Disclaimer: Do not make tax planning or preparation decisions based on just this article. This article is for informational purposes only. The tax code and any guidance the IRS provides should be relied on for tax preparation and planning, as well as a competent tax professional who you have engaged for services. The tax code can and will change and as of July 10, 2025 the IRS has not yet published guidance regarding the tax law changes. This article does not cover all the details of this topic.

I am choosing to cover the items that impact the most people and a few that I view as particularly impactful for a few of my clients. This was a huge change, so there is much more than I cover here but this covers many of the changes. It complicates the tax code and will result in more tax forms. There will also be new tax regulations and new instructions from the IRS. This will result in additional requirements and clarifications that will impact the application of these new tax laws. I expect to be learning and writing on this topic all year. 

These provisions are just for the federal income tax. Individual states with an income tax tend to conform differently to different federal income tax provisions and we could see changes with some state income tax codes due to the federal income tax changes. 

Please take care to note that there are provisions that make changes permanently (unless a new law is passed in the future) and some provisions are temporary. Also note that some provisions start in tax year 2025 (this year), and some start in tax year 2026. 

Individual Taxpayers

  1. Income tax rates. The individual tax rates will continue to be the same as under the Tax Cuts and Jobs Act (TCJA). These are: 10%, 12%, 22%, 24%, 35%, and 37%. Starting in tax year 2026, the 10% and the 12% brackets are also increased slightly in size. 
  2. The standard deduction: the TCJA increased standard deductions amount were not just continued, but also bumped up for 2025: married filing jointly (and Qualified Surviving Spouse) went from $30,000 to $31,500, head of household went from $22,500 to $23,625, and single went from $15,000 to $15,750. 
  3. Child tax credit. Starting in tax year 2025. Permanently increases the child tax credit to $2,200 and the refundable component is limited to $1,700. And there is a big change: these credits are now inflation adjusted going forward. The phase-out thresholds of $200,000 ($400,000 on a joint return) and the $500 other dependent credit are made permanent.
  4. Tips deduction: Please read here. 
  5. Vehicle loan interest deduction: Please read here. 
  6. Senior citizen deduction: Please read here. 
  7. Overtime compensation deduction. Please read here.
  8. When itemizing the state and local tax (SALT) deduction limit is increased from $10,000 to $40,000 BUT income limitations apply. Please read here. 
  9. Mortgage insurance premiums (MIP): They have been gone for a few years. This one may be big for some military and veteran clients who purchase a home with a VA loan as the VA funding fee is treated as MIP. Mortgage insurance premiums are treated as qualified residence interest again starting in tax year 2026 and are thus deductible on the schedule A (when itemizing). However it is limited by income, so that will limit how many will benefit from this deduction. The deduction is reduced by 10% of such amount for each $1,000 ($500 MFS), or fraction thereof, that the taxpayer’s AGI for the tax year exceeds $100,000 ($50,000 MFS).
  10. Home energy credits for individuals are expiring at the end of 2025. This includes ENERGY EFFICIENT HOME IMPROVEMENT CREDIT (think things like qualifying windows, doors, insulation, heating, and air conditioning units) and the RESIDENTIAL CLEAN ENERGY CREDIT (think things like solar panels). If you want to make use of these credits you need to get the qualifying activity done in 2025.
  11. For Electric Vehicle (EV credits): Both the clean vehicle credit and the previously owned clean vehicle credit expire after September 30, 2025. So if you want to make use of this credit, you need to get your qualifying EV by September 30, 2025.[The key for all of these energy credits is “qualifying”. Don’t forget that part. Also watch out for income limitations for electric vehicle credits.Don’t spend money just to get a tax credit, but if you are going to spend the money and would like to get a tax credit. Be sure that the credit will apply before the purchase. HVAC, windows, and doors tends to the areas with most problems. Just because it is energy star rated does not always mean it qualifies for the credit.]
  12.  529s Starting July 4, 2025: permits tax-free distributions from 529 savings plans to be used for additional qualified higher education expenses, including qualified postsecondary credentialing expenses in connection with recognized  postsecondary credential programs and recognized postsecondary credentials. From what I can see right now it seems this means, among other things that 529s can be used for wider workforce, on-the-job training, and continuing education programs.This includes tuition, miscellaneous fees, books, exam costs and supplies for programs listed under the Workforce Innovation and Opportunity Act. This also includes some occupational licensing and professional licensing. While this is immediate, I wouldn’t rush to distribute 529 funds for this purpose until there is some clear guidance.
  13.  Charitable Contributions. Starting in 2026,  a deduction for cash (money credit cards, electronic, and checks count as “cash”) contributions for non-itemizers returns and increases such that deductible amount is $1,000 ($2,000 on a joint return).
  14. Starting in tax year 2026, Assignment-related moves for intelligence community members (as defined by law) are eligible for the moving expenses deduction and exclusion for qualifying moving expenses similar to military service members. 
  15. Starting in tax year 2026, there are changes to eligible educator deductions. The up to $300 educator expense above the line educator expense deduction remains. But starting in 2026, any additional qualifying expenses can be an itemized deduction on a schedule A. For the itemized deduction (and it looks like just the itemized deduction portion), starting in 2026, Interscholastic sports administrators and coaches are added as eligible educatorsAdditionally (starting in 2026), expenses outside of the classroom that are part of instructional activity and supplies and materials not athletics-related (but used in instructional activities) are allowed with respect to the itemized deduction. Often, eligible educators stop tracking expenses after they hit the $300 threshold. Starting in 2026 at least some should carefully track and retain documentation of all eligible expenses.
  16. 529s Starting in tax year 2026: the amount that can be distributed for elementary or secondary public, private, or religious school expenses from $10,000 to $20,000. 
  17. Starting in tax year 2026, the exclusion for employer dependent care assistance goes from  up to $5000 ($2500 for married filing separately) up to $7,500 annually ($3,750 for a married individual filing separately). 
  18. Starting in tax year 2026, the child and dependent care credit is improved, but just marginally. I don’t see this having a big impact for most dependent care tax situations. This provision increases the maximum credit rate to 50% (currently 35%), reduced by 1%, but not below 35%, for each $2,000 or fraction thereof by which the taxpayer’s AGI exceeds $15,000. For AGIs between $43,001 and $75,000 ($86,001 and $150,000, respectively, in the case of a joint return), the credit rate is 35%. This credit rate is further phased down to 20% for AGIs between $75,001 and $105,000 (between $150,001 and $210,000  in the case of a joint return).
  19. 1099-Ks. Starting in tax year 2026, the reporting requirements will move back up to $20,000 and 200 transactions.
  20. 1099-NECs. Starting in tax year 2026, the reporting threshold will move from $600 to $2000. This will also be inflation adjusted in future years.

A final change beneficial for some business owners and rental property owners:

100 % Bonus Depreciation returns- Bonus depreciation permits the accelerating or expensing of certain depreciable items faster than normal. Typically it can be done for items with an asset life of 20 years or less. A few years ago it was at 100% and it was slowly phasing out the past few years. 100% bonus depreciation is back but with a catch or two.  The property has to be acquired and placed into service after January 19, 2025. AND it can’t  have been acquired via a binding written contract entered into before January 20th.