Every 2025 Tax Change Under OBBBA, In Plain English

The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025. It is the most significant federal tax legislation since the Tax Cuts and Jobs Act of 2017, and several of its provisions are retroactive to January 1, 2025. That means every 2025 return you prepare during the 2026 filing season is affected. Here is the plain-English version of what changed.

1. Tips Deduction (NEW)

For tax years 2025 through 2028, taxpayers in occupations that customarily received tips on or before December 31, 2024 may deduct up to $25,000 of qualified tips above the line on Schedule 1. Above the line means it reduces AGI directly. The taxpayer does not need to itemize.

2. Overtime Deduction (NEW)

Up to $12,500 of FLSA overtime (the half-time premium portion only) is deductible above the line for 2025. The deduction phases out when MAGI exceeds $150,000 single or $300,000 MFJ. Hourly workers should track their overtime hours carefully.

3. Senior Deduction (NEW)

An additional $6,000 deduction per taxpayer age 65 or older. $12,000 if both MFJ spouses qualify. Phases out at MAGI over $75,000 single or $150,000 MFJ. Ask every senior client whether they qualify.

4. SALT Cap Raised to $40,000

The state and local tax deduction cap was raised from $10,000 to $40,000 for 2025 ($20,000 for MFS). It phases out at MAGI over $500,000. The cap rises 1% per year through 2029, then reverts to $10,000. This is huge for NJ and NY clients.

For NJ and NY clients, recompute itemized versus standard. The new $40,000 SALT cap puts itemizing back on the table for many homeowners.

5. 100% Bonus Depreciation Reinstated

For qualifying property placed in service after January 19, 2025, full 100% bonus depreciation is back. Property placed in service earlier in 2025 still gets only 40%. This single date detail will catch out 70% of preparers without a current reference.

6. TCJA Individual Rates Made Permanent

The seven individual brackets (10% through 37%) that were scheduled to sunset after 2025 are now permanent. No bracket reset to plan for in 2026.

7. Standard Deductions for 2025

• Single: $15,750
• Head of Household: $23,625
• MFJ and QSS: $31,500

8. Child Tax Credit

The CTC for 2025 is $2,200 per qualifying child (up from $2,000). The refundable portion through ACTC is up to $1,700 per child.

9. Estate and Gift Exemption

Starting 2026, the lifetime exemption rises to $15,000,000 per person, indexed for inflation permanently. The 2025 figure remains $13,990,000.

Kreyol summary

OBBBA siyen 4 Jiyè 2025 ak chanjman retroaktif pou 2025. Nouvo dediksyon pou tips ($25K), overtime ($12.5K), ak granmoun 65+ ($6K). SALT plafonè monte a $40K. Bonus depresyasyon retounen a 100% pou pwopriyete plase apre 19 Janvye 2025.

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