in whether you’re going to owe taxes or get a larger refund this year.
The good news is that we’ll show you your refund all along the way. As you enter information [in TaxAct], we’ll update that in real time.
You’ll also have the opportunity to compare this year’s tax return to last year’s so you can see those differences and understand, “Okay, now I can see how this life change impacted my return from last year to this year,” or “how this law changed my return from last year to this year.” You’ll have the opportunity to see all of that within our product.
Lindy:
Wow, that’s awesome. So it kind of sounds like potentially getting a smaller refund could actually be a good thing?
Tim:
Exactly. I mean, it means you kept more money in your pocket during the year, and therefore, you’re not getting as large a refund.
No tax on tips questions answered
Morgan:
All right, and now for one of the biggest questions coming out of the One Big Beautiful Bill. Did “no tax on tips” pass, and will you owe taxes on tips?
Jared:
Oh, that’s a good one as well. You guys are lighting them up here.
So, the answer is yes, “no tax on tips” passed. But under OB3, starting this year, some reported tips will be treated differently based on two factors, and this is what we have to understand:
One, what’s the qualified industry, and two, what constitutes a qualified tip?
So, Treasury has provided some occupation codes. What they’re saying is that if you worked in these eight different sectors, those are the main industries where you can first consider whether your tips are going to be taxable or not:
- 100s — Beverage and Food Service
- 200s — Entertainment and Events
- 300s — Hospitality and Guest Services
- 400s — Home Services
- 500s — Personal Services
- 600s — Personal Appearance and Wellness
- 700s — Recreation and Instruction
- 800s — Transportation and Delivery
Then the second qualifier for that is — in order to claim the deduction, the worker must both be in one of the listed occupations and qualify under the definition of how those tips are received.
What do I mean by that? It’s not just “oh, I got tipped, everything’s free now,” right?
It means: were your tips paid by cash or card or an equivalent medium — check, debit card, was it a tangible token for a tip?
The other part of it is, was it was received from a customer through mandatory or voluntary tip sharing. Sometimes these are “tip pools” for waiters and waitresses, and those do qualify as qualified tips.
The other part is whether it was a voluntary tip. Sometimes we think about large parties at restaurants — I know I go sometimes with large parties — and you have that automatic 18% gratuity. That gratuity is not considered tax-free because it’s not negotiable by the taxpayer.
So, if it’s automatically applied with no negotiation from the end user, then it’s not a tax-free deductible amount. So that’s kind of interesting.
Now, there are bills in Congress right now that are trying to change or modify that, but as it’s written today, that’s how it works.
There are also some interesting parts about what doesn’t qualify as a tip. The Treasury actually explicitly added a few categories that I think are funny that don’t qualify.
One is, if you received tips for illegal activities, prostitution services, or pornographic activity — those don’t qualify. So, sorry guys, that’s not a tip that qualifies to be deducted.
But there are limits in there too, and we can talk more about that later. Just know that you have to qualify in those two main categories: was it in a qualified industry, and was it a voluntary tip paid in cash, credit card, check, things like that.
Tim:
That’s a lot of information just on tips, and these new rules definitely make it more complicated. As Jared mentioned, it depends on your job and whether these tips count as qualified.
While you should be tracking your tips, you don’t need to sort all of this out on your own. You’ll enter your information as it is on your W-2, and then we’ll ask follow-up questions to clarify what’s qualified and what’s not when it comes time to report this information.
No tax on overtime questions answered
Lindy:
My next question is very similar to this one about tips. Did the “no tax on overtime” pass, and when will the no tax on overtime start?
Jared:
Great question again. Yeah, so no tax on overtime did pass. But it’s a little bit different than you might expect or it sounds.
OB3 exempts the incremental part of your overtime from federal tax. The act includes a federal income tax deduction for qualified overtime effective for tax years starting 2025 — that’s January 1st of this year — and it goes all the way through 2028.
The deduction will be claimed on an individual’s federal tax return, and it’s retroactive — right? That’s the retroactive part — January 1st.
But the catch in all of this is it’s only the “half” in “time and a half” that’s tax-free.
So let’s think about this as an example. If an individual’s pay is $10 per hour for non-overtime earnings and $15 an hour for overtime (your time and a half), only the $5 per hour premium pay for overtime is eligible for the new tax deduction.
Again, that deduction happens after the fact — you’ll claim it on your tax return.
Also, there are limits. You can only claim up to $12,500 (or $25,000 if you’re married filing jointly) for the overtime deduction.
Now, there is a cap on income. If your household, as a single individual, makes $150,000 or more through your modified AGI, they’ll start reducing the $12,500 that you’re eligible to claim.
Likewise, if you’re married, that starts at about $300,000. They call it a “phaseout,” where they start limiting how much of that overtime you can deduct as tax-free.
So again, it’s not quite as clear-cut as you would think when you say, “overtime is not taxable.” It’s simply only the “half,” and there are limits to how much you can actually deduct on your tax return.
Tim:
And I think this is a good reason why we rely so heavily on our internal tax professionals to handle this math for us. They take this complicated law, handle the math in the backend so that you, when you’re entering your overtime information, just answer the questions we ask — and we apply the math on the back end so it’s reflected in your return.
Federal taxes vs. state and local taxes
Morgan:
It sounds like there are a lot of qualifiers for both the “no tax on tips” and the “no tax on overtime” and if it’s truly tax-free or not.
But just to level set, we’re talking about this from a federal perspective, correct? Like, states and local taxes could still be handled differently?
Jared:
Yeah, absolutely. Great question. So this is only at the federal level.
And like Tim mentioned for tips, it’s going to come through your W-2, and there will be reporting on that, which helps some of it.
But each states each have their own ability to decide whether they want to conform to the federal government allowing no tax on tips and overtime. Many states do, but each state will independently choose how they want to tax their state revenues.
So yeah, this is a federal law, and then each state gets to decide if they want to do the same thing as the federal government or go a separate way. It will depend on each state.
Common misconceptions about OB3
Morgan:
Okay, last question here. And this one actually doesn’t come directly from Google, but it is one that we had to ask.
So there’s plenty of tax talk around OB3, but not all of it really adds up. So from your guys’ perspective, what would you say is the biggest misconception about the One Big Beautiful Bill?
Jared:
I think the biggest misconception that I’m hearing and seeing is that there’s some check coming in the mail, similar to a stimulus check that we had years ago, called the economic impact payments.
It has been floated around through Congress of people wanting to do that and pass bills to issue those types of checks, but unfortunately, none of that was included in OB3.
There is no check coming for some sort of stimulus payment.
So I think that’s some of the biggest confusion that I’ve heard outside of the actual tax items that have passed — that there’s going to be a check written. And at this time, through the current bill, there are no stimulus check payments.
Tim:
Yeah, it’s really about reducing taxes throughout the year, which doesn’t always mean you’ll get a larger refund.
Lindy:
Interesting.
Morgan:
All right, and that’s it from us. Thank you so much, Jared and Tim, for participating and walking us through all of the changes that are in the One Big Beautiful Bill.
The bottom line
The One Big Beautiful Bill introduces some major tax changes for 2025 and the coming tax years, including updates to the Child Tax Credit and new deductions for overtime and tip income. Whether you’re a parent, gig worker, or just curious about what’s next for tax season, TaxAct is here to help you understand how these updates affect your 2025 return.
Ready to see how OB3 could impact your refund? Log in to TaxAct and start your return today.
This article is for informational purposes only and not legal or financial advice.
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