2025 Tax Law Update: Major Changes You Need to Know

On July 4, 2025, Congress passed and signed into law the One Big Beautiful Bill Act—the most extensive tax overhaul in years. Many of its provisions are retroactive to the 2025 tax year and introduce powerful planning opportunities for both individuals and business owners.

If you are re looking to reduce your 2025 tax liability, now is the time to act. Here’s a breakdown of the most impactful changes:

Key Highlights at a Glance

Personal Deductions & Credits

• SALT Cap Raised
  The state and local tax (SALT) deduction cap is increased to $40,000 (MFJ) and $20,000 (single), indexed for inflation. Applies to tax years 2025 through 2029, reverting to $10,000 in 2030.

• New Above-the-Line Deductions (2025–2028):
  These reduce your Adjusted Gross Income (AGI) directly:

  • Tip Income Deduction – Up to $25,000

  • Overtime Pay Deduction – Up to $12,500 (individual); phaseouts apply

  • Senior Taxpayer Deduction – $6,000 for age 65+, phased out at $75K (single) / $150K (MFJ)

  • Auto Loan Interest Deduction – Up to $10,000 for U.S.-assembled vehicle loans (income-limited)

• Child Tax Credit
  Increased to $2,200 per qualifying child, effective 2025 and made permanent with annual inflation indexing.

• Trump Accounts
  New tax-deferred savings trusts for children:

  • $1,000 refundable credit per child

  • Up to $5,000 in annual contributions

  • Available starting in 2025; no sunset provision

Business Tax Provisions

• QBI Deduction (20%) Made Permanent
  The 20% deduction for pass-through business income (Section 199A) is now permanent.

  • Expanded income phase-out thresholds: $75K (single) / $150K (MFJ)

  • $400 minimum deduction for QBI ≥ $1,000, indexed

• 100% Bonus Depreciation Reinstated
  Applies to qualified property placed in service between January 20, 2025, and December 31, 2029. Some long-life assets extended through 2030.

• Section 179 Expensing Expansion
  Limit increased to $2.5 million, indexed for inflation, and made permanent.
  Applies to equipment, off-the-shelf software, and certain improvements to nonresidential real estate.

• Research & Experimental Expenses (Section 174A)
  Domestic R&D costs are now immediately deductible (no more amortization).

  • Applies to tax years starting after December 31, 2024

  • Optional retroactive election to 2022 available for small businesses

Timeline Overview

Provision Tax Years Notes

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SALT Deduction Cap $40K 2025–2029 Indexed; reverts to $10K in 2030

Tip & Overtime Deduction 2025–2028 Above-the-line; MAGI limits apply

Senior Deduction ($6K) 2025–2028 Above-the-line for age 65+

Auto Loan Interest Deduction 2025–2028 Above-the-line; U.S.-assembled vehicles only

Child Tax Credit ($2,200) 2025 onward Permanent and inflation-indexed

Trump Accounts 2025 onward No sunset

QBI Deduction (20%) 2025 onward Permanent with expanded SSTB phaseouts

100% Bonus Depreciation 2025–2029 Some assets eligible through 2030

Section 179 Expensing ($2.5M) 2025 onward Permanent

R&D Expensing (Sec. 174A) 2025 onward Retroactive election to 2022 available

What This Means for You

With many changes already affecting the 2025 tax year, this is the time to get ahead. Whether you’re a business owner, retiree, or working professional, these provisions can significantly affect your bottom line.

Schedule your mid-year tax planning session today to make sure you're positioned to benefit from these changes.

Call me at 415-857-3680 or email cashiola@stevenjcpa.com to book your appointment.

Need help understanding how these changes impact you?
I am here to guide you through the new rules and develop a strategy tailored to your goals.