The "big, beautiful" bill recently passed by Congress and signed into law by President Donald Trump makes several retroactive tax changes, meaning there's a chance for some taxpayers to benefit sooner rather than later.
The One Big Beautiful Bill Act became law two days after the midpoint of the 2025 tax year, which fell on July 2. Notably, some of the key tax cuts in the legislation apply to the current tax year, meaning the changes affect the returns most taxpayers will file next spring — by April 15, 2026.
Specific groups of taxpayers may now be on track for larger tax refunds as a result of these provisions, like the $6,000 "senior bonus" for many taxpayers 65 and older, as well as new deductions for tipped workers and employees putting in overtime. In light of the new law, many Americans may have essentially been overwithholding for the first half of the year.
A refund can be a welcome boost in the spring. But there are a couple of reasons why financial pros typically recommend setting your withholding so you don't end up with a big refund.
If you have a present need for funds, you may rather have that money in your pocket now versus waiting for it to come via tax refund in nine months. Even if you plan to invest your tax refund or put it into a high-yield savings account, you're missing out on all the interest that could accrue in that time. That's why economists often refer to tax refunds as interest-free loans to the government.
To avoid a larger refund as result of the law — and to start taking advantage of its tax benefits — the following groups may want to consider a midyear withholding adjustment:
Taxpayers eligible for the new 'senior deduction'
Qualifying Americans 65 and older are eligible for a deduction of up to $6,000 under the new law. If an individual's income exceeds $75,000, the deduction is phased out. (For couples filing jointly, that threshold is $150,000.)
This "senior deduction" takes effect in the 2025 tax year, so some taxpayers who are eligible for the full deduction could benefit from withholding less money in the second half of the year, whether that's from wage income, Social Security benefits, pension distributions or IRA distributions. (Withholding taxes from Social Security is optional, so that route would only be possible if you've already elected to withhold a portion of your benefits throughout the year.)
"If you are entitled to [the deduction], then you may want to make adjustments to get that money sooner rather than waiting until you file your tax return to get a refund," says Eric Bronnenkant, head of tax at Edelman Financial Engines.
Given that it's only six months of interest, there's not a ton at stake, says Bill Smith, national director of tax technical services at CBIZ’s national tax office. In other words, don't stress over this if you're not comfortable changing your withholding.
With your tax refund, "you want to try to come out as close as possible to [a situation in which] you don't owe money, and the government doesn't owe you money. That's the ideal plan," Smith says. "But I've always been one to say that if the numbers aren't large, it doesn't have that big of an impact."
Another notable provision in the tax bill increases the standard deduction — which is a predetermined amount of income non-itemizers can shield from taxes — from $15,000 to $15,750 for single filers and from $30,000 to $31,500 for couples.
For individuals under 65, the potential tax savings of a few hundred dollars from this increased standard deduction does not create an urgent incentive for a midyear change to withholdings, according to Bob Lickwar, tax managing director at UHY.
"Where it really may come in, though, is individuals who may have received tip income or overtime for the first portion of the year, and now they're going to find out that they're going to be receiving a deduction for some of that tip income or that overtime income," he says.
Certain overtime workers
The president campaigned on a promise to end tax on overtime, and the new tax law creates a deduction of up to $12,500 for certain workers who clock additional hours. This includes employees like nurses or technicians who work over 40 weekly hours but excludes highly compensated employees, which are those who perform executive, administrative or professional duties.
Bronnenkant says the tax savings from this provision could be larger than the "senior deduction" benefit.
"For individuals who qualify for the tax-free overtime and tax-free tips, they have a much more compelling argument for making a withholding adjustment," Bronnenkant says.
For a married couple, this tax law change could hypothetically save about $8,750 in taxes, Smith says, assuming they had $250,000 of taxable income and the opportunity to work another $25,000 of overtime. He agrees with Bronnenkant that, in this case, a withholding change would be in order.
"Now you're getting to a point where you'd probably rather have that upfront," Smith says.
Tipped employees
Restaurant servers, bartenders, beauty professionals and workers in several other occupations can now deduct tip income up to $25,000. Like the "no tax on overtime" provision, there are restrictions on who can benefit from the new tip law and by how much, including income limits.
Some workers who make a living from customers' tips will save thousands from this "no tax on tips" provision.
"They may really want to go back and see, you know, where does my withholding stand year-to-date, and can I do anything to change it going forward," Lickwar says.
To adjust your withholding, you may have the option to submit a new W-4 at work. Contact your employer's human resources department for more information.
For 2026, the IRS will be updating withholding tables for employers to account for the "no tax on tips" and "no tax on overtime" deductions, Smith says. But because 2025 is a "transition" year, employees may have to be proactive in order to access the tax savings now without waiting for their refunds.
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