As tax professionals prepare for the upcoming 2026 filing season, it’s important to be aware of several significant federal tax law changes enacted under the One Big Beautiful Bill Act. Many of these provisions apply beginning with the 2025 tax year and impact both individual and business returns.
Below is a comprehensive overview of the key changes you should be prepared for.
Tip Income and Overtime Pay Deductions
The One Big Beautiful Bill Act introduced new deductions for tip income and overtime pay for tax years 2025 through 2028.
Child Tax Credit Changes
Several updates were made to the Child Tax Credit beginning in 2025:
- Maximum Child Tax Credit: $2,200
- Maximum refundable portion: $1,700
- The taxpayer must now have a valid Social Security Number to claim the credit
Increase in the Standard Deduction
The One Big Beautiful Bill Act made the increased standard deduction permanent and added an additional increase beginning in 2025:
- $1,500 for Married Filing Joint
- $1,125 for Head of Household
- $750 for all other filers
With these increases, the standard deduction for tax year 2025 is:
- $15,750 – Single
- $31,500 – Married Filing Joint
- $23,625 – Head of Household
New Senior Deduction
A new Senior Deduction of $6,000 is available for taxpayers age 65 and older for tax years 2025 through 2028.
Key details include:
- Available for both the taxpayer and spouse
- Deduction begins to phase out when AGI reaches $75,000 ($150,000 for MFJ)
- Taxpayer and spouse must have a Social Security Number
- Calculated on new Schedule 1-A, Section V
Qualified Car Loan Interest Deduction
For tax years 2025 through 2028, taxpayers may deduct up to $10,000 of qualified car loan interest paid during the year.
Additional details:
- Applies to interest paid on loans for qualified vehicles purchased in 2025
- Qualified vehicles include cars, minivans, vans, SUVs, pickup trucks, or motorcycles
- Vehicles must have a gross vehicle weight rating under 14,000 pounds
- Final assembly must have occurred in the United States
- Vehicle must be for personal use
- Deduction phases out when AGI reaches $100,000 ($200,000 for MFJ)
- The VIN must be entered on the return on Schedule 1-A
- Final assembly information can be found on the vehicle information label or verified using the NHTSA VIN Decoder
- Calculated on Schedule 1-A, Section IV
SALT Deduction Limitation (Schedule A)
Changes were made to the limitation on itemized deductions for state and local taxes (SALT):
- Maximum SALT deduction increased to $40,000 for 2025
- Once AGI reaches $500,000, the limit is gradually reduced until it reaches $10,000
- Available for tax years 2025 through 2029
- Both the overall limit and AGI reduction threshold will be adjusted annually for inflation
Adoption Credit Update
For tax years 2025 through 2028, up to $5,000 of the adoption credit is refundable.
Bonus Depreciation
- 100% bonus depreciation is available for qualified property acquired after January 19, 2025
Clean Vehicle Credits for 2025
The following clean vehicle credits are only available for qualified vehicles purchased between January and September 2025:
- New Clean Vehicle Credit
- Used Clean Vehicle Credit
- Commercial Clean Vehicle Credit
Additional Resources
For more detailed guidance, reference the following IRS resources:
- IRS Fact Sheet FS-2025-03 – One Big Beautiful Bill Act: Tax Deductions for Working Americans and Seniors
(Covers tip income, overtime pay, car loan interest, and senior deductions) - One Big Beautiful Bill Act Provisions Web Page
- Draft of Schedule 1-A
