New Tax Provisions from One Big Beautiful Bill Act
The One Big Beautiful Bill Act, which became law in July, introduces various new tax provisions and modifies existing ones. With the 2025 tax season approaching, here are some key updates to consider.
Your tax payment could potentially be lower, or your refund might increase, depending on the new regulations. However, figuring out your eligibility and the necessary documentation can be, well, quite complex and a bit overwhelming for many taxpayers.
As noted in an analysis by the Tax Foundation, “US tax laws are not simple; they are complex. Unfortunately, OBBBA has made the tax filing process even more complicated.”
Here are ten notable changes for individual filers.
1. Increase in Basic Deduction Amount
The basic deduction for 2025 has seen an increase. For single filers, the amount is now $15,750, up from $15,000. For married couples filing jointly, it rises from $30,000 to $31,500. Additionally, the standard deduction for heads of households will grow from $22,500 to $23,625.
Most tax filers opt for the standard deduction as it’s higher than the total of itemized deductions they could claim, like mortgage interest, state and local taxes, charitable contributions, and medical expenses.
If you were born before January 2, 1961, and have a valid Social Security number, there’s an additional deduction of $6,000 (or $12,000 if both spouses qualify for married couples). This deduction is separate from either the standard or itemized deductions.
However, if your modified adjusted gross income (MAGI) exceeds $75,000 ($150,000 for joint filers) but is below $175,000 ($250,000 for joint filers), this deduction will be reduced. No relief applies above these thresholds.
3. Increased State and Local Tax Deductions
The limit for deducting state and local taxes on federal income tax returns has increased from $10,000 to $40,000 ($20,000 for those married filing separately).
The SALT deduction allows you to deduct state and local income taxes or general sales taxes and, in certain cases, property taxes, provided the combined taxes do not exceed the limits.
If you’re a high-income filer, keep in mind the deductible amounts have caps. Specifically, this applies to individuals with a MAGI above $500,000 (or $250,000 for married filing separately).
If you purchased a new vehicle for personal use this year, you might be able to deduct part of the interest from your loan, but only if the vehicle’s final production stage was in the U.S. This should be noted at the time of purchase.
The maximum deductible amount per year is $10,000, which may decrease if your MAGI exceeds $100,000 ($200,000 for married couples). No deduction is permitted if your MAGI exceeds $149,000 ($249,000 for joint filers).
Lenders typically file forms reporting the interest you’ve paid to both you and the IRS, but this year, they are not mandated to do so. To keep accurate records, you should check your loan statements or consult your lender for the interest you paid in 2025, as advised by Tom Oseven, director of tax content at the National Association of Tax Professionals.
To claim this deduction, you’ll need to complete New Form – Schedule 1-A, according to draft IRS instructions.
Although the Trump administration labeled the system as “tax-free” for tips, that’s somewhat misleading. It’s actually a partial or full deduction applicable to “qualified” tips, with certain income limitations.
“Eligible” is defined as voluntary cash or paid tips received directly from customers or through tip sharing within industries where tipping is standard. Workers can claim up to $25,000 in tip income, but the full deduction is only available if their MAGI is under $150,000 ($300,000 for joint filers).
Interestingly, many tipped workers may not actually benefit from this provision since their earnings might be too low to incur federal income tax. Instead, it’s middle-income earners who are likely to take advantage of this deduction.
To apply for new tax relief, you again will use New Form – Schedule 1-A, as per draft IRS guidelines.
Child Tax Credit and Other Changes
The OBBBA raised the child tax credit cap to $2,200 per qualifying child from the prior $2,000. It also mandates that parents and eligible children possess valid Social Security numbers.
Regarding new clean vehicle tax credits worth up to $7,500 (for new purchases) and $4,000 (for used vehicles), these credits will only apply to purchases made before September 30, 2025.
Notably, if you bought a qualifying vehicle for personal use before that date or are otherwise eligible for the credit, you’ll need to fill out Form 8936 and include it with your tax return.
The federal government plans to contribute $1,000 to investment accounts for infants born between 2025 and 2028. The baby needs to be a U.S. citizen, and both the parents and child must have Social Security numbers.
To notify the Treasury Department about the eligibility of a newborn, you should file Form 4547 with your tax return this year. More precise guidance will follow.
For the first time, centralized crypto exchanges like Coinbase will be reporting transactions to the IRS. If you sell or exchange cryptocurrency on these platforms in 2025, expect to receive a 1099-DA by mid-February. However, not every crypto activity will be reported, so it’s good to be aware of what’s excluded.
