2025 Tax Law Changes You Need to Know Before Filing in 2026

1. Major Federal Tax Law Changes in 2025

A new federal law, the One Big Beautiful Bill Act, was signed in July 2025. This law makes several tax rules permanent and introduces new benefits starting in tax year 2025. These changes apply when you file your return in 2026.

This law impacts deductions, tax brackets, and long-term tax planning for individuals and families.

2. New and Expanded Tax Deductions

Several new deductions are available in 2025, even if you do not itemize. Income limits apply.

Senior Deduction
Taxpayers aged 65+ can claim an additional $6,000 deduction (up to $12,000 for a couple). This is available even if you don’t itemize, and it phases out at certain income levels.

Tip Income Deduction
Up to $25,000 of qualified tip income may be deductible (individuals $25,000 total, phases out for higher incomes).

Overtime Pay Deduction
Up to $12,500 per individual (or $25,000 joint) of overtime pay above your regular rate is deductible.

Car Loan Interest Deduction
You may be able to deduct up to $10,000 of interest on a personal car loan for a new U.S.-assembled vehicle. Conditions apply (loan after 12/31/2024, vehicle, income phaseouts).

**Note: These deductions are above-the-line (available regardless of itemizing) and effective 2025–2028, not permanent. 

3. SALT Deduction Cap Increase

The State and Local Tax deduction cap increased significantly for 2025.

Taxpayers can deduct up to $40,000 in state and local taxes. Married taxpayers filing separately can deduct up to $20,000.

This change benefits taxpayers in high-tax states the most.

4. Standard Deduction and Tax Brackets

Standard Deduction did increase for 2025:
• Single: $15,750
• Married filing jointly: $31,500

Clarification: 2026 standard deduction amounts are even higher (e.g., $16,100 single; $32,200 MFJ). But your 2025 numbers are right.

Tax Brackets: The existing Tax Cuts and Jobs Act bracket structure was extended/locked in by OBBBA, and brackets are inflation-adjusted.

5. Smart Tax Planning for 2025

Early preparation is critical this year.

New deductions and income phase-outs mean documentation matters more than ever. Gathering records early can help maximize tax savings and avoid delays.

Refund amounts may also change due to updated withholding calculations under the new law.

Final Takeaway

The 2025 tax law changes create new opportunities and new complexity. Understanding these updates early can help you save money and avoid surprises when filing in 2026.

If you want to make the most of these changes, proactive tax planning is essential.

Need help with your taxes? Learn more about our Tax Services.