2025 Tax Returns: What Changed with the Big, Beautiful Law
On July 4, 2025, the President signed the "Big Beautiful Act" (known as the Working Families Tax Cut). It makes permanent many of the temporary tax breaks enacted in 2017 by the Tax Cuts and Jobs Act (TCJA). Here's a look at the key changes affecting our 2025 tax returns: TurboTax.
Most of the changes took effect on January 1, 2026, and will affect tax returns filed in 2027. However, some changes are retroactive and may affect returns filed in 2025.
Changes that will affect the 2025 declaration:
- Tips are not subject to income tax—the maximum deduction is up to $25,000 in tips. The deduction gradually decreases for modified adjusted gross income (MAGI) incomes above $150,000 (or $300,000 for married filing jointly).
- Overtime pay is also tax-deductible—up to $12,500 per person, with the same phase-out as tips;
- increasing the child tax credit from $2000 to $2200;
- Additional deduction for seniors - an additional $6000 can be deducted from taxable income for individuals over age 65, with a phased reduction for MAGI over $75,000 ($150,000 for spouses);
- partially refundable adoption loan - up to $5000;
- increasing the local income tax deduction (SALT) to $40,000 in 2025 with annual indexation until 2029;
- a deduction from taxable income for interest paid on certain automobiles—up to $10,000, with a phased-out MAGI over $100,000 ($200,000 for spouses);
- Trump Child Accounts - For the 2025 and subsequent tax years, you can file Form 4547 to have the IRS open an account for a child born between January 1, 2025, and December 31, 2028; the government will deposit $1000 into it;
- abolition of the tax credit for electric vehicles from September 30, 2025;
- The standard deduction increases in 2025 to $15,750 for single filers, $23,625 for heads of households, and $31,500 for married couples filing jointly (adjusted annually for inflation).
On the subject: Which States Have the Highest and Lowest Property Taxes
Additional changes for 2025
Income tax rates, deduction and credit thresholds, and the standard deduction will be adjusted for inflation. For example, the top 10% rate for single individuals will increase from $11,600 in 2024 to $11,925 in 2025. The 37% rate will begin at $626,350 for single individuals (from $609,350).
Many deductions and credits have received new reduction thresholds. For example:
- Earned Income Credit — Maximum of $8046 for married couples with three or more children, phased out at $68,675 adjusted gross income. For singles without children — maximum of $649, phased out at $19,104;
- IRA contributions—the amounts remained the same, but the reduction thresholds increased: for active participants in employer pension plans—from $79,000 to $89,000 for singles and heads of households, and from $126,000 to $146,000 for spouses. For spouses where one does not participate in the plan and the other does—from $236,000 to $246,000. For spouses filing separately, the limit remains $0 to $10,000, with no annual indexation.
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