The Big Beautiful Bill Brings Big Changes For Taxpayers

Authored by Sandra Block via Kiplinger’s Perosnal Finance,

The One Big Beautiful Bill Act, signed by President Trump on July 4, includes tax breaks for an expansive range of taxpayers, while scrapping credits for energy-saving vehicles and home improvements.

More broadly, the legislation makes the tax cuts in the 2017 Tax Cuts and Jobs Act permanent, which means tax rates won’t increase after 2025. Here’s a look at how other provisions in the bill could affect your taxes.

Older Adults

Larger Standard Deduction

Starting in the 2025 tax year, those who are 65 or older will be eligible for an additional standard deduction of $6,000. The bonus deduction comes on top of an existing increase in the standard deduction of $2,000 for single filers who are 65 or older; for married couples who file jointly, it’s $1,600 for each spouse 65 or older.

The expanded deduction means an eligible taxpayer with a filing status of single will be able to deduct up to $23,750 from taxable income, while a married couple will qualify for a deduction of up to $46,700, assuming both are 65 or older.

The deduction starts to phase out for couples with modified adjusted gross income of more than $150,000 and is fully phased out at MAGI of $250,000 ($75,000 and $175,000 for single filers). This new deduction is available for 2025 through 2028.

The legislation won’t eliminate taxes on Social Security benefits. But by lowering taxable income, it will reduce the number of beneficiaries who pay the taxes from 36 percent to 12 percent, according to the White House Council of Economic Advisers.

Estate Tax Exemption

As a result of the legislation, the vast majority of taxpayers won’t have to worry about paying federal estate taxes. The law increases the estate tax exemption, which is $13.99 million per person in 2025, to $15 million per person, or $30 million for a married couple, in 2026. The exemption will then be adjusted annually for inflation. Without congressional action, the exemption would have dropped to about $7 million after 2025.

Homeowners

Property Tax Deduction

Homeowners will be able to deduct up to $40,000 in state and local taxes, up from a cap of $10,000. The higher cap takes effect for 2025 and lasts through 2029, and it will be increased by one percentage point each year until returning to the $10,000 cap in 2030. The higher cap phases out for homeowners with MAGI above $500,000 ($250,000 for a married individual filing separately). Taxpayers with MAGI of $600,000 or more will be ineligible for the increase. You must itemize to claim this deduction.

Credit for Energy-Efficient Home Improvements

Planning to install rooftop solar panels? Get busy, because a tax credit for these improvements will expire at the end of 2025. The Residential Clean Energy Credit, which provides a 30 percent tax credit toward the cost of buying and installing solar panels, solar water heaters, or other energy-saving measures, was previously scheduled to phase out in 2033. To claim the credit on your 2025 tax return, you’ll need to start work by the end of the year.

Families

Extension of the Child Tax Credit

The bill permanently extends the child tax credit and increases the amount of the credit to $2,200 per child, up from $2,000.

Savings Accounts for Kids

The law creates a new tax-advantaged savings account for children. Until the child turns 18, parents, grandparents and others can contribute up to $5,000 a year to the account, where the money is invested in a fund that tracks a stock index and grows tax-deferred. Parents of children born between January 1, 2025, and December 31, 2028, will be eligible to receive $1,000 in federal seed money to start the account.

Car Buyers

Deduction on Car Loan Interest

Taxpayers will be eligible to deduct up to $10,000 in interest on loans for cars purchased between 2025 and 2028. You don’t have to itemize to claim this deduction, but it’s available only for loans taken out to buy new cars assembled in the United States. The deduction phases out for individuals earning more than $100,000 or married couples making over $200,000.

Credit for Electric Vehicles (EVs) and Charging Stations

The $7,500 tax credit to buy or lease qualified EVs, along with the $4,000 credit for eligible used EVs, will end September 30, 2025.

Workers

Tip Income

Eligible tipped workers will be able to deduct up to $25,000 in tips a year from 2025 through 2028. The tax break will decrease by $100 for every $1,000 of MAGI over $150,000 for single filers and $300,000 for joint filers. You don’t need to itemize to claim this deduction.

Overtime Pay

From 2025 through 2028, workers will be allowed to deduct up to $12,500 a year in overtime pay, or $25,000 if they’re married and file jointly. This phases out for single filers with MAGI of more than $150,000 and joint filers with MAGI over $300,000.

©2025 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC.

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