Key federal tax law changes for 2025 include the permanent extension of many provisions from the 2017 Tax Cuts and Jobs Act (TCJA), new temporary deductions for specific types of income, and the expiration of some clean energy tax credits. The new rules were enacted in July 2025 under the "One Big Beautiful Bill".
New individual deductions (temporary until 2029)
- Qualified tips: You can deduct up to $25,000 in qualified tip income if your Modified Adjusted Gross Income (MAGI) is below $150,000 (single) or $300,000 (joint). FICA taxes on tips still apply.
- Overtime pay: A deduction of up to $12,500 (single) or $25,000 (joint) is available for qualified overtime pay. This is also subject to income phaseouts.
- Auto loan interest: A deduction of up to $10,000 is available for interest on loans for new, U.S.-assembled passenger vehicles purchased after December 31, 2024. The deduction phases out at higher incomes.
- Senior bonus deduction: Taxpayers aged 65 and older can claim an additional $6,000 deduction ($12,000 for couples). It begins phasing out for indidviduals with a MAGI over $75,000.
Permanent TCJA extensions and other updates
- Income tax brackets: The seven individual tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) are now permanent.
- Standard deductions: The higher standard amounts introduced by the TCJA have been made permanent. For the 2025 tax year, the standard deduction is $15,750 for single filers and $31,500 for those married filing jointly.
- Child Tax Credit: The maximum credit has permanently increased to $2,200 per qualifying child. The refundable portion is capped at $1,700 and requires a valid Social Security number.
- Business income deduction: The 20% Qualified Business Income (QBI) deduction for pass-through entities is now permanent.
- Estate and gift tax: The lifetime estate and gift tax exemption is now permanent at $15 million per person starting in 2026.
Expiring and reduced benefits
- Clean energy credits: The federal tax credits for purchasing new and used electric vehicles (EVs) have ended for vehicles acquired after September 30, 2025. The residential solar credit also disappears after December 31, 2025.
- 1099-K reporting threshold: The reporting threshold for third-party payment platforms like PayPal and Venmo reverts to the higher pre-2022 level of over $20,000 and 200+ transactions.
- Student loan forgiveness exclusions: The exclusion of forgiven student loan debt from taxable income, which was temporarily in place, expires after December 31, 2025.
Important Dates
- July 4, 2025: President Trump signs the "One Big Beautiful Bill" into law, establishing most of the changes.
- September 30, 2025: The federal EV tax credit expires for vehicles acquired after this date.
- December 31, 2025: The ACA payment tax credit subsidies are set to expire unless Congress acts.
