The One Big Beautiful Bill Act, signed by President Donald Trump in July, is poised to offer taxpayers more substantial refunds during the 2025 tax season.
According to the Tax Foundation, an independent think tank based in Washington, D.C., average taxpayers may see refunds increase by $300 to $1,000 when they file taxes in early 2026 compared to the previous year.
For many, this potential bonus can largely be attributed to provisions in the new legislation that exempts tips, overtime income, and car loan interest from taxation. It also increases deductions for state and local taxes, as well as for parents and seniors over 65.
That said, the new rules can be intricate, and there are numerous exceptions. One requirement is the completion of a new Schedule 1-A form, which hasn’t been released yet. Once available, I’ll share more updates about it.
While the legislation aims to boost refunds, it also raises concerns about the national deficit, which is expected to increase for over a decade, according to the Congressional Budget Office. Additionally, the One Big Beautiful Bill Act has substantial advantages for large corporations and wealthy individuals, but it may also lead to cuts in healthcare for low-income and elderly Americans, as well as reductions in food assistance programs.
In Oregon, the state usually follows federal tax cuts, which could mean significant revenue losses.
So, as you prepare to file your 2025 taxes, here’s what you might want to keep in mind.
First day to file taxes: As of now, the IRS hasn’t confirmed a start date for federal tax filing. Oregon will accept state returns the same day as the federal government. Last year, that day was January 27.
Phase out paper checks: With some exceptions, paper checks for refunds will not be available. It’s essential to have your bank account details ready to ensure direct deposit of your refund to avoid delays.
How big will my federal refund be?: Last year, the average taxpayer received a refund of $3,052. This year, you could expect an additional $300 to $1,000, depending on new tax breaks applicable to your situation.
Standard deduction: Taxpayers can take a fixed deduction off their taxable income. For 2025, the standard deduction will increase by $750 to $15,750 for single or separately married filers, and by $1,500 to $31,500 for married couples filing jointly.
Tips are tax-free: Those who regularly receive tips, such as waitstaff, can avoid paying taxes on up to $25,000 of that income. This applies to single filers making less than $150,000 and joint filers earning under $300,000; beyond those thresholds, the deduction phases out.
Overtime work is not taxed: Single filers can deduct up to $12,500 from their overtime income, while joint filers can deduct up to $25,000. Reduced deductions will begin for single filers earning over $150,000 and joint filers exceeding $300,000.
Car loan interest is tax-free: Taxpayers buying eligible vehicles can deduct up to $10,000 per year in car loan interest if their modified adjusted gross income is below $100,000 for singles and $200,000 for joint filers. The vehicle must also be assembled in the United States.
Deduct state and local taxes: The Act enhances the SALT (state and local tax) deduction, allowing deductions up to $40,000 instead of $10,000. This change mainly benefits wealthier taxpayers due to their higher tax burdens.
Those with incomes below $500,000 can claim the full $40,000 deduction, while higher earners will receive a reduced amount. About 90% of individuals using this deduction earn over $100,000 annually.
Child tax credit: The child tax credit is increasing by $200 from last year, totaling up to $2,200 per child for the 2025 tax year.
Elderly taxpayers: Taxpayers over 65 can claim a new additional deduction of $6,000 for singles and $12,000 for married couples, gradually phasing out for incomes exceeding $75,000 and $150,000, respectively.
Lastly, regarding the Oregon Kicker refund: Oregon is issuing what may be the fourth-largest kicker in state history, which returns excess state revenue to taxpayers. However, to receive this refund, you’ll need to file your state taxes for 2025 and have also submitted your 2024 return. You can find out more about your potential payment by entering your Social Security number and answering a few questions on the Oregon Department of Revenue website.
