MADISON, Wis. – New Tax Changes to Note for 2025
With tax season upon us, it’s worth paying closer attention if you’re in the middle class, have kids, earn tips or overtime, or are a senior citizen filing this year. There are a few notable changes and new deductions to keep in mind.
President Trump’s “One Big Beautiful Bill” (OBBB) Law came into effect last July. However, the IRS didn’t update the withholding tables right away. So, many taxpayers might have paid more in taxes from their paychecks throughout 2025 than necessary. This could lead to larger refunds when filing 2025 tax returns.
One significant change is the standard deduction, which is the amount of income exempt from taxation. For 2025 tax returns, which will be filed in 2026, the IRS has increased the standard deduction amounts in line with the OBBB adjustments and inflation:
- $15,750 for single filers
- $31,500 for married couples filing jointly
- $23,625 for heads of households
These increases may potentially lower your taxable income and boost your refund.
Regarding the state and local tax (SALT) deduction, the cap has been temporarily raised from $10,000 to $40,000 for the 2025 tax year, offering relief for middle-class families in high-tax states. Just a heads up, though: this cap is set to revert back to $10,000 after 2029.
Additionally, seniors aged over 65 can claim an extra $6,000 deduction on top of their standard or itemized deductions.
The American Association of Retired Persons (AARP) highlights that “these deductions will help alleviate the tax burden for many older Americans from now until the 2028 tax year.”
There’s also a new increase in the child tax credit — now up by $200 to a maximum of $2,200 per eligible child. But be cautious; the qualification rules have become stricter. The child must be a U.S. citizen, live with the taxpayer for at least half the year, and both must have valid Social Security numbers, which might affect some mixed-status or immigrant families.
The 2025 tax law introduces a new deduction that taxpayers can claim prior to calculating their taxable income:
- If your vehicle qualifies, you could receive a $10,000 tax-free credit on your auto loan interest (as long as the vehicle was assembled in the U.S. and meets certain weight specifications). Make sure to check your vehicle’s VIN for eligibility.
- Also, subject to certain income limits and regulations, up to $25,000 can be deducted from qualified tip income and up to $12,500 from overtime pay for single filers.
It’s worth noting that low-income taxpayers who already pay little to no taxes may not see much of a change. On the flip side, higher-income taxpayers may find that certain credits and deductions begin to phase out.
