ONE BIG BEAUTIFUL BILL—tax changes for 2025

The One Big Beautiful Bill Act, (3B) was signed into law on July 4, 2025 and takes effect in 2025.  Everyone will be affected by something in the bill.

The Standard Deduction increases to $31,500 for couples and $15,750 for singles.  It will go up again in 2026 to $32,200 for Married Filing Jointly and $16,000 for Singles.

Couples will hit the 24% marginal tax rate when their income goes over $211,400.  They don’t hit 35% until their income goes over $512,450—quite a big gap.  The numbers for Singles are 24% for over $105,700 and 37% for over $640,600.

The Estate Tax exclusion rises from $13,990,000 in 2025 to $15,000,000 in 2026.

The Adoption Credit is now $17,280 in 2025 and rises to $17,670 in 2026.  Up to $5,120 is now refundable (a nice change).

For 3 years only, 2025-2028, Senior Citizens can claim an additional $6,000 deduction.  This is in addition to the Standard Deduction.  But it starts phasing out for couples with income over $150,000 and singles over $75,000.

For 3 years only, 2025-2028, taxpayers can deduct “tips” received in the normal course of their work.  Maximum annual deduction is $25,000.  The tips must be reported on a W-2, Form 1099, Form 4137, or other furnished statement from the employer.

For 3 years only, 2025-2028, taxpayers can deduct part of their overtime wages—the “half” of time and a half.  The overtime must be reported on the W-2.  Maximum excludable amount is $12,500 for Singles and $25,000 for Married Filing Jointly.

For 3 years only, 2025-2028, taxpayers can deduct the interest paid on a car/minivan/van/ SUV/ pickup truck or motorcycle loan.  The maximum deduction is $10,000, and the car must have been purchased in the current year (2025 for this year).  The vehicle must be used by the taxpayer, secured by a lien on the vehicle, and be for personal use only (no business use).  You must report the VIN number.

Children born in 2025 are eligible for a “Trump Account”.  It can be funded after July 4, 2026.  Maximum contribution is $5,000 per year.  The federal government will make a one-time $1,000 contribution as well.  Employers can contribute to an employee’s Trump Account without it counting as taxable income to the employee.  Funds in the account must be invested in mutual funds or a stock index fund.  The money cannot be withdrawn before the child turns 18.  After that, it is treated like a traditional IRA.