2025 Tax Law Changes: What You Need to Know
Big tax changes are here — and this time, they actually matter. The new O.B.B.B. introduces new deductions for tips, overtime, and car loan interest, increases standard deductions and tax credits, and brings major wins for business owners. Here’s what changed and how it could impact your 2025 taxes.
Tax season looks very different this year. Recent legislation introduced sweeping changes that affect workers, families, retirees, and business owners alike. To help cut through the noise, we’ve pulled together the most important updates in one place: what’s new, what’s changed, and what actions you may want to consider.
Our goal is simple: fewer surprises, less stress, and better tax outcomes.
New Worker Deductions You Can Take Without Itemizing
One of the most talked about changes comes from the O.B.B.B., which introduced three brand new deductions available even if you take the standard deduction.
No Tax on Tips
Qualified workers may deduct up to $25,000 in tip income ($12,500 for single filers).
This applies to:
W-2 employees
1099 contractors
Qualified professions
These deductions phase out for higher earners, generally beginning at $300,000 MAGI for married couples and $150,000 for others. There are also rules and restrictions on which type of tips count. Talk to your tax preparer to fully understand the ins and outs of this new rule.
No Tax on Overtime
Employees can now deduct the overtime premium—the amount earned above their regular hourly rate—up to $25,000 ($12,500 for single filers).
Car Loan Interest Deduction
Taxpayers may deduct up to $10,000 in interest paid on loans for new personal vehicles, provided the vehicle’s final assembly occurred in the U.S.
Bigger Deductions for Most Taxpayers
Thanks to expanded deductions, fewer people will need to itemize this year.
Increased Standard Deduction (Now Permanent)
Married Filing Jointly: $31,500
Head of Household: $23,625
Single Filers: $15,750
SALT Cap Relief
The deduction for State and Local Taxes (SALT) has increased from $10,000 to $40,000 for 2025—welcome news for homeowners and taxpayers in higher-tax states.
New Senior Deduction
Individuals age 65 or older receive an additional $6,000 deduction per person. Combined with other increases, this change effectively eliminates federal income tax on Social Security benefits for nearly 90% of recipients.
Expanded Tax Credits for Families
Several credits aimed at families and caregivers were expanded this year.
Child Tax Credit
Increased to $2,200 per child
At least one parent must have a Social Security Number
ITIN-only households no longer qualify
Child and Dependent Care Credit
Credit rate increased from 35% to 50%
Maximum credit:
$1,500 for one child
$3,000 for two or more
Adoption Credit
Up to $17,280 total
Now partially refundable, up to $5,000
Major Changes for Business Owners and the Self-Employed
Business owners will see some of the most impactful updates this year.
100% Bonus Depreciation Made Permanent
Businesses can continue deducting the full cost of qualifying equipment and assets in the year they are placed in service.
Qualified Business Income (QBI) Deduction
The 20% QBI deduction is now permanent, with more favorable phase-out rules for certain service-based businesses.
1099-K Reporting Threshold Reversal
For 2025, 1099-K forms are issued only if both thresholds are met:
More than $20,000 in gross sales
More than 200 transactions
Immediate R&D Write-Offs
Research and Development expenses may once again be fully deducted in the year incurred. This change is retroactive to 2022.
Expiring Tax Credits: Timing Matters
Some popular energy-related incentives are ending earlier than expected.
Electric Vehicle Credits
Credits for new and used EVs expire after September 30, 2025.
Residential Energy Credits
Credits for solar panels, heat pumps, and energy-efficient windows and doors expire after December 31, 2025.
If you’re considering any of these improvements, planning ahead is critical.
Important IRS Administrative Changes
End of Paper Checks
Starting September 30, 2025, the IRS will no longer:
Issue paper refund checks
Accept paper payments
All refunds and payments must be handled electronically. The best thing to do is make your IRS.gov account and log in! You can also use EFTPS and directpay.gov for payments.
Simplified IRS Payment Plans
Taxpayers who owe up to $50,000 can now set up a payment plan of up to 10 years online, without submitting detailed financial statements.
How to Prepare for a Smooth Tax Season
To help avoid delays and unnecessary stress:
Submit documents as soon as they’re available
Inform us of life changes such as job changes, new businesses, home purchases, vehicle purchases, or family changes
Don’t panic over headlines—we’ll apply what matters to your specific situation
Ask questions early rather than late
Have your banking info ready for electronic payments
Log in and take control of your IRS.gov account ahead of time
Tax law may be complex, but navigating it doesn’t have to be. We’re here to handle the details and help you make the most of the opportunities available this year.
If you have questions about how these changes affect you, reach out anytime—we’re happy to help.