The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, introduces tax changes that may affect your financial strategy as a major airline pilot. The overtime deduction is unlikely to apply to most of you, but the increased State and Local Tax (SALT) deduction presents a significant opportunity. Here’s an overview to help you plan.
Overtime Deduction: Limited Relevance for Pilots
The OBBBA offers an above-the-line deduction of up to $12,500 ($25,000 for joint filers) for overtime pay, but this applies only to employees covered by the Fair Labor Standards Act (FLSA). Most major airline pilots are exempt due to their professional status and high earnings, making this deduction generally inapplicable.
Key Opportunity: Increased SALT Deduction
The OBBBA enhances the State and Local Tax (SALT) deduction, which allows you to deduct state and local taxes—such as income or property taxes—from your federal taxable income:
• Increases from $10,000 to $40,000 in 2025.
• Grows 1% annually through 2029 (e.g., $40,400 in 2026).
• Reverts to $10,000 in 2030.
• Phases out gradually for modified adjusted gross income (MAGI) above $500,000 ($250,000 for single filers), reducing to $10,000 at higher income levels.
For pilots in high-tax states like California, New York, or New Jersey, or with property taxes from homes near airline bases, this change may increase your deductible amount. For example, if you pay $35,000 in state and property taxes and your MAGI is below $500,000, you could deduct the full $35,000, potentially reducing federal taxes by $11,200 in the 32% bracket. If your MAGI exceeds $500,000, the deduction may decrease (e.g., by 30% at certain levels), but you may still deduct more than the current $10,000 cap.
Planning Considerations
• Itemizing vs. Standard Deduction: The OBBBA sets the standard deduction at $31,500 for joint filers and $15,750 for single filers (adjusted for inflation). If you have high state or property taxes—common with multiple properties due to base assignments—itemizing may be more beneficial.
• Timing Strategies: Prepaying property taxes or bundling deductions (e.g., charitable contributions) before 2030 could optimize the SALT deduction.
• High-Income Planning: For incomes near or above $500,000 MAGI, strategies like deferring bonuses or increasing retirement contributions may help manage the SALT phase-out.
• Senior Pilots: Those 65 or older may qualify for a temporary $6,000 additional standard deduction (phasing out above $75,000/$150,000 MAGI for single/joint filers) through 2028.
Additional OBBBA Provisions
A $10,000 deduction for interest on loans for U.S.-made vehicles (through 2028, phasing out above $100,000/$200,000 MAGI for single/joint filers) may apply if you’re purchasing a car. Other provisions, such as the child tax credit, could be relevant depending on your circumstances.
How We Can Help
At Creative Planning, our advisors—many with experience as major airline pilots—understand your unique financial needs, including per diem deductions, multi-state tax challenges, and airline pension planning. We can help you evaluate how the OBBBA impacts your 2025 tax strategy and aligns with your long-term goals.
