We are writing to inform you about the significant new tax legislation (the Act) signed into law July 4, 2025 (known as One Big Beautiful Bill). The Act includes numerous changes and makes permanent many provisions of the 2017 tax bill set to expire December 31, 2025. Navigating these changes can be complex, and their impact on your specific tax situation will vary. We encourage you to review this this list, which highlights some of the key provisions, and contact us at your earliest convenience to discuss the impact of these changes.
Individuals
- Reduced Income Tax Rates: The Act makes the lower individual income tax rates and wider tax brackets introduced by the Tax Cuts and Jobs Act “TCJA” permanent, preventing a scheduled tax rate increase after 2025.
- Increased Standard Deduction: The standard deduction has been permanently increased and enhanced for 2025 and beyond: $30,000 for joint filers, $22,500 for heads of household, and $15,000 for singles in 2025, with further increases to $31,500, $23,625, and $15,750, respectively, for 2026 and after.
- State and Local Tax Deduction (SALT): Increased cap for 2025-2029: The deduction limit, which was previously capped at $10,000 under the Tax Cuts and Jobs Act of 2017 (TCJA), has been raised to $40,000 starting in 2025. The $40,000 cap will increase by 1% each year from 2026 through 2029. The benefit of the increased cap is reduced for taxpayers with higher incomes. The $40,000 cap begins to phase out when Modified Adjusted Gross Income (MAGI) exceeds $500,000, and it reverts to $10,000 for those with MAGI of $600,000 or more.
- Deduction for Taxpayers Age 65 or Older: For tax years 2025–2028, individuals age 65 or older (and their spouses, if filing jointly) can claim a new $6,000 deduction per qualified person. To maximize this benefit, seniors should aim to keep their adjusted gross income (AGI) below $75,000 (single) or $150,000 (joint), as the deduction is reduced by 6% of any excess.
- Child Tax Credit: The Child Tax Credit (CTC) has been permanently increased to $2,200 per qualifying child for tax years after 2024, and will be indexed for inflation in future years.
- Car Loan Interest: For tax years 2025–2028, individuals can deduct up to $10,000 per year in interest paid on loans for new personal-use vehicles even if they don't itemize deductions. The deduction phases out for single filers with MAGI over $100,000 and joint filers over $200,000. To qualify, the loan must be for a new, U.S.-assembled car, SUV, van, pickup, or motorcycle (under 14,000 pounds), secured by a first lien, with the taxpayer as the original owner, and the vehicle's VIN reported on the tax return. Loan must originate in 2025.
- Child and Dependent Care Credit: Starting in 2026, the Child and Dependent Care Credit will be more valuable for many families. The maximum credit rate increases to 50% of eligible expenses, up to $3,000 for one qualifying individual or $6,000 for two or more. The full 50% rate applies to families with AGI up to $15,000 and gradually phases down to 35% for AGI up to $75,000 ($150,000 for joint filers).
- Disaster-Related Personal Casualty Losses: If you suffered a loss due to a federally declared disaster, you can now claim a personal casualty loss deduction even if you don't itemize.
- Deduction for Qualified Residence Interest: The deduction for mortgage interest on home acquisition debt is now permanently capped at $750,000 ($375,000 if married filing separately) rather than increasing to $1 million in 2026 as previously scheduled.
- Miscellaneous Itemized Deductions: The Act permanently eliminates miscellaneous itemized deductions for individual taxpayers. the Act adds a new deduction thereunder for educators, allowing K–12 teachers, counselors, coaches, and aides working at least 900 hours per year to deduct unreimbursed classroom expenses (like books, supplies, and equipment) starting in 2026.
- New Tax-Deferred Investment Accounts for Children: Taxpayers can open a new tax deferred investment account for children, called a “Trump account” for each eligible child. Taxpayers can contribute up to $5,000 per year in after-tax dollars for each child, and funds must be invested in a diversified U.S. equity index fund. For children born between Jan. 1, 2025, and Dec. 31, 2028, the federal government will automatically contribute $1,000 to each account.
- Qualified Higher Education Expenses: Changes to 529 savings plans allow families to use tax-free distributions for a much broader range of K-12 education expenses including not just tuition, but also curriculum, books, online materials, tutoring, standardized test fees, dual enrollment, and educational therapies for students with disabilities. Starting in 2026, the annual limit for K-12 distributions doubles from $10,000 to $20,000 per beneficiary.
