Learning Library | Taxes

2025 Tax Law

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OBBBA - 2025 Tax Law

This is a quick summary of many of the changes that impact individual taxpayers. This list is not exhaustive and only meant as a starting point to understand the plethora of changes. Sources used to create this list include the text of the Bill, Cornell's searchable Legal Information Institute (not yet updated with changes), and Tax Foundation's article on OBBBA

  • (Near) Immediate Changes
    • EV Credit - $7,500 for new EVs built in the USA – now ends September 30. 2025 (was December 31, 2032)
    • EV Credit - $4,000 for used EVs – now ends September 30, 2025 (was December 31, 2032)
    • Commercial EV Credit - $7,500 or $40,000 depending on gross vehicle weight for EVs built in the USA – now ends September 30, 2025 (was December 31, 2032)
    • Residential Clean Energy Credits
      • Most appliance credits now end December 31, 2025
      • Credits for solar panels now end December 31, 2025
  • Marginal Tax Brackets from TCJA – made permanent
    • One-time catch-up inflation adjustment for 10%, 12%, and 22% brackets
  • Above the line Deductions
    • New permanent above-the-line deduction for charitable contributions
      • Only available if NOT itemizing
      • $1,000 for Single, HoH, MFS
      • $2,000 for MFJ
      • Starts in 2026
    • New temporary above-the-line deduction for tip income, starts in 2025
      • Deduction of up to $25,000
      • Reduced for taxpayers with income above $150,000 ($300,000 for MFJ)
      • Deduction ends after 2028
      • Restricted to (upcoming) listed occupations that traditionally receive tips
      • FICA still applies to tip income
    • New temporary above-the-line deduction for overtime pay, starts in 2025
      • Deduction of up to $12,500 ($25,000 for MFJ)
      • Reduced for taxpayers with income above $150,000 ($300,000 for MFJ)
      • Deduction ends after 2028
      • Deduction is for the additional multiple of pay received (e.g. if receive 1.5x for hours worked, the .5x is what is deductible)
      • FICA still applies to overtime pay
    • New temporary above-the-line deduction for interest on car loans, starts in 2025
      • Deduction of up to $10,000
      • Reduced for taxpayers with income above $100,000 ($200,000 for MFJ)
      • Deduction ends after 2028
  • Standard Deduction
    • Increase permanent
    • 2025
      • MFJ $30,000 -> $31,500
      • HoH $ 22,500 -> $23,625
      • Other $15,000 -> $15,750
  • Senior Deduction
    • Not tied to Social Security
    • $6,000 per person, above the line
    • Phases out with MAGI > $75,000
    • 2025 – 2028
  • Child Tax Credit
    • Made permanent
    • Increased maximum $2,000 -> $2,200 in 2026
  • Itemized Deductions
    • 37% tax bracket filers are capped at 35% itemized deduction maximum (35% of what? AGI, taxable income, what?)
    • Mortgage Interest Deduction
      • $750,000 max on principal made permanent
    • SALT
      • $40,000 cap for 2025 (up from $10,000)
      • Phase out at $500,000
      • 1% increase to cap and phaseout annually
      • In 2029 cap goes back to $10,000
      • PTET strategy still works
    • Charitable Contributions
      • 0.5% floor to take any charitable contribution deduction (presumably of AGI)
  • AMT (most changes start in 2026)
    • AMT exemption increase made permanent
    • Exemption Phaseout LOWERED:
      • $626,350 -> $500,000 (Single, HoH, MFS)
      • $1,252,700 -> $1,000,000 (MFJ)
    • Exemption Phaseout ACCELERATED:
      • Was every dollar over decreases exemption by 25%
      • Changed to 50%
      • Range to get any exemption was (Single, HoH):
        • $626,350 - 978,750
      • Changed to (assuming the exemption amount is not inflated):
        • $500,000 – 676,200
      • Range to get any exemption was (Single, HoH):
        • $1,252,700 – 1,800,700
      • Changed to (assuming the exemption amount is not inflated):
        • $1,000,000 – 1,274,000
  • Tax Favored Savings
    • New Child IRA
      • NOT a Roth IRA
      • Beneficiary must be under 18 the entire year
      • For children born after December 31, 2024, and before January 1, 2029
        • The Federal Government will contribute $1,000 to the account
        • How this works is still TBD
      • Contributions:
        • Do NOT receive a tax deduction
        • Parents can contribute up to $5,000
        • Employers can contribute up to $2,500
          • This is considered non-taxable income
        • Withdrawals:
          • Not allowed until the child is 18
          • All monies withdrawal are subject to ordinary income tax
          • 10% penalty for taking money before age 59.5
            • Exceptions to the penalty tax for higher education, first time home purchase ($10,000), birth of child ($5,000)
          • Special Note: Parent contributions do NOT receive a tax deduction, and that money will be taxed on withdrawal, making this the only ‘tax-favored’ account that is double taxed.
  • Estate Tax
    • Estate and Gift Tax Exemption permanently increased
      • Beginning in 2026
      • Single: $15,000,000
      • Joint: $30,000,000
  • QBI Deduction
    • Made permanent
    • Minimum deduction
      • For those with QBI of at least $1,000; minimum deduction of $400
    • Increase phase-out range by $50,000 ($100,000 for MFJ)