2025 TAX LAW UPDATE

One Big, Beautiful Bill Act (OBBBA)

Signed July 4, 2025

This law affects your 2025 tax return and future years. Some changes apply immediately in 2025, while others begin in 2026.  This is a summary, please call us for details to see if you qualify.

KEY TAX RULES CONTINUING (MOSTLY PERMANENT)

  • Lower tax rates remain in effect (top rate stays at 37%)
  • Higher standard deduction continues
  • Mortgage interest limit remains at $750,000
  • Mortgage insurance premiums remain deductible
  • Investment advisory fees, tax prep fees, and other 2% miscellaneous deductions remain nondeductible
  • 20% Qualified Business Income (QBI) deduction continues for eligible business owners
  • Estate & gift tax exemption increases to $15 million per person starting January 1, 2026

CHILD TAX CREDIT (CTC)

For 2025 and later tax returns:

  • Up to $2,500 per qualifying child
  • Up to $1,800 per child may be refundable
  • Child must be under age 17 and have a valid Social Security number
  • Income phaseouts begin at:
    • $200,000 (Single / Head of Household)
    • $400,000 (Married Filing Jointly)

Please report any changes in dependents or Social Security numbers.

NEW TEMPORARY DEDUCTIONS (2025–2028 ONLY)

“No Tax on Tips”

  • Deduction of reported tip income (up to $25,000 per year)
  • Income phaseout begins at $150,000 ($300,000 joint)
  • Applies only to certain occupations

“No Tax on Overtime”

  • Deduction for the overtime premium portion of pay
  • Maximum deduction:
    • $12,500 (Single)
    • $25,000 (Married Filing Jointly)

“No Tax on Car Loan Interest”

  • Deduct interest on a new vehicle loan (up to $10,000 per year)
  • Vehicle must be new and finally assembled in the U.S.
  • Vehicle VIN is required on the tax return
  • Income phaseout begins at:
    • $100,000 (Single)
    • $200,000 (Married Filing Jointly)

ADDITIONAL DEDUCTION FOR SENIORS (AGE 65+)

For 2025–2028:

  • $6,000 additional deduction per qualifying person
  • $12,000 if both spouses qualify
  • Income phaseout begins at:
    • $75,000 (Single)
    • $150,000 (Married Filing Jointly)

STATE & LOCAL TAX (SALT)

  • SALT deduction limit increased to $40,000
  • Applies for 2025–2029
  • Reduced for higher-income taxpayers

CHARITABLE CONTRIBUTIONS

(CHANGES BEGIN WITH 2026 RETURNS)

  • Non-itemizers may deduct:
    • $1,000 (Single)
    • $2,000 (Married Filing Jointly)
  • New limits apply to itemized charitable deductions
  • Certain school scholarship donations may qualify for a tax credit

ENERGY CREDITS — ENDING IN 2025

  • Clean vehicle credits end after September 30, 2025
  • Home energy credits (solar, batteries, heat pumps, efficiency upgrades) end after December 31, 2025

To qualify, property must be installed and placed in service before the deadline.