Key 2025 Tax Changes You Need to Know Now

Bassyonni

ago 4 hours

The One Big Beautiful Bill Act, enacted in July, has introduced several tax changes that will impact individual filers in 2025. These adjustments could potentially lower tax bills or increase refunds. Understanding these changes is vital for taxpayers as they prepare their returns.

Key 2025 Tax Changes You Need to Know Now

Here are the significant alterations to tax provisions for individuals:

1. Increased Standard Deduction

Single filers will see the standard deduction rise to $15,750, up from $15,000.
Married couples filing jointly can now claim $31,500, an increase from $30,000.
Heads of households will receive a deduction of $23,625, up from $22,500.

2. New Deduction for Older Filers

Individuals born before January 2, 1961, can take an additional deduction of $6,000 ($12,000 for qualifying couples). Income limits apply.

3. Expanded State and Local Tax Deduction

The cap on the state and local tax (SALT) deduction has increased from $10,000 to $40,000 ($20,000 for married filing separately).
Eligible taxpayers may deduct state and local income or sales taxes, along with property taxes.

4. Vehicle Interest Deduction

If you financed a new vehicle, interest on the loan may be deductible, provided the vehicle’s production final leg occurred in the U.S. The maximum deduction is capped at $10,000, subject to income restrictions.

5. New Deductions for Tips and Overtime

Workers receiving tips can deduct up to $25,000 in qualified tips, contingent on income levels.
For overtime pay, a deduction for qualified overtime can go up to $12,500, but similar income limits apply.

6. Enhanced Child Tax Credit

The child tax credit has increased to $2,200 for each qualifying child, subject to Social Security number requirements.

7. Clean Vehicle Tax Credits

New clean vehicle tax credits worth up to $7,500 and used clean vehicle credits worth up to $4,000 are set to expire for purchases made after September 30, 2025.

8. Federal Seed Money for Newborns

Newborns between January 1, 2025, and December 31, 2028, will have $1,000 deposited into investment accounts, contingent on citizenship and Social Security number eligibility.

9. Reporting of Cryptocurrency Transactions

For the first time, centralized crypto exchanges will report transactions to the IRS, providing taxpayers with a 1099-DA form by mid-February.

Conclusion

As taxpayers prepare for the 2025 tax season, these changes may significantly influence their financial planning. Understanding eligibility and documentation requirements is crucial to maximizing available deductions.