Tax year 2025 brings some big changes. A few updates come from the One Big Beautiful Bill (OBBB), while others are the usual annual adjustments. If you’re wondering what this means for your tax return, here’s what you need to know.
Key takeaways: What are the tax law changes for tax year 2025?
Here are some of the most notable updates that could impact your 2025 taxes:
- Americans can deduct tips and overtime pay for the first time.
- The standard deduction is going up again.
- The Child Tax Credit is up to $2,200 per qualifying dependent.
- Retirement contribution limits are higher.
- Seniors age 65+ can get a bonus deduction of $6,000 per eligible person.
- Some clean energy credits are ending soon.
Let’s break it down.
2025 tax law changes from the One Big Beautiful Bill
The One Big Beautiful Bill (OBBB) was signed into law on July 4, 2025. The bill extended some tax provisions and made others permanent. It also introduced some new laws. Here are the big ones impacting 2025 taxes (returns filed in 2026).
Permanent provisions from the Tax Cuts and Jobs Act (TJCA)
Some of the current tax law provisions we’re already familiar with are here to stay.
The standard deduction was nearly doubled in 2017 when the TCJA was signed. Since then, it’s been adjusted for inflation every year – but under the OBBB, the amounts are slightly higher.
The current seven tax brackets will also remain permanently in place. As a reminder, those currently range from 10% to 37%.
Bonus depreciation is now permanently set at 100%, instead of 40%. That means businesses can now deduct the full cost of eligible equipment, machinery, and other qualified property in the year it’s placed into service, instead of spreading the deduction over time.
Some additional provisions that were made permanent include:
- Elimination of the miscellaneous itemized deductions moving expense deductions
- The 20% pass-through deduction, which allows small businesses that are pass-through entities to deduct up to 20% of qualified business income on their federal income tax return
- The $750,000 mortgage interest deduction limit
- The itemized deduction for personal casualty losses due to a federally declared disaster
New and expanded tax deductions
These new or expanded tax breaks are already in place for tax year 2025 and will be reflected on the return you’ll file in 2026:
- Up to $25,000 deduction for overtime pay. If you receive overtime pay, you can deduct the amount you earn above your regular rate up to $12,500 if you file as single, or $25,000 if you file jointly.
- $25,000 deduction for tip income. Eligible taxpayers can deduct up to $25,000 per tax return in tip income. Note that whether you file as single or jointly, the deduction is worth $25,000.
- Auto loan interest on qualifying vehicles. For 2025 through 2028, up to $10,000 in interest paid on qualifying car loans can be taken as an above-the-line deduction.
- A bigger SALT deduction cap. Under the OBBB, the limit is temporarily increasing to $40,000 beginning in 2025, and it will increase by 1% for the next five years before it drops back down to $10,000.
- A temporary $6,000 bonus deduction. The new deduction is available for individuals age 65 and older. You don’t have to itemize to claim this break. This amount is in addition to the age-based standard deduction.
- Increased Child Tax Credit. The Child Tax Credit is worth $2,200 per qualifying child in 2025 and will be adjusted by $100 increments going forward. The refundable portion, known as the Additional Child Tax Credit (ACTC), is now $1,700 for the 2025 tax year.
- The adoption credit will hold steady at $17,280 and is refundable up to $5,000.
Expiring tax benefits
If you’ve been planning upgrades, now’s the time. These green energy credits are going away soon:
- Energy-efficient home improvements (windows, heat pumps, solar panels) end December 31, 2025.
- EV credits for new and used cars expire September 30, 2025.
- EV charger installation credit ends June 30, 2026.
2025 standard deduction increase
The standard deduction is adjusted each year, but this year – under the OBBB – the amount has increased more than it would have for inflation. Here’s what the standard deduction amounts are this year by filing status.
| Tax year 2024 | Tax year 2025 | |
| Single filers and married filing separately | $15,000 | $15,750 |
| Married filing jointly | $30,000 | $31,500 |
| Head of household | $22,500 | $23,625 |
Income tax bracket changes for 2025
For the return you’ll file for 2025, the federal income tax bracket rates didn’t change, but income ranges did. Here’s what you can expect:
| Tax rate | Single filer | Married filing jointly (or surviving spouse) | Head of household | Married filing separately |
| 10% | $0 to $11,925 | $0 to $23,850 | $0 to $17,000 | $0 to $11,925 |
| 12% | $11,926 to $48,475 | $23,851 to $96,950 | $17,001 to $64,850 | $11,926 to $48,475 |
| 22% | $48,476 to $103,350 | $96,951 to $206,700 | $64,851 to $103,350 | $48,476 to $103,350 |
| 24% | $103,351 to $197,300 | $206,701 to $394,600 | $103,351 to $197,300 | $103,351 to $197,300 |
| 32% | $197,301 to $250,525 | $394,601 to $501,050 | $197,301 to $250,500 | $197,301 to $250,525 |
| 35% | $250,526 to $626,350 | $501,051 to $751,600 | $250,501 to $626,350 | $250,526 to $375,800 |
| 37% | $626,351 or more | $751,601 or more | $626,351 or more | $375,801 or more |
Adjustments to the EITC for 2025
The Earned Income Tax Credit (EITC) amounts and income thresholds for 2025 are as follows:
| Number of qualifying children | Maximum credit |
| 0 | $649 |
| 1 | $4,328 |
| 2 | $7,152 |
| 3 or more | $8,046 |
| Number of qualifying children | Max income: single, head of household, or widowed filers | Max income: married filing jointly |
| 0 | $19,104 | $26,214 |
| 1 | $50,434 | $57,554 |
| 2 | $57,310 | $64,430 |
| $ | $61,555 | $68,675 |
Retirement contribution limits for 2025
Saving for retirement? For tax year 2025, the maximum total employer and employee contributions that can be made to a defined contribution plan is $70,000 (plus catch-up contributions).
The maximum IRA contribution limit increased to $7,000 – and if you’re 50 or older, the limit is $8,000.
The elective deferral limit for 401(k), 403(b), and 457 plans for tax year 2025 is $23,500, with a $7,500 catch-up contribution if you’re age 50 or older. A higher catch-up contribution of $11,250 is available if you’re age 60-63.
