Tax Law Changes

Personal

  • SALT Deduction Cap: Increased to $40,000 in 2025 and indexed through 2029. Phased out for high-income earners. Returns to $10,000 in 2030.

  • Tax on Tips: New deduction up to $25,000 for qualified tips, subject to MAGI-based phase-outs. Applies 2025–2028.

  • Overtime Deduction: Above-the-line deduction up to $12,500 ($25,000 for MFJ). Applies 2025–2028.

  • Car Loan Interest: Deduction up to $10,000 for interest on new personal-use vehicle loans. VIN required. Applies 2025–2028.

  • Adoption Credit: Up to $5,000 of the credit is refundable. Tribal governments can determine special needs. Starts 2025.

  • 529 Plan Expansion: More qualified expenses covered, including certain tutoring and testing fees. Deduction limit increases to $20,000 in 2026.

  • Energy Credits: Clean vehicle and energy efficiency credits sunset between 2025 and 2026.

  • Tax Rates: The reduced rates from TCJA 2017 are now permanent.

  • Standard Deduction: Permanently retains the higher TCJA deduction amounts.

  • Personal Exemption for Seniors: $6,000 exemption for taxpayers 65+, phased out at $75,000/$150,000 MAGI. Applies 2025–2028.

  • Child Tax Credit: Increased to $2,200 and indexed. The refundable portion remains $1,400. SSN requirements apply.

  • AMT Exemption: Higher exemption levels from TCJA made permanent.

  • Mortgage Interest: $750,000 acquisition debt limit and PMI deduction made permanent (PMI starts 2026).

  • Casualty Losses: Expanded to include state-declared disasters.

  • Misc. 2% Itemized Deductions: Permanently disallowed, except special educator expense deduction.

  • Itemized Deduction Limitation: Reinstated phase-out based on high income.

  • Wagering Losses: Deduction capped at 90% of income. Includes wagering-related expenses.

  • Student Loan Discharge: Excluded from income if due to death or disability. Made permanent.

  • Dependent Care Credit: Modified phase-outs; applies to more middle-income taxpayers.

  • Dependent Care Benefits (DCB): Cap increased to $7,500 ($3,750 MFS).

  • Scholarship Contributions Credit: New $1,700 credit. Scholarships not included in income.

  • Charitable Contributions: Above-the-line deduction up to $2,000 (MFJ). New 0.5% AGI floor.

  • Education Credits: Restricted to legal U.S. residents with SSNs.

  • Direct File Program: Treasury to evaluate replacing Direct File with a public-private model.

  • Social Security Income: No changes

Business

  • Qualified Business Income (QBI) Deduction: 20% deduction made permanent. Higher phase-out and a $400 minimum deduction added.

  • Form 1099 Threshold: Increased from $600 to $2,000 and indexed.

  • Third-Party Network (1099-K) Reporting: Reverts to original $20,000/200 transaction rule. Retroactive.

  • Bonus Depreciation: 100% deduction reinstated for eligible property acquired after Jan 19, 2025.

  • Section 179 Expensing: Limit raised to $2.5M, with phase-out beginning at $4M.

  • Bonus Depreciation (Real Estate): Applies to non-office real estate used in U.S. production (2025–2028).

  • Estate & Gift Tax: Exemption set to $15M starting 2026, with annual indexing.

  • Transportation Benefits: Bicycle reimbursements remain taxable.

  • Moving Expenses: Employer reimbursements remain taxable.

  • Employer-Provided Child Care Credit: Increased to 40% (50% for eligible small businesses), with higher limits.

  • Business Interest Limitation: TCJA rules made permanent; expanded to trailers and campers.

  • ERTC Claims: No claims allowed after Jan 31, 2024. Promoter penalties apply.

  • Student Loan Repayment: Employer-paid amounts remain nontaxable. Now permanent.

  • Corporate Charitable Contributions: New 1% AGI floor introduced.

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