A First Look at Tax Updates in the "Big, Beautiful Bill"
On July 4th, 2025 the “big, beautiful bill” was signed into law. There are many changes/updates included in the new law from taxation and spending to national defense. While there are many opinions regarding the costs and benefits of the new law, we wanted to take time to outline the provisions that directly relate to our clients and their taxes. This is not an exhaustive list nor does it include all the nuance regarding the rules. Rather, it is a first look at some key features, among others, that we will be incorporating into our planning process to ensure tax efficiency for our clients.
Individual Income Tax brackets will remain the same, adjusted annually for inflation. What this means is the current brackets which range from 10% to 37%, are now permanent.
The Standard Deduction increase has been made permanent and was increased. For 2025, the new standard deduction for single filers is $15,750 (up from $15,000) and for married filing jointly it is $31,500 (up from $30,000). This will continue to be adjusted annually for inflation.
The Estate and Gift Tax exemption has been increased to $15 million per person in 2026 and is indexed to inflation.
The Child Tax Credit is increased to $2,200 per child (up from $2,000) in 2025 and will be adjusted for inflation. The refundable portion of the credit will also become permanent and adjust for inflation ($1,700 in 2025). The credit is based on additional eligibility rules.
The State and Local Tax Deduction (SALT) limit has been increased to $40,000 in 2025 for joint filers with a 1% increase per year through 2029. With no additional action, it will revert back to $10,000 in 2030.
An additional Senior Deduction in the amount of $6,000 per qualified senior (65+) from 2025 to 2028. There is an income phase out on this deduction.
In addition to these headline updates, there are also updates to the following:
Charitable Giving: The law re-establishes and makes permanent an above-the-line tax deduction for charitable contributions (filers can take advantage of this deduction without itemizing). The deduction is capped at $1,000 per year for individuals and $2,000 per year for married couples.
Trump Saving Account: The law creates a tax-deferred saving account similar to an IRA in which parents can contribute up to $5,000 and employers $2,500 each year. Funds can be used on education, housing, or retirement expenses. Contributions can only be made to those under the age of 18 and distributions can only be made beginning in the calendar year the beneficiary turns 18. A pilot program was also established that provides a $1,000 tax credit for opening this type of account for a child born between January 1, 2025 and December 31, 2028.
Clean Energy Credits: The law repeals/phases out most energy credits (EV, solar, etc.) previously signed into law in 2022.
Taxation of Tips: The law exempts qualified tips up to $25,000 from federal taxation through 2028 (not state, local, or payroll tax) and has income phase outs.
Taxation of Overtime: The law allows a deduction of $12,500 ($25,000 for joint filers) for qualified overtime pay from 2025 to 2028 and has income phase outs. There is no deduction for state, local, or payroll taxes.
Auto Loan Interest: The law allows for the deduction of auto loan interest on certain vehicle purchases up to $10,000 through 2028. There are income limitations.
Qualified Business Income (QBI): The law makes the 20% QBI deduction permanent, subject to terms.
Alternative Minimum Tax (AMT): Makes higher exemption and phase outs permanent and adjusts for inflation.
We will stay up to date as additional details emerge regarding the law and any items that may need further clarification. If you have any questions, please feel free to reach out.