The new tax law — officially called the “One Big Beautiful Bill Act” — was signed in 2025. It makes several big changes that affect individuals, families, and small businesses starting with the 2025 tax year. Here’s what matters most to everyday taxpayers:
1. Your tax rates stay the sameThe lower tax rates we’ve had since 2017 are now permanent.
2. Extra help for seniorsIf you’re 65 or older, you’ll get an extra tax deduction — up to $6,000 — when filing your taxes. This helps reduce the amount of income that gets taxed, meaning you could owe less.
3. Deductions for tips and overtime payFor the next few years (2025–2028), workers who earn tips or overtime can get a new deduction. That means part of that extra income won’t be taxed, giving waiters, bartenders, delivery drivers, and hourly workers a break.
4. Bigger deduction for state and local taxesIf you live in a state with high property or income taxes, you used to be limited to a $10,000 deduction. Now that cap is temporarily raised (up to around $40,000). This helps homeowners in states like New York, California, and New Jersey especially — but it only lasts a few years.
5. More help for families and parentsThe Child Tax Credit went up slightly to about $2,200 per child, and will rise with inflation. If you’re adopting, the Adoption Credit can now be refundable, meaning even if you owe little or no tax, you can still get money back.
6. Business and small business breaksBusinesses can still deduct 100% of the cost of certain new equipment and assets right away — that rule is now permanent. This helps small business owners and self-employed people invest and grow without waiting for slow depreciation schedules.
7. Student loan help is tax-freeIf your employer helps you pay off your student loans, that money is now tax-free — and it’s staying that way permanently.
8. Some green-energy credits ending soonerCertain clean energy tax credits (like solar and EV credits) will be reduced or end earlier than planned. So if you’re thinking about installing solar panels or buying an electric car, it’s best to do it soon.
9. What to keep in mind
Some new deductions only last a few years — unless Congress renews them.
People with higher incomes may not qualify for all the breaks.
These deductions lower income tax, but you’ll still pay Social Security and Medicare taxes on your wages.
Every situation is different — it’s best to talk to a tax professional (like us!) to see how the new law affects you.