- Individuals' Charitable Deductions: Beginning in 2026, the Act makes permanent the 60% ceiling for cash gifts. Also beginning in 2026, non-itemizing taxpayers may claim a below the-line deduction for charitable contributions of $1,000 ($2,000 in the case of a married filing joint return).
- Limitation on Casualty Loss Deduction: Starting in 2026, personal casualty loss deductions are permanently limited to losses from federally declared disasters (and certain state-declared disasters).
- Gambling Losses: Starting in 2026, only 90% of your wagering losses can be deducted against your winnings, even if your losses equal or exceed your winnings.
- Clean vehicle credits: The credits for new and previously owned clean vehicles terminate for vehicles acquired after Sept. 30, 2025. The credit for qualified commercial clean vehicles also terminates for vehicles acquired after Sept. 30, 2025.
- Alternative fuel vehicle refueling property credits: The credit for “alternative fuel vehicle refueling property” (such as an EV charger) terminates for property placed in service after June 30, 2026.
- Moving Deduction: Extends suspension of moving expense deduction and exclusion for most taxpayers, while continuing eligibility for active-duty military and newly adding members of intelligence community who relocate due to job assignments. Starting after Dec.31,2025.
- Dependent Care: Increases the annual exclusion for employer provided dependent care assistance from $5,000 to $7,500 ($2,500 to $3,750 for married individuals filing separately). For tax years beginning after December 31,2025.
- Residential clean energy credit: The residential clean energy expenditures credit is terminated for any expenditures made after 2025.
Business
- Corporate Tax Rate: Remains at 21%.
- Qualified Business Income (QBI) deduction: The Act makes this deduction permanent and establishes inflation adjustments for the new minimums starting in post-2026 tax years.
- Bonus depreciation: The Act makes additional first-year (bonus) depreciation for certain qualified property permanent at 100% (under prior law, it was to phase out to zero ). This provision is effective for property acquired after Jan. 19, 2025.
- 179 Expensing limits: For property placed in service after 2024, the Code Sec. 179 expensing limits are increased to $2,500,000 and the phasedown threshold is increased to $4,000,000 (both subject to inflation adjustments).
- Information reporting, Forms 1099-NEC, 1099-MISC: For payments made after 2025, the reporting thresholds for Forms 1099-NEC and 1099-MISC are increased from $600 to $2,000 (adjusted for inflation after 2026). The Act retroactively reverts the Form 1099-K reporting threshold back to the pre-ARPA $20,000 and 200 transactions threshold.
- Energy efficient home improvement and new energy efficient home credits: The energy efficient home improvement credit under Code Sec. 25C is terminated for property placed in service after 2025.
Payroll
- Tip Deduction: Federal Tax Deduction: Eligible workers in traditionally tipped occupations can now deduct up to $25,000 in qualified tips from their federal taxable income through 2028.. Tips must be voluntary, customer-determined, non-negotiated, and reported to the employer to qualify for the deduction The tip and overtime pay deductions are available in full for workers with adjusted gross income (AGI) under $150,000 ($300,000 for joint filers) and phases out for those earning above this threshold. Workers will still report tips as part of their gross income and then claim the deduction when filing their taxes. While the overtime tax deduction reduces your taxable income, employers are still required to withhold federal income tax from overtime pay. The new law does not exempt overtime from Social Security and Medicare taxes (FICA taxes). These taxes will still be withheld at the standard rates. This new provision only applies to your federal return. State and local tax treatment is not affected by this law.
- Overtime Pay: Eligible employees can deduct a portion of their overtime pay from their federal taxable income. This deduction applies retroactively to January 1, 2025, and is available through December 31, 2028. This deduction is capped at $12,500 for single filers and $25,000 for those filing jointly, and it phases out for higher incomes. While the overtime tax deduction reduces your taxable income, employers are still required to withhold federal income tax from overtime pay. The new law does not exempt overtime from Social Security and Medicare taxes (FICA taxes). These taxes will still be withheld at the standard rates. This new provision only applies to your federal return. State and local tax treatment is not affected by this law.
I hope you find this helpful. As noted above, these are just some of the changes in the Act.