Fireworks weren’t the only spectacle in Washington D.C. on July 4 as President Trump signed the One Big Beautiful Bill Act implementing new tax laws after weeks of wrangling between the House and Senate. A large number of taxpayers (particularly those over 65, with taxable income under $500,000 and business owners) will receive tax breaks. Here we summarize changes that could affect you most.
Tax Brackets
Current tax brackets in place since 2017 have been made permanent. Instead of the highest tax bracket reverting to 39.6%, it will remain at 37%. It also keeps the 12% and 22% brackets and avoids the return of the 25% and 28% brackets.
Standard Deduction
Like the tax brackets, the new Bill retains the 2017 increases in standard deduction levels, with a slight increase for this year. For 2025, the base standard deduction is $15,750 (single), $23,625 (head of household), and $31,500 (married filing jointly). These amounts will continue to be annually inflation adjusted.
SALT Tax Deduction
The maximum State and Local Tax Deduction (SALT) of $10,000 has been raised to $40,000 and will increase 1% a year through 2029. The amount is phased down once income crosses $500,000 (for both single and married filers). This means more taxpayers who have high property and state taxes could benefit. Please note, for taxpayers whose AGI (adjusted gross income) exceeds $600,000, the max SALT deduction will remain $10,000 due to the phase out. Without further legislative actions, the SALT rules will revert to a $10,000 cap in 2030.
Itemized Deduction Limitations
Itemized deductions will now be reduced for taxpayers in the 37% bracket. Thankfully the reduction is modest.
Senior Deductions
While Social Security income remains taxable, all taxpayers over 65 and older (regardless of receiving Social Security benefits) can receive a deduction of $6,000 if their taxable income is $75,000 or less ($150,000 or less for married couples). This deduction is phased out once taxable income passes $175,000 ($250,000 per married couple). This deduction is effective this year, 2025 through 2028.
In addition, seniors aged 65 and older will still receive their standard-deduction increase, which in 2025 is $2,000 for single filers and $1,600 per individual if married filing jointly.
Income Deductions for Tips and Overtime
Qualified workers can deduct up to $25,000 of tips from their taxable income. A list of qualified professions eligible has not yet been released. Workers who receive overtime can deduct $12,500 of their overtime income ($25,000 for joint filers). Both deductions for tips and overtime are phased down once your modified adjusted gross income surpasses $150,000 ($300,000 for joint filers). These deductions are effective this year, 2025 through 2028.
Auto Loan Interest Deduction
Car buyers can now deduct up to $10,000 of auto loan interest for new cars. The car’s final assembly must be in the U.S. This deduction benefit is only available for loans initiated in 2025 through 2028. Furthermore, you only qualify for the deduction if your taxable income is below $100,000 ($200,000 for joint filers).
Charitable Deduction
Taxpayers who claim the standard deduction will be able to claim an additional charitable deduction. The amount is limited to $1,000 for single taxpayers and $2,000 for joint filers. This new deduction will be permanent beginning in 2026 and is only applicable to those who make cash gifts and do not itemize deductions.
Business Deductions
The new law allows 100% bonus depreciation of domestic capital spending on manufacturing equipment and structures. This is retroactive to January 1, 2025.
Qualified Business Income (QBI) deductions were kept in place at 20%. However, the phaseout ranges have increased from $50K for single / $100K for joint filers to $75K for single / $150K for joint filers.
Additionally, there are significant expansions to the Section 179 deduction which allows businesses to immediately expense the purchase of equipment. This expansion increases the amount eligible for the deduction and the phaseout levels.
Child Tax Credit
The child tax credit is increased from $2,000 to $2,200 per eligible child, beginning in 2025. The income phase outs to claim the tax credit were unchanged.
Trump Account
New investment accounts (Trump Accounts) are created for newborns. The new bill calls for the account to be automatically funded with a $1,000 contribution for each child born between 2025 and 2028.
Annual contributions are allowable, with a $5,000 limit per year. While the tax treatment of this account generally acts like an IRA, the contributions are not deductible. Distributions from this account are generally prohibited prior to the beneficiary turning 18. Lastly, there are restrictions on the type of investments that can be held in the account.
Lifetime Estate / Gift Tax Exemption
The lifetime estate and gift exemptions will increase to $15 million effective 2026. The exemption remains portable, meaning a married couple effectively has $30 million of lifetime exemption. This amount will be indexed by inflation annually.
Energy Credits
Tax credits for electric cars will expire on Sept. 30, 2025. Home energy improvement projects must be completed by December 31, 2025 to be eligible for credits before they expire.
Health Insurance
While the Bill includes many changes that go beyond tax law, an important part of the legislation extends to how many Americans obtain health care coverage.
Health Insurance Marketplace
Significant changes and more stringent requirements apply to Health Insurance Marketplace enrollees. Current people enrolled in the Marketplace will be required to re-enroll versus being automatically re-enrolled. The period during which individuals can enroll and re-enroll for coverage is truncated by a month, between November 1 and December 15. All enrollees (those enrolling and re-enrolling) will be required to submit updated income information each year.
Premiums are expected to increase due to the expiration of subsidies implemented during Covid. Additionally, new enrollees will be required to pay full, unsubsidized premiums until any subsidy eligibility is approved.
Medicaid Coverage
New work, volunteer, or work training requirements of 80 hours per month will now apply for Medicaid eligibility unless individuals are exempt. Exemptions extend to those who are disabled, pregnant, caregivers of young children, and those who are “medically frail.”
SageVest understands that taxes have a profound effect on your finances and planning. We are committed to identifying proactive planning strategies toward your current and future success. Such strategies are just one element of our broader services extended on your behalf. We invite you to contact us to learn more about how we can help you secure your financial future.
