07/15/2025
We decided to post some information regarding the 7/4/25 tax bill as we received a few calls the past week and a half. As far as I can recall, this One Big Beautiful Bill contains more tax law changes that will affect our clients than any other year. Many experts recommend using a tax professional in the coming years due to all of the changes that affect so many people and the income limitations. We thought we should at least list a summary of some of the common changes that will affect many of you in the next 4 years. These are not written in stone as all inclusive, but a summary of some of the important items in the bill. Here we go:
The 2025 standard deductions are as follows: $15,750 for single and MFS taxpayers, $23,625 for head of household filers and $31,500 for taxpayers filing jointly. Additional deduction of $2,000 for single and HOH filers age 65+ and $1,600 each for married couples per qualifying spouse. There is a new $6,000 bonus deduction for each individual age 65+. It can even be claimed by those who itemize their deductions. This is in effect for the 2025-2028 tax years to be filed in 2026-2029. This bonus deduction is meant to help the many senior citizens reduce the amount of taxable social security benefits. If you are under age 65 and collect social security, there is no change for you yet.
The maximum SALT (sales and local tax) deduction has been increased from $10K to $40K. This will increase the number of people that were not able to itemize in the past. It could lead to a higher itemized deduction total. If you pay a high amount of state and local taxes from employment and high real estate taxes, you may benefit from this change.
The maximum child tax credit has been increased by 10% from $2,000 to $2,200 for each child under the age of 17. Up to $1,700 may qualify as a refundable tax credit (still may receive a refund even with no income or tax liability). The $2,200 will be adjusted upward for inflation beginning in 2026.
Tip income and overtime income ARE still taxable. The income tax will still be deducted from your paycheck. Congress is allowing a deduction on your tax return for up to $25K per person for tip income. They are also allowing up to $12,500 deduction per person for overtime wages. Both of these deductions are based on total income and are limited/phased out for high income earners. States have not weighed in yet on what they plan to tax. Some states may follow along with Congress’s changes while some may not. Time will tell.
Car loan interest MAY be deductible in the years 2025-2028. Up to $10K of interest paid may be deducted, but certain criteria must be met. No, principal oaymebts are not deductible. First, the deduction only applies to new vehicles purchased on or after 1/1/25. Used vehicles do not qualify. Second, the new vehicle must be 100% assembled in America and must qualify as a light vehicle (under 14,000 pounds). Lastly, there are income limitations on the deductible portion of the interest. You do not have to itemize to take the deduction. There should be published lists later in the year stating which vehicles qualify. Keep your eye out and print yourself a copy.
Some Charitable contributions can be deducted even if you do not itemize, but not until tax year 2026. Up to $1,000 per filer can be deducted as an additional deduction. Save your receipts. This is similar to the $300 maximum each that you were able to deduct a few years ago during COVID-19. This law does not take effect until 2026 tax year to allow taxpayers to plan ahead.
If you heard of the Trump Accounts, it has to do with investing for newborns. This is another tax law that only spans 4 years, 2025-2028. Congress could extend it in the future, but it is set to expire on 12/31/28. This allows for taxpayers to receive up to a $1,000 tax CREDIT for qualified investments for dependent children born 1/1/25-12/31/28. The contributions must be made to qualified Trump Savings accounts (must be invested in certain investments like the S&P 500 and others). Investment advisors/companies should be able to determine the qualified accounts. Withdrawals are taxable, but a tax credit is much better than a deduction. Again, only newborns qualify.
We hope this information helps answer some of your questions. Again, it is still early and more detail will be available as experts interpret the 1,000+ pages of the bill. We only read a portion of it so far, but focused on the more common changes. Have a safe summer and good luck planning. The upcoming tax season should be very interesting.
