What do you need to know about the new Tax Bill?
A new tax bill, known as the One Big Beautiful Bill Act (the OBBBA), was signed into law by President Trump on July 4th, 2025. While many provisions of this tax bill do not take effect until 2026, this bill is unique in that some of the provisions take effect immediately for the 2025 Tax Year.
Here are the main things that you need to know as you prepare for 2025 Tax Filings early next year.
- There is a new “above-the-line” deduction for charitable contributions. This means those who use the Standard Deduction can get this additional deduction for up to $2,000 (Married Filing Jointly) or $1,000 (Single or Head of Household) for charitable contributions. Those of you who Itemize deductions, and all Oregon residents are used to reporting charitable donations to me, but now all of you need to report all charitable donations to me.
- The SALT (State and Local Tax Deduction) has been moved from $10,000 up to $40,000. This deduction of all Property Taxes, State Income Taxes, and Sales Taxes applies to taxpayers with Taxable Income below $500,000, and it phases out for income up to $633,333. This is a reversal of the SALT Cap that was put in place in President Trumps previous 2017 Tax Bill.
- The Electric Vehicle Tax Credit of $7,500 has phased out, effective September 30th, 2025. So you have until this weekend if you were planning to buy an electric vehicle, and the car dealer is the best person to check each vehicle’s eligibility.
- The Solar Tax Credit expires on 12/31/2025. This is a massive tax credit of 30% of the Total Cost of new Solar Panels. So if you have good southern sun exposure and are interested in taking advantage of this tax credit, installation must be fully complete by December 31st.
- There is a new $6,000 bonus deduction for taxpayers over the age of 65 with incomes under $75,000 (Single or Head of Household) or $150,000 (Married Filing Jointly).
- There is a temporary deduction for $25,000 of tip income and $12,500 of overtime pay. This is for taxpayers with income under $150,000 (Single or HoH) or $300,000 (Married Filing Jointly). There was expectation that W2s would be changed in order to report overtime income, but the IRS has issued a statement saying that this will not happen. So if you receive overtime income, you are going to need to work with your employer’s payroll department to report all overtime income received. Tip income is already separated out on W2s.
- The Child Tax Credit for children under age 17 has increased from $2,000 to $2,200. It’s finally paying off to have those mouths to feed!
- Some car loan interest may be deductible. This is only for vehicles purchased in 2025 if the vehicle was assembled in the US. And this is for taxpayers with taxable income below $100,000 (Single and HoH) or $200,000 (Married Filing Jointly).
- The tax bracket rates that have been in place since the 2017 Tax Bill are now permanently extended. They were scheduled to expire at the end of 2025.
Those are the most important pieces of the 800+ page OBBBA. Feel free to reach out with specific questions regarding your tax situation.
On one other note, a couple of the continuing education instructors and authors that I learned from have expressed concern that the 2025 Tax Season may be delayed for a couple of reasons. First, this is a massive bill and there is not a lot of time for the IRS to work out the minutiae, give guidance, and prepare for tax season. Second, there have already been 7 IRS Commissioners so far in 2025, and the current Acting IRS Commissioner, Scott Bessent, is also the Secretary of the Treasury. The rank and file IRS employees have also been decimated by DOGE cuts. This is unprecedented turnover and upheaval throughout an entity that has struggled mightily since the Covid pandemic. Finally, there is a the potential looming government shut-down if Congress does not approve funding.
Stay tuned for news on that front, and all the best to you as we head into the Fall season.
Jeremy Watson
Enrolled Agent, Licensed Tax Consultant, CFP®