The “Big Beautiful Bill” has been signed and includes several major changes that will take effect beginning in 2025. These updates may impact many individuals and families. Below are some of the key points:
Standard deduction increase
The standard deduction will permanently increase to $31,500 for joint filers, $23,625 for heads of household, and $15,750 for all other filers. These amounts will be adjusted annually for inflation.
New senior deduction
From 2025 through 2028, a $6,000 deduction will be available for each qualifying senior. This applies to both itemizers and non-itemizers and begins to phase out once modified adjusted gross income exceeds $75,000.
SALT deduction expansion
The cap on state and local tax deductions increases to $40,000 in 2025 and will rise 1 percent annually through 2029. The cap phases out for taxpayers earning more than $500,000 and returns to $10,000 after 2029.
Limit on itemized deductions for high earners
For taxpayers in the top bracket, the value of itemized deductions will be limited to 35 cents on the dollar.
Tip income deduction
From 2025 through 2028, workers in traditionally tipped industries can deduct up to $25,000 in tip income. The deduction phases out at a 10 percent rate once income exceeds $150,000 for individuals and $300,000 for joint filers.
Overtime pay deduction
A temporary deduction of up to $12,500 ($25,000 for joint filers) is available on the premium portion of overtime pay for 2025 through 2028. This phases out above $150,000 for individuals and $300,000 for joint filers.
Auto loan interest deduction
Interest on loans for new vehicles assembled in the United States will be deductible for 2025 through 2028. The deduction is capped at $10,000 and begins to phase out above $100,000 for individuals and $200,000 for joint filers.
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Please reach out if you would like to discuss how these changes could affect your specific situation.