New 2025 Tax Laws

The Federal Government’s Big Beautiful Bill recently went into effect and includes many new tax laws that impact many taxpayers. But will they impact you?

1.  Social Security is Still Taxable – But Less So for Many.

• • Instead, you get a new senior deduction: $6,000 for individual age 65+ and $12,000 for married couples age 65+. It takes effect in 2025 and is in place through 2028
  • The new senior deduction starts phasing out when income exceeds $75,000 (single) or $150,000 (joint) – and is gone entirely at $175k/$250k
  • This deduction reduces taxable income, which may lower or eliminate the tax on social Security for many middle-income seniors.
  • The existing regulations remain, up to 85% of Social Security benefits may be subject to taxation if income is high enough.

2.  The new tax laws also add new clarity to estate-and-gift tax.

• • For 2025, the exemption is $13.99 million per individual which was set to drop to about $7 million in 2026.
  • The new law sets a permanent base of $15 million per person starting in 2026 with inflation adjustments after that.

3.  No Tax On Tips is one of the most talked about changes in the new tax laws.

• • This provision allows for a deduction up to $25,000 for single filers with income up to $150,000 before phasing out
  • Married joint filers can deduct up to $25,000 with combined income of $300,000 before phasing out
  • The Treasury Department will compile a list of who qualifies
  • This provision takes effect in 2025 and is in place through 2028
  • You’ll still qualify for the same Earned Income Tax Credit (EITC) as before. In short: your EITC stays strong, and your refund gets a boost, but you’ll still pay Social Security and Medicare taxes

4.  The Child Tax Credit has become permanent and has increased.

• • The $2,000 Child Tax Credit was enacted in 2017
  • Starting in 2025, the base amount will be $2,200 per child
  • It will be indexed for inflation annually after 2025

5.  The Child and Dependent Care Credit has also changed.

• • Effective 2026, the maximum tax credit is $1,500 for one child and $3,000 for two or more

6.  No Tax On Overtime is a provision set out by the tax law changes that has gleaned a lot of media attention.

• • The provision for qualified overtime takes effect in 2025 and is in place through 2028
  • The deduction for single filers is $12,500 for income up to $150,000
  • Married joint filers can deduct up to $25,000 with income up to $300,000
  • Even though overtime pay is excluded from federal income tax, it’s still counted as earned income for Earned Income Tax Credit (EITC) purposes
  • Your EITC won’t shrink just because your overtime is tax free
  • You’ll still pay Social Security and Medicare taxes

7.  Tax law changes the Charitable Donations.

• • A new law takes effect for tax year 2026.
  • Taxpayers who take the standard deduction (i.e., don’t itemize) can deduct:
    • Up to $2,000 for married joint filers
    • Up to $1,000 for single filers

8.  Gamblers will pay more taxes starting in 2026 with the new tax law.

• • Instead of gambling losses being deductible to the full extent of gambling winnings, losses are going to be limited to 90%
  • Many gamblers do not get a tax break for losses because they don’t itemize deductions
  • Gamblers lost a bit of a tax break in the nearly 900-page mega tax-and-spending bill

9.  A new tax law encourages US auto production with the Car Loan Interest Deduction.

• • You can deduct up to $10,000 per year in interest on new, US – assembled personal vehicles for tax years 2025 through 2028
  • The deduction in addition to the standard deduction so you do not need to itemize to claim it
  • The interest deduction starts phasing out when income exceeds $100,000 for a single filer or $200,000 for married joint filers
  • There is no deduction for single filers earning$150,000 or more or married joint filers with combined incomes of $250,000 or more

10. Another new tax law has increased standard deductions for 2025.

• • The standard deduction for single filers is now $15,750
  • Married joint filers can now deduct $31,500
  • The standard deductions moving forward will adjust with inflation starting in 2026

11. There is an exciting change in the tax law relating to 529 education savings plans.

• • The legislation expands tax-free withdrawals from these popular accounts to include more K-12 expenses
  • It also applies to expenses for certifications and licenses such as HVAC work
  • This expansion takes effect in 2026
  • The annual aggregate per-beneficiary distribution is increased to $20,000 effective 2026

12. One of the new tax laws has expanded the SALT deduction.

• • The new law expands the Schedule A deduction for state and local property, income or sales taxes from $10,000 per return to $40,000 for taxpayers with income up to $500,000 and phases down to $10,000 after that. The provision takes effect for tax year 2025 and expires at the end of 2029
  • Filers who will benefit from this change should evaluate the timing of other Schedule A items such as charitable contributions to maximize benefits

13. The new tax laws do not impact the following:

• • The 20% qualified business income deduction for pass-through entities still applies
  • Investment tax rates and retirement account rules are unchanged, so the top rate for long-term capital gains and some dividends stays at 20% plus a 3.8% surtax, with no changes to IRA or 401(k) contribution rules

14. The new tax laws relieve a lot of taxpayer stress concerning the alternative minimum tax.

• • The alternative minimum tax has been adjusted so it doesn’t catch millions of filers in 2026 and beyond by surprise