In July, the 2025 Reconciliation Legislation—better known as the One Big Beautiful Bill Act (OBBBA)—was signed into law, bringing a wide range of tax changes for individuals, families, and businesses. With so many revisions contained in this legislation, it can be difficult to know what actually affects you. This updated guide highlights the most important changes you need to understand for 2025 and beyond.
Key Changes for 2025:
Standard Deduction Increases
The Act raises the standard deduction amounts for 2025:
- Single or Married Filing Separately: $15,750
- Head of Household: $23,625
- Married Filing Jointly: $31,500
Seniors (age 65+) also receive an additional $6,000 deduction per qualifying taxpayer, available 2025–2028.
Itemizing Becomes More Likely for Many Filers
Expanded SALT Deduction Cap
The previous $10,000 cap on the SALT (state and local tax) deduction is temporarily replaced with a much higher limit—up to $40,000, depending on filing status.
This is a major change for mid- to higher-income taxpayers. Under the new rules, many more households may benefit from itemizing rather than taking the standard deduction, especially if they pay significant property or state income taxes.
Income-Based Tax Changes
Tip & Overtime Deductions
Under OBBBA, certain types of income may be deducted:
- Up to $12,500 in overtime premiums (the “extra” portion of overtime pay) may be excluded from taxable income.
- For workers who receive tips, some reported tips may be deductible.
Eligible taxpayers may deduct:
- Up to $25,000 in qualified tips
- Up to $25,000 in qualified overtime wages
These provisions can offer meaningful tax savings to individuals in tipped industries or jobs with significant overtime.
Vehicle Loan Interest
Individuals may deduct up to $10,000 of interest paid on loans for new U.S.-assembled vehicles purchased after December 31, 2024.
How Social Security Benefits Are Taxed
This section did NOT change under the new law. Social Security taxation still depends on provisional income, defined as: Adjusted Gross Income + Nontaxable Interest + Half of Social Security Benefits
Here is the unchanged structure:
Taxable Portion of Social Security Benefits
| Filing Status / Combined (Provisional) Income: | Taxable Portion of Social Security Benefits: |
| Single / Head of Household / Qualifying Widow(er) | Single / Head of Household / Qualifying Widow(er) |
| Below $25,000 | 0% — Benefits are not taxed |
| $25,000 – $34,000 | Up to 50% taxable |
| Above $34,000 | Up to 85% taxable |
| Married Filing Jointly | Married Filing Jointly |
| Below $32,000 | 0% — Benefits are not taxed |
| $32,000 – $44,000 | Up to 50% taxable |
| Above $44,000 | Up to 85% taxable |
Credits & Deductions You Should Know About
Child Tax Credit
- The $2,000 child tax credit is now permanent.
- In 2025, the credit increases to $2,200 per child, with future inflation adjustments.
- Up to $1,400 of the credit is refundable (indexed for inflation).
Child & Dependent Care Credit
- Maximum credit rate increases to 50%
- Phaseouts adjusted to benefit more moderate-income families
- Dependent Care FSA limit increased to $7,500
Adoption Credit
The first $5,000 of the adoption credit is now refundable.
Charitable Giving & Education Savings
- Mortgage interest & PMI rules from the prior TCJA are made permanent
- Itemizers now face a 0.5% floor for charitable contributions
- Non-itemizers may claim a small above-the-line charitable deduction
- 529 plans are expanded to cover more K–12 uses and career credential programs
HSAs (Health Savings Accounts)
Bronze and catastrophic health insurance plans now qualify taxpayers to contribute to HSAs, expanding access significantly.
Key Business Tax Changes for 2025
100% Bonus Depreciation
Now permanent — businesses may fully expense qualifying assets with no phase-down schedule.
Section 179 Expensing
- Deduction limit increases to $2.5 million
- Phaseout begins at $4 million
- Both indexed for inflation
R&D Expenses
Businesses may fully deduct research and development expenses in the year incurred.
1099 Reporting Thresholds
- 1099-K threshold returns to $20,000 / 200 transactions
- Beginning in 2026, 1099-MISC & 1099-NEC thresholds increase to $2,000
What Does This All Mean for You?
These changes can significantly affect tax planning for:
- Moderate- to high-income taxpayers
- Seniors
- Tipped or overtime-based workers
- Parents and caregivers
- Car buyers
- Small business owners and self-employed individuals
With the SALT cap expansion and the senior deduction, many taxpayers who previously relied on the standard deduction may now benefit from itemizing in 2025. Running both scenarios—itemizing vs. standard deduction—may be worthwhile.
How We Can Help You Plan Ahead
As with all tax matters, the ultimate answer is often “it depends.” Every taxpayer’s situation is unique, and facts and circumstances can vary greatly from one case to the next. With the recent changes under The One Big Beautiful Bill Act, many provisions are still evolving, and several IRS forms and instructions remain in draft form and may be subject to further revision. We will continue to monitor these developments closely and will keep you informed to the best of our ability as updates become available. If you have questions about how the new law may affect your specific situation, please feel free to contact our office — we are here to help you navigate these changes.