On July 4, 2025, the President signed the new 2025 Tax Bill, known as the “One Big Beautiful Bill Act” or OBBB. To counter any misinformation you may encounter, here is an overview of the changes that may affect you for 2025:
Brackets and Rates
Tax rates and capital gains rates did not increase or decrease for 2025.
Tax brackets did increase slightly, meaning you can make a bit more money before being moved into a new tax bracket.
Standard deduction
For 2025, the standard deduction is $15,750 if single, $23,625 for Head of Household, and $31,500 if married.
Itemized deductions
- Deductible taxes increased to a maximum deduction of $40,000 in 2025 vs. $10,000 in 2024. This category includes property tax and state and local income tax paid, but it does phase out for high-income earners
- Deduction for gambling losses is unchanged for 2025, but beginning in 2026, it is limited to 90% of gambling winnings
Senior Deductions
There is a new deduction for seniors, which allows an additional deduction of $6,000 for each filer who has reached age 65 by December 31, 2025. However, this deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers).
Car Loan Interest Deduction
There is also a new deduction this year for car loan interest if you bought a new car in 2025 through 2028, if it was assembled in the US. This deduction phases out starting at $100,000 of income if single, and $200,000 if filing jointly. This amount is deductible in addition to the standard deduction, so you don’t need to itemize.
Tip Deduction
If your W-2 reflects tip income, or self-reported tip income, you may deduct the lesser of the tip income from your W-2’s OR $25,000. This deduction phases out starting at $150,000 of income if single, and $300,000 if filing jointly. This amount is deductible in addition to the standard deduction, so you don’t need to itemize.
Overtime Deduction
If your W-2 reflects overtime pay income, you may deduct the lesser of the overtime income from your individual W-2’s OR $12,500 each. This deduction phases out starting at $150,000 of income if single, and $300,000 if filing jointly. This amount is deductible in addition to the standard deduction, so you don’t need to itemize.
Tax Credits
The credit for children reported as dependents on your returns increases from $2,000 to $2,200.
The credit for an electric car ended on September 30, 2025, and the credits for insulation, storm windows, doors, furnaces, water heaters, solar power, geothermal, and wind energy systems end on December 31, 2025.
We will continue to stay abreast of new developments in the tax law. If you should have any questions, please don’t hesitate to contact us.
Thank you,
Your team at Orcutt
