Tax Expert Warns: 7 Hidden Traps in One Big Beautiful Bill’s New Tax Laws

The White House has been promoting the One Big Beautiful Bill Act (OBBB) as a win for working Americans. While "no tax on tips and overtime" and auto loan deductions certainly sound like good ways to get ahead financially, tax advisors caution that the fine print contains several surprises that could trip up uninformed taxpayers.

As one tax professional we talked to says, the OBBB's new tax rules may not work the way you think.

"People may misunderstand the new tax deductions," says Lisa Greene-Lewis, a CPA and tax expert for TurboTax. She warns about strict limits, income caps, and looming expiration dates. Being unaware of these details could lead to a much smaller refund than you were expecting — or even an unexpected tax bill.

Here are seven things you should know to avoid a shock at tax time.

While President Donald Trump campaigned on "no tax on tips," the text of the OBBB tells a slightly different story. Tip income isn't actually tax-free now, but the bill does offer a healthy deduction.

According to Greene-Lewis, "The [tip income] provisions are deductions which will be reported at tax time, and your savings depend on your tax rate." For example, if you earn $5,000 in tips and fall into the 12% tax bracket, the deduction saves you $600 ($5,000 x 0.12), but it doesn't reduce your tax bill by $5,000.

Similar to the tip deduction, the new tax break for overtime pay is a welcome relief for hourly workers. However, there's a cap on how much you can deduct.

The new law only allows you to deduct up to $12,500 in overtime pay ($25,000 for joint filers). If you work significant overtime and earn, say, $20,000 in extra income, you'll still owe taxes on the $7,500 that's over the limit. Furthermore, as Greene-Lewis notes, the deduction "is phased out with income over $150,000 ($300,000 for married couples filing jointly)."

The ability to deduct auto loan interest is back for the first time in decades, but it's not for every car buyer. This deduction is exclusively for the purchase of new vehicles assembled in the U.S.

If you buy a used car, a leased car, or a new car assembled outside the United States, you're out of luck. This detail could surprise buyers who assume any auto loan qualifies. The deduction is also capped at $10,000 in interest and, as Greene-Lewis points out, "is phased out at income over $100,000 ($200,000 married filing jointly)."

The Inflation Reduction Act, passed under the Biden administration, provided homeowners with a generous tax credit for making energy-efficient upgrades. The OBBB is ending this popular program.

"Homeowners should be aware that energy efficient credits for home improvements, like energy efficient windows and doors … will end for property placed in service after 2025," Greene-Lewis warns. If you're planning green upgrades, start now. You must have qualifying items installed and in use by December 31, 2025, to claim the credit on your 2025 tax return.

If you've been thinking about buying an electric vehicle to claim the lucrative tax credit, you need to act fast. The OBBB eliminates this credit for cars purchased after this quarter.

"The Clean Vehicle Credit is also eliminated … for EVs purchased after September 30, 2025," Greene-Lewis said. Waiting for end-of-year sales could be a costly mistake, as you'll miss out on a credit worth up to $7,500 for a new EV or $4,000 for a used one.

The OBBB reinstated the home office deduction for self-employed and small business owners, a victory for the many who live and work from their own homes. However, a fairly strict set of rules still applies. To qualify, you must use a part of your home exclusively and regularly for your business.

This means the dining room table you work from during the day and eat at with your family at night does not qualify. The IRS is very strict on the "exclusive use" test, a fact that could come as a shock to many who were expecting a new tax break.

Homeowners in high-tax states rejoiced when the OBBB increased the State and Local Tax (SALT) deduction cap from $10,000 to $40,000. Now, they can deduct more property tax and other local levies. In the fine print, however, you'll find that this extra relief is temporary.

In fact, the provision is set to expire at the end of 2029. Starting in tax year 2030, the cap will revert to the old $10,000 limit unless Congress acts to extend it again. With no guarantees, long-term financial planning is a bit more difficult.

If the new OBBB tax provisions teach us anything, it's that there's often a wide gap between the headlines and real-world benefits. Understanding the rules can help you prepare yourself financially.

"Taxpayers should treat these new rules like a 'check the fine print' agreement. The headline might promise a great deal, but the real value, and the potential pitfalls, are always in the details," Greene-Lewis said.

Another thing to keep in mind is that these provisions only impact federal income tax. You'll still owe federal payroll taxes on tips and overtime, and you may still owe state income taxes depending on where you live.