With every new presidential administration comes a new tax law. This administration is no different. President Trump has signed into law the “One Big Beautiful Bill”. Here are some of the key tax changes that may affect you.
Individual Taxpayers
SALT cap:
Among the substantive changes is an increase in the limit on the federal deduction for state and local taxes (the SALT cap) to $40,000 per household ($20,000 for married taxpayers filing separately) starting in 2025. The deduction would be phased down for taxpayers with modified adjusted gross income (MAGI) over $500,000 ($250,000 for married taxpayers filing separately). The phasedown will reduce the taxpayer’s SALT deduction by 30% of the amount by which the taxpayer’s MAGI exceeds the threshold, but the limit on a taxpayer’s SALT deduction can never be less than $10,000.
Trump account:
New tax-favored savings account for children. The administration aims to stimulate wealth creation for American children by establishing $1,000 “Trump accounts” for babies born during President Trump’s second term in office. Every child born in the U.S. between Jan. 1, 2025, and Jan. 1, 2029, with a Social Security number, and whose parents have Social Security numbers, would be automatically enrolled in the program. The U.S. Treasury would set up and fund the accounts. Families and third parties could also contribute up to $5,000 a year to a child’s account. Employer contributions to Trump accounts would be allowed and not considered taxable income to the employee.
No tax on tips
A new deduction of up to $25,000 annually would be allowed for taxpayers working in traditionally tipped industries (excluding specified services) who earn tips. The income limit for 2025 is $150,000, which would be inflation-adjusted, and the deduction would apply for the years 2025-2028, limited to the amounts included as tip income on the employee’s W-2. Tip income would still be subject to payroll taxes.
No tax on overtime
A deduction of up to $12,500 ($25,000 in the case of a joint return) for overtime pay (excluding tips) will apply starting in 2025 to workers earning up to $150,000 annually. This exclusion would apply for the years 2025-2028 to overtime required under Section 7 of the Fair Labor Standards Act (FLSA).
Auto Loan Interest Deduction
The bill calls for an above-the-line deduction of up to $10,000 in car loan interest during a given taxable year. However, the deduction would phase out by $200 for every $1,000 of modified adjusted gross income above $100,000 for single filers and $200,000 for joint filers and would apply to loans taken out between 2025 and 2028. The law does not specify new cars only, but requires final assembly in the United States.
Increase in the standard deduction:
The bill includes a boost in the standard deduction — an increase for individuals, bringing it to $15,750 for individual filers, and $31,500 for joint filers. This starts in 2025.
It also adds a new, temporary $6,000 standard deduction per individual senior (65 and over) from 2025 to 2028 but phases out for taxpayers with income exceeding a threshold amount of $150,000 for joint filers and $75,000 for all other taxpayers.
Reduction in itemized deductions
For those taxpayers in the top tax bracket (37%), the total itemized deductions will be reduced.
Charitable deductions for those who don’t itemize
This provision creates a temporary deduction for non-itemizing taxpayers up to $1,000 for single filers ($2,000 for married filing jointly) for charitable cash contributions for tax years 2025 through 2028. The charitable contribution must be made to a qualified charity and cannot be made to Donor-Advised Funds or supporting organizations.
For itemizers, the bill imposes a 0.5% floor on the charitable contribution deduction: The amount of an individual’s charitable contributions for a tax year is reduced by 0.5% of the taxpayer’s contribution base for the tax year.
Increase in the child tax credit:
There is also a $200 increase in the child tax credit, bringing it to $2,200 starting in 2025.
Child and dependent care credit:
The bill permanently increases the amount of the child and dependent care tax credit from 35% to 50% of qualifying expenses. The credit rate phases down for taxpayers with adjusted gross income (AGI) over $15,000. It will be reduced by 1 percentage point (but not below 35%) for each $2,000 that the taxpayer’s AGI exceeds $15,000. It will then be further reduced by (but not below 20%) 1 percentage point for each $2,000 ($4,000 for joint returns) that their AGI exceeds $75,000 ($150,000 for joint returns).
Termination of energy credits:
Most of the popular tax credits related to energy will be terminated. These include replacing doors & windows (12/31/25), HVAC systems, heat pumps, solar panels (12/31/25), and electric vehicles (09/30/25). If you’re interested in purchasing an electric vehicle, you should do so before the end of September to capitalize on the tax credits.
Increase in the estate tax exemption:
The estate tax exemption rises to $15 million and is adjusted for inflation going forward.
Business Taxpayers
QBI deduction:
The bill makes the Sec. 199A qualified business income (QBI) deduction permanent and keeps the deduction rate at 20% (the bill passed by the House would have raised it to 23%). The bill expands the Sec. 199A deduction limit phase-in range for SSTBs and other entities subject to the wage and investment limitation by increasing the $50,000 amount for non-joint returns to $75,000 and the $100,000 amount for joint returns to $150,000.
Depreciation
The amended bonus depreciation provision reinstates the 100% first-year depreciation for qualified property acquired and placed in service after January 19, 2025.
There would also be a special bonus depreciation allowance for nonresidential real property that is “qualified production property.” Qualified production property does not include the portion of any nonresidential real property used for offices, administrative services, lodging, parking, sales activities, software engineering activities, or other functions unrelated to manufacturing, production, or refining of tangible personal property.
A qualified production activity is the manufacturing, production, or refining of a qualified product.
The Section 179 deduction cap is also extended from $1 million to $2.5 million, with phase-outs beginning at $4 million for property placed in service after December 31, 2024.
Repeal of de minimis rules for 1099-K
This removes the current $600 threshold for third-party networks to issue a 1099-K and restores the threshold to the original amount of $20,000, below which a 1099-K is not required.
