IRS and Tax Law Changes

The following sections address important information regarding the 2025 tax season. Unless otherwise stated, all changes are effective for 1040 returns only.

You can review detailed information about the changes under the new tax bill at Congress.gov and IRS.gov.

Personal Exemptions

Personal exemptions are permanently eliminated.

Standard Deduction

The higher standard deduction is no longer set to expire. Amounts will adjust annually after 2025. 2025 amounts:

• $31,500 – Married filing jointly (MFJ) and qualifying surviving spouse

• $23,625 – Head of household (HOH)

• $15,750 – Single or married filing separately (MFS)

Senior Deduction

This is a new, temporary deduction for seniors available for tax years 2025–2028. This is in addition to the standard deduction and can be taken by both itemizers and non-itemizers.

• $6,000 per qualified individual

• Taxpayers must be 65 or older by the end of the year

• This is subject to phaseout if the MAGI exceeds:

• $75,000 (single/HOH)

• $150,000 (MFJ)

Note: If married, taxpayers must file MFJ to claim the deduction.

SALT Deduction (State & Local Taxes)

Temporary increase in the SALT deduction cap to $40,000 in 2025. This is subject to income-based reduction if the taxpayer’s MAGI exceeds the following threshold:

• $500,000 (single/joint)

• $250,000 (MFS)

Adjustments to the limitation and threshold amounts are planned through 2029. After 2029, the limitation will be $10,000 with no threshold.

Deduction for Qualified Tips

Both itemizers and non-itemizers can take the deduction for qualified tips, if eligible. The maximum deduction is $25,000, subject to phaseout for taxpayers with MAGI over:

• $150,000 (single/HOH)

• $300,000 (MFJ)

• For self-employed individuals, the deduction may not exceed their net income (without regard to this deduction) from the trade or business in which the tips were earned.

Deduction for Qualified Overtime

Taxpayers who have qualified overtime compensation as defined by the Labor Standards Act can deduct up to:

• $12,500 (single/HOH)

• $25,000 (MFJ)

This is subject to phaseout for taxpayers with MAGI over

• $150,000 (single/HOH)

• $300,000 (MFJ)

Both itemizers and non-itemizers can take the deduction for qualified overtime.

Deduction for Car Loan Interest

• Covers “qualified passenger vehicle loan interest” up to $10,000.

• Only certain individuals and vehicles qualify. Notably,

o the loan must have originated after December 31, 2024,

o the vehicle must be for personal use,

o used vehicles are not eligible,

o the loan must be secured by a lien on the vehicle,

o final assembly in the United States.

• More detailed information about qualified vehicles and interest is available on the IRS website.

• This deduction can be claimed by both itemizers and non-itemizers.

• Phaseout: Reduced $200 for each $1,000 of MAGI over $100,000 (single/HOH) or $200,000 (MFJ).

Clean Vehicle Incentives

Repealed credits for purchases after September 30, 2025:

• Up to $7,500 new clean vehicle credit.

• Up to $4,000 previously-owned clean vehicle credit.

Child Tax Credit (CTC)

The maximum Child Tax Credit (CTC) available has been increased to $2,200 per child beginning in 2025. This amount will be adjusted for inflation in future years.

The refundable portion, up to $1,700 in 2025, is now permanently extended and will be indexed for inflation in the future.

To claim the Child Tax Credit, both the qualifying child and the taxpayer (or at least one spouse if filing jointly) must have a Social Security Number that is valid for employment, and it must be issued before the due date of the tax return, including extensions.

Other Dependent Credit (ODC)

The Other Dependent Credit ($500) for taxpayers who have a dependent that does not qualify for the CTC is permanent.

Child and Dependent Care Tax Credit

The credit percentage range has changed. The credit percentage chart now has ranges starting at 50% for taxpayers with AGI of $15,000 or less with the lowest credit percentage of 20% for AGI over $103,000 ($206,000 MFJ).

The expense limit of $3,000 ($6,000 for two or more qualifying people) has not changed.

Adoption Credit

The Adoption Credit is now refundable up to $5,000.

100% Bonus Depreciation

100% Bonus Depreciation under Section 16(k) has been made permanent and is available for qualified property that was both acquired and placed in service after January 19, 2025.

Section 179 Deduction Limit

The Section 179 deduction limit for 2025 has been increased to $2.5 million.

The Section 179 investment limit for 2025 has been increased to $4 million.

Both amounts will be adjusted annually for inflation going forward.

Energy Credits and Deductions

Adapted from IRS FAQs

• Energy efficient home improvement credit – not allowed for any property placed in service after December 31, 2025.

• Residential clean energy credit – not allowed for any expenditures made after December 31, 2025.

• Previously-owned clean vehicles credit – not allowed for any vehicle acquired after September 30, 2025.

• Alternative fuel vehicle refueling property credit – not allowed for any property placed in service after June 30, 2026.

• New clean vehicle credit – not allowed for any vehicle acquired after September 30, 2025.

• New energy efficient home credit – not allowed for any qualified new energy efficient home acquired after June 30, 2026.

• Qualified commercial clean vehicle credit – not allowed for any vehicle acquired after September 30, 2025.

• Energy efficient commercial buildings deduction - not allowed for any property that began construction after June 30, 2026.