Standard Deduction Under the OBBBA
There are permanent changes and temporary ones. Pay attention to the date when each provision of the law comes into effect. Many taxpayers will feel the benefits and tax advantages as early as when filing their 2025 tax returns!
Standard Tax Deduction in 2025: Increased and Made Permanent by the OBBBA Act
Starting in 2025, new, increased standard deduction amounts take effect—and they are permanent! The One Big Beautiful Bill Act (OBBBA) has made them permanent (with annual inflation indexing).
Standard Deduction Amounts for 2025:
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$15,750 — for Single filers and Married Filing Separately
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$31,500 — for Married Filing Jointly and Qualifying Surviving Spouse
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$23,625 — for Head of Household
Additional Deduction for Individuals 65+ or Blind:
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$2,000 — for Single filers and Head of Household
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$1,600 — for each eligible spouse when filing jointly or separately (If you are both 65+ and blind, the amount doubles.)
NEW from OBBBA:
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$6,000 bonus deduction for those aged 65+.
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Important: This is in effect from 2025 to 2028 and is reduced (phase-out) at high incomes ($150,000 for couples filing jointly, $75,000 for single filers).
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Increase in the Child Tax Credit Amount
The maximum credit per child will increase from $2,000 to $2,200.
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Refundable Portion: Part of the credit (up to $1,700) remains refundable. This means you can receive this money even if your tax liability is zero.
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Expiration Removed: The expanded credit becomes permanent.
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Inflation Protection: The credit amount will be indexed annually for inflation, meaning it will grow over time.
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Mandatory Requirement: To receive the credit, both the parent (at least one in a joint return) and the child must have a valid Social Security Number (SSN) with work authorization!
Tips are No Longer Subject to Federal Tax!
Starting January 1, 2025, tips up to $25,000 per year are exempt from federal income tax.
However, there are important requirements, limitations, and nuances:
Conditions for Exemption:
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You work in a profession where tips are traditionally accepted: waiters, bartenders, delivery drivers, taxi drivers, hairdressers, nail technicians, hotel staff, and other service sectors.
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The full list of professions will be approved by the Treasury before October 2025.
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Tips are received in cash (including tip-sharing) and are reported via W2 or 1099-NEC/K.
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Your annual income does not exceed:
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$150,000 — for Single filers
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$300,000 — for Married couples filing jointly.
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Maximum deduction is up to $25,000 per year.
Taxes That Still Apply to Tips:
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Social Security and Medicare: Still withheld from tips.
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State and Local Taxes: States include tips in the tax base.
Fewer Taxes on Overtime? YES!
Imagine being able to get back some of the taxes paid on your overtime at the end of the year.
What You Need to Know:
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This is a tax DEDUCTION. You are not completely exempt from the tax, but you reduce the base for its calculation. The result is a lower tax bill.
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There are limits:
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The maximum you can deduct is $12,500 per year (or $25,000 for married couples).
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Not for everyone:
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Income limit is $150,000 per year for single filers or $300,000 per year for married couples filing jointly.
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Duration:
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This is not permanent! The program is set to last until the end of 2028, so this is a chance to save in the next few years.
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Auto Loan Interest is Now Deductible!
Great news for everyone planning to buy a new car! The One Big Beautiful Bill Act (OBBBA) introduces a temporary but very generous tax deduction for auto loan interest. Previously, interest on a loan for a personal vehicle could not be deducted.
Key Facts About the New Deduction:
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When it applies: Only for tax years 2025 through 2028 inclusive.
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How much can be deducted: Up to $10,000 in loan interest per year.
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The most important thing: This deduction can be claimed EVEN IF you use the standard deduction! You will not need to gather receipts for itemized deductions to use it. This makes it accessible to a large number of taxpayers.
Who and Under What Conditions Can Claim It? (Checklist)
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Vehicle Type: It must be a new passenger car, minivan, SUV, pickup truck, or motorcycle.
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Assembly: One of the most important conditions is that the final assembly of the vehicle must have taken place in the USA.
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Use: The vehicle must be purchased for personal use, not for commercial purposes or renting out.
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Loan: The loan must be taken out after December 31, 2024, specifically for the purchase of this vehicle. Refinancing also qualifies, but with limitations.
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Vehicle Condition: The deduction cannot be claimed for a car purchased with a salvage title (restored after a major accident) or one intended for parts.
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Reporting: You will must include the vehicle’s VIN number on your tax return.
What are the Limitations?
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Income Limit: The deduction begins to phase out if your Modified Adjusted Gross Income (Modified AGI) exceeds $100,000 for single filers or $200,000 for a married couple filing jointly.
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No Leasing: The deduction does not apply to lease payments.
This law is a clear incentive for the purchase of new, US-assembled vehicles. If you were planning a purchase, 2025–2028 is an excellent time to save on taxes.
SALT Deduction Limit Increased 4-fold! But It’s Temporary
What is SALT (State And Local Taxes)? These are taxes you pay to your state and city. For example:
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Property taxes
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State income tax
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Sales Tax
Simply put: the greater the amount of SALT you can deduct, the lower your taxable income at the federal level, and the less tax you pay overall.
How was it before? Until now, you could deduct no more than $10,000 of state and local taxes paid from your federal taxable income.
Key Changes starting January 1, 2025:
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2025: Limit is $40,000
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2026: Limit is $40,400
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2027–2029: The amount will be indexed and grow annually
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Starting 2030: The limit will revert to the previous level of $10,000
Important Nuance: There is a limitation for high-income taxpayers. If your Modified Adjusted Gross Income (Modified AGI) exceeds $500,000 in 2025, the amount of the available deduction will gradually decrease, but will not fall below $10,000.
Who Benefits and What Does This Change?
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Direct Benefit for Residents of “Expensive” States: California, New York, New Jersey, Connecticut, Illinois, and Massachusetts.
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Return to Itemized Deductions: SALT + mortgage interest + charitable contributions, etc., may exceed the standard deduction.
Want to Get a Tax Credit for Buying an Electric Vehicle? Hurry Before September 30, 2025!
According to the new OBBBA (One Big Beautiful Bill Act) bill, the federal EV Tax Credit will soon be a thing of the past.
Deadline: September 30, 2025.
What This Means:
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After this date, you will no longer be able to get a tax credit of up to $7,500 for buying a new electric car or $4,000 for a used one.
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If you buy the car later, the tax benefits will be unavailable.
Don’t put it off—if you were planning to buy an electric vehicle, now is the best time!
To get the credit, the car and the seller must meet IRS requirements, and the buyer’s income must not exceed the limits. Check the VIN and Form 15400 with the dealer.
$1,000 for Your Child’s Future Starting in 2025!
What is a Trump Account? A Trump Account is a special retirement account opened for children born between 2025 and 2029. These accounts will provide initial financial support for your little ones right from birth! The best part is, the government will deposit $1,000 into the account upon registration!
Who is it for? If your child is born after December 31, 2024, and before January 1, 2029, you can receive $1,000 into their account upon registration!
Until the age of 18, the money in the account will remain invested in low-cost investments, ensuring minimal fees and stable capital growth.
When can the money be withdrawn? Withdrawal is possible only upon reaching age 18! This money will serve as a long-term financial cushion for your child when they start independent life.
Who else can contribute to the account? Parents and even an employer can contribute additional amounts to your child’s account!
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Contribution Limits:
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Parents can contribute up to $5,000 per year.
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An employer can contribute up to $2,500 (with a possibility of inflation adjustment starting in 2027).
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Government Contributions: A fixed $1,000 upon registration and possible additional contributions if the program is expanded.
