As you probably already know, right before the 4th of July holiday, Trump’s new bill passed. Now, the first thing on everybody’s mind is, “How will Trump’s new bill affect taxes?”
We’ve outlined some changes for you below:
Changes to Tax Deductions
New Standard Deductions in 2025
The standard deduction will increase in 2025 by $750 for single filers, and $1,500 for those married filing jointly.
- Single standard deduction increases from $15,000 to $15,750.
- Married Filing Jointly standard deduction increases from $30,000 to $31,500.
New Deduction for Tips and Overtime Pay through 2028
If you earn tips or overtime pay, new tax deductions for those tips and overtime pay could reduce your tax liability, but there are limits. These deductions will lower your taxable income and will be available through 2028.
- Those who earn tips can deduct up to $25,000 of their tip income, as long as your total income is below $150,000 for single filers and $300,000 for married filing jointly.
- The overtime pay deduction is limited to $12,500 for single filers and $25,000 for married filing jointly. Total Income caps are the same as those for tip income.
New Charitable Deductions
A charitable tax deduction has been considered a personal itemized deduction, so those who take the standard deduction have not been able to deduct any charitable contributions. Starting in 2025, there is a new charitable deduction allowed for those who are not taking personal itemized deductions. This deduction is limited to $1,000 for single filers and $2,000 for those filing married filing jointly.
State and Local Tax Deductions through 2029
For those who are able to deduct state and local taxes as personal itemized deductions, the cap on the amount you could deduct used to be $10,000. The new bill raises that cap to $40,000 starting in 2025 and going through 2029.
Deductions for Social Security Benefits through 2028
Despite what the recent email from the Social Security Administration claimed, taxes were not actually eliminated for those receiving social security benefits. Instead, taxpayers who are 65 and older and have adjusted gross incomes (AGI) of less than $75,000 for single filers and less than $150,000 for married filing jointly, will get a $6,000 deduction from their AGI—this includes all income, not specifically social security benefits. You may or may not end up owing taxes on your adjusted gross income. This deduction is available through 2028.
Changes to Tax Credits
Child Tax Credit
The child tax credit will Increase to $2,200 per child starting in 2025 and going through 2028.
Cuts to Energy Tax Credits
If you’relooking to take advantage of one of the energy tax credits, you should act fast, as these credits are being cut by the new tax bill.
- The electric vehicle tax credit of $7,500 for the purchase of a new electric vehicle will now expire on September 30, 2025. You will have to purchase that vehicle before the end of September.
- The home energy tax credits for solar panels and other energy efficient home improvements are set to expire on December 31st, 2025.
Business Tax Changes
Qualified Business Income Deduction
The qualified business income deduction, which was set to expire at the end of 2025, has been made permanent. This provides a 20% deduction on any business income from a pass-through entity, such as an S corporation.
Cuts to Energy Credits for Businesses
While there isn’t a set date for these tax credits to expire, any businesses looking for the 30% tax break on costs for wind and solar projects will probably need to start those projects within the next year to be eligible.
The new bill will most likely change the tax liability for your 2025 tax return. Rest assured that Moore & Paquette Tax Group will be familiar with the new tax laws and will get your through the coming tax season.
**Please note that details of the tax law changes are very new, and the above should not be considered legal advice. Always consult with a tax preparer before completing a tax return.