This article was originally published on: New law change lets Americans erase federal income tax
See if you’re one of the groups that will benefit from the new law
Maya Lanzone , Consumer Reporter
Published: 10:29, 1 Oct 2025
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Updated: 10:34, 1 Oct 2025
UNDER a comprehensive budget package passed by the Trump administration, a new tax law switch-up will permit certain Americans to drop their federal income taxes to $0.
New tax legislation under the One Big Beautiful Bill Act means that millions of more Americans will pay nothing in federal income tax when they submit their returns for the 2025 tax year.
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Trump signed the One Big, Beautiful Bill Act, his comprehensive budget reconciliation tax package, into law on July 4, 2025, which has a major impact on federal taxes, credits, and deductions.
For example, many Americans will now receive new tax breaks on top of existing deductions and credits, helping to bring the federal income taxes they owe down to zero.
The portion households that will not pay federal income tax was estimated to jump from 40% to 42%, per early projections from the Tax Policy Center.
Groups including tipped employees, senior citizens age 65 and older, parents, families with an adopted child, and workers with overtime pay will especially benefit from the new tax laws.
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For example, workers making tips will be permitted to deduct up to $25,000 in tips from their taxable income, while overtime employees will be able to deduct up to $12,500 of overtime pay.
Seniors 65 and older can claim an additional deduction of $6,000 in addition to their standard deduction.
The One Big Beautiful Bill Act also increased the maximum child tax credit that parents can claim from $2,000 to $2,200 per qualifying child with refundable options.
Additionally, the adoption tax credit for families is now refundable.
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All these new deductions and credits are added to the ones that already exist, such as the standard deduction and earned income credit.
Because deductions lower taxable income and credits directly reduce the taxes an American owes, the combined effect could reduce many people’s federal income tax bill down to $0.
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Rather than having to do complicated tax strategies such as itemizing deductions or finding loopholes, average workers and families may already owe no federal income tax just by claiming these straightforward, built-in deductions and credits.
For example, a single waitress with a child could take advantage of the tips deduction, earned income tax credit, standard deduction, and child tax credit to pay nothing in federal income tax, per The Wall Street Journal.
TAXING TIMES
Many of the tax changes are retroactive to the start of this year on January 1, meaning that the majority of Americans will see the benefits of the One Big Beautiful Bill Act on their taxes when they file in early 2026.
Because the new tax breaks will mostly benefit lower and middle-income taxpayers, experts have said that they will not significantly hurt the federal government’s budget.
Trump’s main policy points
DONALD Trump closed the Republican National Convention on July 18, telling supporters he wanted to become president for “all Americans.” During his speech, he touched upon a number of policies he plans to implement if re-elected, including:
- Implementing tax cuts, including no tax on tips.
- Protecting Social Security and Medicare – Trump said, “Incomes will skyrocket and the middle class will prosper like never before.”
- Protecting borders – He pledged to end the “border nightmare.” That means two things on day one – “Drill baby Drill,” as he said, and close the borders.
- Finishing building the wall.
- Keeping our “sons and daughters safe.”
- Replenishing the military and building a military “dome” – Trump insisted he could stop wars with just a phone call and said no military would be able to penetrate the USA if he came into office.
- Ending the war in Ukraine and imposing tariffs on Iran.
- Vowing to “beat” China.
- Working to decrease prices and ease inflation.
- Bringing down the cost of energy.
- Making cities “safe, clean and beautiful” again.
- Making it possible for Americans to buy gas-run cars by ending the electric vehicle mandate on the first day of his presidency.
This is because groups such as seniors and tipped workers already pay a relatively small portion of the income tax revenue that the federal government pulls in, especially in comparison to those paid by high earners or corporations.
“These deductions won’t affect government deficit so much,” economist Michael Szanto told the Daily Mail, explaining that the top 10% of earners in the country already pay the vast majority of federal income taxes.
Even those who see their federal income tax drop to $0 may still have to cough up money for payroll taxes, state and local income tax, sales tax, and property tax, which can be much larger than the eliminated federal income taxes.
“Those who receive large amounts of their income through tips and overtime can be helped by this new package,” continued Szanto.
“Everyone should work carefully to study how to maximize the credits and deductions applicable to their respective situation.”
Check out these other changes to be rolled out under Trump’s One Big Beautiful Bill Act.
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The new law package is pushing to eliminate federal taxes on millions of Social Security checks.
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