Last July, Congress passed a significant tax bill that has provisions benefiting the average traveler. We won’t go over all the details of the “One Big Beautiful Bill” (OB3 Tax Bill) here, but a comprehensive list can be found on our website www.traveltax.com.
How the “One Big Beautiful Bill” (OB3 Tax Bill) Can Help You:
The biggest one
By now, you should have heard about the new deduction for overtime premiums. This is by far the most advantageous part of the tax legislation for travelers. But before diving into it, let’s list the limitations.
- Your income cannot exceed 150K filing single or 300K as a married filer
- You cannot file separately from your spouse and deduct the overtime premiums. This does not preclude Head of Household status, however
- Only the overtime premiums are deductible, not the entire hourly wage
- The deduction is only available for overtime premiums earned after 40 hours in one week. If the staffing agency gives you overtime after 36 hours, the deduction does not apply until you have reached the 40th hour.
- Most states will not copy the federal law.
It’s important to distinguish what an overtime premium is, as there is some confusion surrounding this. The overtime premium is the additional amount you are paid more than your base taxable hourly wage after 40 hours of work in the same pay cycle. For example, if you normally make $40 an hour, want to work more than 40 hours in a designated pay week, you get an additional 20 an hour totaling $60 an hour for the work after 40 hours in the pay cycle. The additional $20 is what is called the premium. That is the part that is deductible on your tax return.
This deduction is available for 2025 through the 2028 tax year, so there are three additional years left after this year. There are several scenarios that travelers can take advantage of. For example, getting an overtime multiple greater than 1.5X is very advantageous, and for those travelers who may work two or three assignments in a calendar year and take the rest of the year off, working overtime will certainly allow for more after-tax money.
The premiums are still subject to payroll taxes (Social Security and Medicare). To note: if you are a Canadian traveler keeping your tax residence in Canada, this deduction will not benefit you since the Canada Revenue Agency will not recognize the same deduction. It will simply shift the tax burden to the Canadian side, since the tax you pay in the US is reduced.
The second biggest one
If you finance a new car purchase for the next four years, you will be able to deduct the interest paid on the loan. This is a throwback to the 1980s, when consumer credit interest was deductible. The car must have its final assembly in the United State,s and the same income limitations that apply to overtime, apply to the interest deduction for new vehicles. You do not have to file jointly if you are married to receive this benefit.
Others
There are several other deductions that are new that you may want to consider as we close out the year.
Donations to charities
You no longer have to itemize to be able to deduct charitable contributions. Starting in 2026, you can deduct up to $1000 if you are single or$ 2000 on a joint return for charitable contributions in cash or cash equivalent. If you are reading this in December and considering giving to a church or cause, you may want to give that donation by January since this deduction does not kick in until 2026.
State and local income tax limitations
Since 2018, individuals have only been able to deduct up to $10,000 in state and local income taxes. State and local income taxes include your state withholding from your paycheck, local withholding if you live in an area that has a municipal income tax, and property taxes on the real estate or cars. Not everybody is going to benefit from this, but travelers who have significant mortgage interest deductions will now be able to add up to $40,000 of state and local income taxes to their deduction.
Tax credits and deductions that were removed
Not everything in the tax legislation is all rosy. The credits for electric vehicles, energy improvements on your principal residence, and solar installations are no longer deductible or creditable starting next year.
There are other provisions that may benefit your situation. Be sure to review the list on our website to see what you can take advantage of
Want to make the most of your travel assignments and maximize your earnings? Check out the latest travel healthcare jobs on TGN’s Job Board and start planning your next adventure today: TGN Job Board.
