Tax bills are confusing enough, so let’s cut through the jargon and break down what actually matters in for regular people (in plain English). Here’s what you need to know.
Higher Standard Deduction Made Permanent
- The larger standard deduction amounts introduced a few years ago are now permanent and slightly increased for 2025 and beyond.
- Single: $15,750
- Head of Household: $23,625
- Married Filing Jointly: $31,500
- These amounts will continue to increase with inflation each year.
No More Personal Exemptions
- Personal exemptions remain eliminated. This means deductions for yourself, your spouse, or dependents are not coming back, except for a special provision for certain seniors.
Tax Brackets Stay the Same
- The lower tax rates from the 2017 Tax Cuts and Jobs Act will not expire. The seven tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) remain in place, instead of reverting to higher pre-2018 rates.
Temporary Deductions for Tips and Overtime
- For tax years 2025–2028, employees in tipped occupations may deduct up to $25,000 of qualified tip income.
- There’s also a deduction of up to $12,500 for qualified overtime pay. Both have income-based phaseouts (generally for MAGI over $150,000 single, $300,000 joint).
Larger Child Tax Credit
- The Child Tax Credit increases to $2,200 per child and is indexed for inflation. Make sure all dependents have valid Social Security numbers.
Expanded State and Local Tax (SALT) Deduction
- For tax years 2025–2029, the SALT deduction cap increases from $10,000 to $40,000, with phaseouts for high earners (MAGI over $500,000). This could make itemizing deductions more appealing for some clients.
New Senior Deduction
- Taxpayers 65+ can take an additional $6,000 deduction from 2025–2028 with income limits and eligibility rules.
Vehicle Loan Interest Deduction
- Interest on personal-use vehicle loans may be deductible up to $10,000 per year, with income phaseouts (MAGI over $100,000 single, $200,000 joint). Lease payments do not qualify and it only pertains to new vehicles assembled in the US. The VIN number will designate if the vehicle is eligible.
Miscellaneous Changes
- Most clean energy tax credits (like the electric vehicle credit) expire by the end of September 2025.
- The 1099-K threshold returns to $20,000/200 transactions, reducing reporting for side-gig/online sales.
Bottom Line
Taxes don’t have to be overwhelming, even when the rules change. While these updates might seem significant, remember that most affect specific situations rather than everyone across the board. The key is staying informed about the changes that apply to your circumstances and planning accordingly. When in doubt, contact us for personalized guidance based on your unique situation.
