Important 2025 Tax Law Changes - Individual Taxpayers' Edition

Congress has passed the One Big Beautiful Bill Act (OBBBA), a sweeping federal tax law effective for tax year 2025. I want to highlight key provisions that could affect your personal tax planning.

What You Need to Know as an Individual Taxpayer

• Lower Individual Tax Rates Made Permanent: The current seven tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) have been permanently extended and indexed for inflation. In practice, this means 2025 tax returns (filing in 2026) will use the same rates/brackets as 2024 but with one more inflation adjustment.

• Standard Deduction Increased (2025 Onward):

  • Single: $15,750 vs $13,850 in 2024.

  • Head of Household: $23,625 vs $20,800 in 2024.

  • Married Filing Jointly: $31,500 vs $27,700 in 2024.

  • This is available in lieu of itemizing and may reduce your taxable income.

• Senior Deduction (2025–2028): Taxpayers aged 65+ can claim an additional $6,000 deduction, subject to income phaseout (begins at $75,000 for single filers)

• SALT Deduction Cap Increased: The State and Local Tax (SALT) deduction cap rises to $40,000 in 2025, indexed through 2029. It reverts to $10,000 in 2030. High-income taxpayers may see a partial phaseout. In practice, this means your high property State taxes payments may help reduce your tax liability. In addition, mortgage insurance premiums on acquisition debt are now treated as qualified residence interest (i.e. deductible). These apply to loans entered into after Dec. 31, 2025.

• Child Tax Credit (CTC) Updated:

  • Credit per child increased to $2,200

  • Refundable portion remains at $1,400

  • Indexed for inflation starting 2026

  • Income phaseouts ($200k/$400k AGI) stay at TCJA levels. The credit and refundability rules (including SSN requirements) follow current laws.

• New Temporary Deductions (2025–2028):

  • Up to $25,000 of reported tip income is deductible

  • Up to $12,500 of overtime compensation is deductible

  • Up to $10,000/year of car loan interest is deductible (for U.S.-assembled vehicles) These deductions phase out starting at $150,000 MAGI (joint).

• Estate & Gift Tax Exemption Increased: Beginning 2026, the estate and gift tax exemption rises to $15 million per individual, indexed for inflation. Review your estate plan accordingly.

Please note: This summary is not exhaustive. The OBBBA contains additional provisions and complexities not covered in this overview. Please reach out if you would like to discuss how these rules apply to your unique situation.

Please schedule a time to review your 2025 strategy. These changes present planning opportunities and potential tax savings.