2025 Tax Law Changes - OBBB 

Tax Brackets – 10%, 12%, 22%, 24%, 32%, 35% and 37%

Enhanced standard deduction/personal exemption elimination - Under the Bill, the TCJA’s larger standard deduction is now permanent ($31,500 in 2025 for married filing joint taxpayers and $15,750 for most other filers).  Personal exemptions are permanently removed with an exception for seniors.

Tax credit for seniors - The law offers a temporary tax deduction of up to $6,000 for taxpayers 65 and older, set to expire in 2028. The deduction starts to decrease for taxpayers with a Modified Adjusted Gross Income (MAGI) of over $75,000 (single) / %150,000 (married couples).  Requires a Social Security number valid for work and is not available for those using married filing separate status.

Charitable deduction changes - The law allows a tax deduction for charitable contributions made by an individual who does not itemize their tax deductions. The deduction is limited to $1,000 ($2,000 if married filing jointly).  For individuals who itemize their charitable contributions, a tax deduction is allowed only of the amount that exceeds 0.5 percent of their adjusted gross income,

State and local tax deduction limitation (SALT cap) - In general, the Bill kept the SALT cap under the TCJA, but the Bill increases the maximum SALT deduction to $40,000 for incomes under $500,000 ($250,000 for married filing separately).  If your Modified Adjusted Gross Income (MAGI) is over $500,000 then the cap is reduced by up to 30% (until it reaches $10,000).  The "cap" amount increases by 1% each year beginning in 2026, but reverts to $10,000 in 2030.

No tax on certain tips (temporary) - The Bill allows a deduction “capped” at $25,000 annually for qualified tips. The deduction is an "above-the-line" deduction and is not treated as an itemized deduction. The deduction begins to phase out when the taxpayer’s MAGI exceeds certain threshold amounts ($300,000 for married couples filing jointly; $150,000 for most other returns). The special tip deduction applies from 2025 through 2028.

No tax on certain overtime pay (temporary) - The Bill allows an "above-the-line" deduction of up to $12,500 annually ($25,000 in the case of married couples filing jointly) for "qualified overtime compensation" received by an individual. The deduction begins to phase out when the taxpayer’s MAGI exceeds certain threshold amounts ($300,000 for married couples filing jointly; $150,000 for most other returns). The amount of "qualified overtime compensation" is determined under standards set forth in the Fair Labor Standards Act. The special overtime deduction applies from 2025 through 2028.

Tax deductible for loan interest for U.S.-assembled cars - The law allows car buyers to deduct up to $10,000 per year in auto loan interest for cars assembled in the United States and purchased between 2025 and 2028. The deduction phases out for individuals making over $100,000 or couples making over $200,000

Child tax credit - The law increases the maximum amount of the child tax credit from $2,000 to $2,200 per child.

Trump accounts - The law creates "Trump accounts," which are individual retirement accounts for minors where the government will contribute $1,000 to this account for each child with a valid Social Security number born between Dec. 1, 2025 and Dec. 31, 2028. The earnings grow tax-deferred. The account may receive up to $5,000 in contributions each year (increasing annually for inflation). Contributions to the accounts are not tax deductible. No distributions may be made before the child turns 18.

Changes to education savings plans -Popularly known as Section 529 plans, the expenses that qualify as higher education expenses for elementary or secondary public, private or religious schools are expanded from the existing tuition, fees, books, supplies and equipment to specifically include curriculum and curricular materials, books or instructional materials, online education materials and certain tutoring and education classes outside of the home, fees for specified tests, and others. The annual limit for K-12 expenses increases from $10,000 to $20,000 after 2025. 

 Business Tax -The Bill expands many provisions from the TCJA, impacting qualified small business stock, business income deductions, employee retention credits, and more. 

Restoration/expansion of bonus depreciation - For "qualified property" acquired on or after Jan. 20, 2025, the Bill restores, permanently, the 100% bonus depreciation initially allowed under the TCJA.