‘One Big Beautiful Bill’: How new tax law changes Social Security, overtime pay, car loan interest, and 529 plans

A massive new tax law, nicknamed the “One Big Beautiful Bill” (OB3), is bringing sweeping changes to the U.S. tax system, and experts say taxpayers should take time to understand the fine print. Signed into law by the president earlier this year, the nearly 900-page legislation contains numerous provisions affecting Social Security, overtime pay, vehicle loan interest, and education savings accounts.

Tulsa tax attorneys Ashlee Hall and Mary Lundstedt joined the News On 6 Digital Studio’s Your Money Matters to explain what’s in the bill, what’s not, and how to prepare.

Does the ‘One Big Beautiful Bill’ eliminate taxes on Social Security benefits?

Not exactly. According to Lundstedt, confusion about Social Security benefits under OB3 stems from both political promises and a widely circulated, but misleading, email from the Social Security Administration.

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The new law does not exempt Social Security income from federal taxation. All standard rules for taxing benefits still apply.

What OB3 does create is a temporary “bonus” deduction for taxpayers 65 and older, available through 2028. But it’s not Social Security-specific — even those not receiving benefits can qualify.

Failing to understand this could lead to costly mistakes. For example, assuming benefits are now tax-free might prompt a retiree to convert pre-tax retirement funds to a Roth account, only to find that the extra income increases the portion of benefits subject to tax, and potentially raises their marginal tax rate above 40%.

How does 'One Big Beautiful Bill' change overtime pay taxes?

Under the law, certain overtime wages can now be deducted from taxable income, but not all overtime pay qualifies.

Only the “premium” portion, or the extra 50% paid above regular hourly wages, can be deducted. For example, if your base pay is $20 per hour and your overtime rate is $30, only the $10 premium is eligible.

The deduction is capped at $12,500 per individual or $25,000 for joint filers each year. This provision is retroactive to Jan. 1, 2025, but IRS guidance on reporting is still pending.

Hall emphasized that employees and employers should keep detailed records this year, as most payroll systems won’t yet reflect the change.

What’s the new deduction for car loan interest?

The 'One Big Beautiful Bill' allows taxpayers to deduct interest paid on loans for certain passenger vehicles — but only if the vehicle is assembled in the United States and used for personal, not business, purposes.

Eligible vehicles include new cars, vans, SUVs, pickup trucks, and motorcycles weighing less than 14,000 pounds. The deduction is capped at $10,000 per year, and there’s no limit on the number of loans covered.

However, the benefit phases out for individuals with adjusted gross incomes above $100,000 ($200,000 for joint filers). The provision applies from 2025 through 2028 unless extended by Congress.

How does 'One Big Beautiful Bill' expand 529 education savings plan benefits?

The law significantly broadens the scope of qualified expenses for 529 plans.

Starting in 2026, the annual cap for K–12 tuition withdrawals will rise from $10,000 to $20,000 per student.

Newly eligible expenses include:

1. Tutoring by licensed teachers or subject experts
2. Standardized testing fees (ACT, SAT, AP)
3. Dual-enrollment college courses
4. Therapies for students with disabilities (speech, occupational, behavioral, physical)
5. Tuition for career training programs (HVAC, coding boot camps, nursing prep)
6. Certification exams (CPA, bar, nursing boards)
7. Continuing education to maintain professional credentials

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Hall noted that this expansion benefits not only traditional college-bound students but also those pursuing hands-on trades and technical careers.

What’s the bottom line for taxpayers?

While the “One Big Beautiful Bill” contains multiple taxpayer-friendly provisions, experts urge caution. Misunderstanding the details, particularly on Social Security taxation, could lead to costly mistakes.

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Before making financial moves based on OB3, Hall and Lundstedt recommend consulting a qualified tax professional to ensure you qualify for deductions and to avoid unintended tax consequences.