Congress recently passed the One Big Beautiful Bill Act, which brings a number of significant tax changes that will affect almost everyone’s tax return this year and going forward.

This is an overview of the key changes that will have the most wide ranging impact:

Changes Effective in 2025

Higher Standard Deduction – Permanently

The standard deduction has been increased for 2025 and will no longer revert to pre-2017 levels. This means more taxpayers will likely continue using the standard deduction instead of itemizing deductions.

New Deduction for Seniors

Taxpayers aged 65 or older can deduct an additional $6,000 per person. This deduction begins phasing out at $150,000 of modified adjusted gross income (MAGI) for joint filers and $75,000 for single filers. This deduction will expire in 2028.

State & Local Tax (SALT) Deduction Expanded

The SALT deduction cap has increased from $10,000 to $40,000 – this includes state and local income and property taxes. However, this only benefits those who itemize deductions, and the benefit phases down for incomes over $500,000.

New Tip Income Deduction

A new deduction allows up to $25,000 of tip income to be deducted, with phaseouts starting at $150,000 MAGI (single) or $300,000 (married). This deduction is available from 2025 to 2028.

Overtime Pay Deduction

You can now deduct the portion of your overtime earnings that is above and beyond your standard pay rate – up to $12,500 (single) or $25,000 (married). This also phases out at the same income levels as above and applies from 2025 to 2028.

Auto Loan Interest Deduction

Interest on new car loans taken out in 2025 or later may be deductible, up to $10,000. This begins to phase out at $100,000 MAGI (single) or $200,000 (married). Only new vehicles qualify.

End of Energy Efficiency Tax Credits

Credits for electric vehicles will end on Sept. 30, 2025. Credits for solar panels and other energy efficient home improvements will expire at the end of 2025.

Changes Effective in 2026

Mortgage Insurance Premiums (PMI) Deductible Again

PMI will once again be deductible, but you’ll need to itemize to claim this.

New Rules for Charitable Giving

You’ll only be able to deduct charitable contributions (if you itemize deductions) that exceed 0.5% of your adjusted gross income (AGI).

Charitable Deduction for Non-Itemizers

A new charitable contributions deduction allows up to $1,000 (single) or $2,000 (joint) in cash donations to be deducted even if you don’t itemize.

Reduced Deductibility of Gambling Losses

Starting in 2026, only 90% of gambling losses (up to the amount of winnings) will be deductible.

High-Income Itemized Deduction Limitation

For those in the 37% tax bracket, itemized deductions will be gradually reduced, up to 2/37 of your total deductions.

Introduction of “Trump Accounts”

Beginning July 2026, you can contribute up to $5,000 per year into a special savings account for children under 18. The government will provide a $1,000 contribution for children born in 2025 through 2027. There is still a lot that remains to be seen on exactly how this account type will work and what the benefits will be.

Dependent Care FSA Increase

Annual contribution limits for Dependent Care FSAs will increase from $5,000 to $7,500.

There are many more tax changes that are part of this bill, but these are the items that are most impactful and relevant. If you have any questions about these or any other changes you’ve heard about, feel free to let me know.

Joe Calvetti is a CPA, CFP®, and the founder of Still River Financial Planning, a comprehensive, fee-only financial planning firm that specializes in working with young families and professionals. Click here to learn more about how we work with clients.

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Disclaimer: The information provided above is for educational purposes only and should not be considered financial, legal, or tax advice. You should consult with a professional for advice specific to your situation.