What the 2025 “Big Beautiful Bill” Tax Law Changes Mean for You

Congress has finally settled the “What happens after 2025?” tax debate by passing the “Big Beautiful Bill.” While many 2017 rules stay in place, new provisions arrive as early as this year. Here’s an overview that covers what changes, when it starts, and why it matters without the political slants and fervor of the news outlets.  

1. Tax Brackets & Personal Exemption

Effective: 2025 and beyond (permanent) 

Overview: The current seven tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) are now permanent. The personal exemption, which previously allowed taxpayers to deduct a set amount per person in the household, remains repealed along with the repeal of miscellaneous itemized deductions. Interest on mortgages continues to be limited to $750k of principal. 

Impact: This is a continuation of what has been in place since 2017. The higher standard deduction continues to offset the loss of personal exemptions for many families.  

2. State & Local Tax (SALT) Deduction Cap

Effective: 2025–2029 

Overview: The SALT deduction limit (which covers state income taxes, real estate taxes, and vehicle excise taxes) increases from $10,000 to $40,000; phasing out once income reaches $500,000.  

Impact: Taxpayers with significant state income and/or real estate taxes may benefit from itemizing once again.  

3. Senior Deduction

Effective: 2025–2028  

Overview: Taxpayers age 65 or older can claim an additional $6,000 deduction per person. The deduction phases out above AGI of $75,000 single or $150,000 joint. 

Impact: Because this deduction stacks on top of the regular standard deduction, many retirees’ taxable income will now fall below the thresholds that trigger tax on Social Security benefits. Higher-income filers will still owe partial tax. 

4. Charitable Deduction for Non-Itemizers

Effective: Begins in 2026 (permanent unless Congress acts again) 

Overview: Taxpayers who don’t itemize can deduct up to $2,000 (joint) or $1,000 (single) in charitable contributions.

Impact: Those who’ve elected the standard deduction can still get some tax benefit for charitable giving beginning in 2026. 

5. Auto Loan Interest Deduction

Effective: 2025–2028  

Overview: Deduct up to $10,000 of interest on auto loans for new, U.S.-assembled vehicles. Leases and non-U.S.-assembled vehicles don’t qualify. This deduction phases out above $100,000 single or $200,000 joint. 

Impact: Taxpayers financing a new car purchase could see deductions, depending on income level and vehicle eligibility. 

Effective: Program launches in July 2026 for children born 1/1/25–12/31/28 

Overview: Trump Accounts start with a $1,000 government contribution. Family and others may contribute up to $5,000 annually until the child turns 18. Funds could be invested in mutual funds and certain Exchange Traded Funds and grow tax-deferred. Withdrawals are taxable and can only be taken after the child turns 18. 

Impact: A potential new tool for long-term savings, particularly when used alongside 529 plans or custodial accounts.  

7. Tax Relief on Tips

Effective: 2025–2028 (retroactive to Jan 1, 2025) 

Overview: Up to $25,000 of tip income may be deducted from federal income tax for those earning under $300,000 joint ($150,000 single). Social Security and Medicare taxes still apply. The deduction applies to “qualified” tips; meaning tips must be a normal part of the business. The IRS will publish a list of the occupations that qualify. 

Impact: Workers in tip-heavy professions could see meaningful tax savings, especially if tips represent a significant share of income. 

 8. Tax Relief on Overtime Pay

Effective: 2025–2028 (retroactive to Jan 1, 2025)

Overview: Employees may take an above-the-line deduction for overtime premiums—up to $12,500 single or $25,000 for joint filers—so long as adjusted gross income stays below $150,000 (single) or $300,000 (joint). Payroll (Social Security and Medicare) taxes still apply.

Impact: Workers who regularly earn overtime can lower their taxable income beginning with the 2025 tax year, potentially increasing their take-home pay during the year or reducing next April’s tax bill. 

 9. Estate & Gift Tax Exemption

Effective: 2026 and beyond (permanent)

Overview: The lifetime exemption for estate and gift taxes increases to $15 million per person.

Impact: High-net-worth individuals have more room to transfer wealth tax-efficiently. 

10. Business Expensing

Effective: Applies to property placed in service after Jan 1, 2025

Overview: Section 179 expensing is expanded from $1 million to $2.5 million, and 100% bonus depreciation is reinstated.

Impact: Business owners can immediately deduct more qualifying equipment purchases, improving cash flow and reducing taxable income. 

Many people will benefit from at least one of the provisions outlined above. For most people, the only planning to consider is changing your payroll withholdings to keep the cash now, otherwise you’ll likely receive a refund (or lower balance due) in April 2026.