The One Big Beautiful Bill Act (OBBB), which President Trump signed into law on July 4, 2025, makes major changes to the tax code. The legislation makes many provisions from the 2017 Tax Cuts and Jobs Act permanent while introducing new temporary deductions and adjustments. People will start to see their taxes impacted when they file their 2025 taxes by tax day, which is on April 15, 2026.
Personal Tax Changes That Took Effect in 2025
The maximum Child Tax Credit for 2025 has increased to $2,200 per qualifying child, up from $2,000 in previous years. This amount will be adjusted annually for inflation. The credit begins to phase out for single filers with MAGI above $200,000 and married couples filing jointly with MAGI above $400,000.
Up to $1,700 of the credit is refundable in 2025 through the additional child tax credit, which is designed for taxpayers who earn at least $2,500 during the year but pay little to no federal income tax. This means that you can receive up to that amount as a refund even if you don't owe taxes.
Other Dependents Credit remains the same, it is up to $500 but not refundable. It is for dependents who do not meet the requirements for the Child Tax Credit, such as qualifying relatives or children over the age of 17.
For the 2025 tax year, the Dependent Care Assistance Program (DCAP) offers tax benefits for families. Key provisions remain largely consistent with recent years, the maximum amount you can contribute to a Dependent Care FSA remains $5,000 ($2,500 if married filing separately).
Earned Income Tax Credit (EITC) is up to $8,046 for qualifying taxpayers who have three or more qualifying children. The maximum EITC amount is up to $649 for taxpayers without a qualifying child, $4,328 for taxpayers with one qualifying child, and $7,152 for those with two qualifying children. Income limitations apply.
New Clean Vehicle Credit, Previously-Owned Clean Vehicle Credit, and Qualified Commercial Clean Vehicle Credit are not available for vehicles acquired after September 30,2025. If you acquire a new plug-in electric vehicle (EV) or fuel cell vehicle (FCV) on or before Sept. 30, 2025, you may qualify for a clean vehicle tax credit when the vehicle is placed in service. The credit is available to individuals and their businesses. To qualify, you must buy it for your own use, not for resale and use it primarily in the U.S. Your modified adjusted gross income (AGI) may not exceed $300,000 for married couples filing jointly or a surviving spouse, $225,000 for heads of households, and $150,000 for all other filers.
The Energy Efficient Home Improvement Credit is available for qualifying improvements installed through December 31, 2025. Taxpayers can claim an annual credit of up to $3,200 per year, with no lifetime limit. The credit is a nonrefundable personal tax credit, meaning it can reduce your tax liability to zero, but you won't receive a refund for any excess amount. Unused credits for the Energy Efficient Home Improvement Credit cannot be carried forward to future tax years.
In 2025, the federal Residential Clean Energy Credit (often called the solar tax credit) is available for 30% of the total cost of installing an eligible solar energy system; however, it is set to expire on December 31, 2025, for homeowner-owned systems.
Increased SALT Deduction Cap: The cap on the itemized deduction for state and local taxes (SALT) is temporary raised from $10,000 to $40,000 for single and married filing jointly tax payers with an adjusted gross income of $500,000 or less.
Deductions for Tips and Overtime: New, temporary deductions (through 2028) have been created for up to $25,000 in qualified cash tips for workers in traditionally tipped occupations and up to $12,500 for qualified overtime pay required by the FLSA (or $25,000 for joint filers).
Car Loan Interest Deduction: A temporary, above-the-line deduction for up to $10,000 of interest paid on new loans taken out in 2025 for a new, U.S.-assembled personal vehicle.
For the 2025 tax year, eligible educators can claim an above-the-line deduction of up to $300 for unreimbursed, qualified expenses. This deduction can be claimed whether or not you itemize other deductions on your tax return.
Required Minimum Distributions (RMDs) are annual withdrawals from retirement accounts like traditional IRAs and 401(k)s, and the calculation depends on your age and account balance. For 2025 RMD applies to individuals who reach age 73 during year 2024, meaning their first RMD was due by April 1, 2025. There is a one-time grace period, which allows you to take the 2025 RMD by December 31, 2025. For all other 2025 RMDs, the deadline is December 31, 2025.
The Contribution Limit for employees who participate in 401(k), 403(b), and most 457 plans is increased to $23,500, up from $23,000. Participants who are 50 and older generally can contribute up to $31,000 each year, starting in 2025.
The limit on annual Contributions to an IRA remains $7,000. The IRA catch-up contribution limit for individuals aged 50 and over remains $1,000 for 2025. Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer's spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income.
There is no age limit on making regular contributions to traditional or ROTH IRAs. The amount you can contribute to a Roth IRA depends on your modified adjusted gross income (MAGI). In 2025, you can contribute the full amount if your MAGI is under $150,000 if you are single or under $236,000 if you are married filing jointly. If your MAGI is higher, you may be able to contribute a reduced amount; contributions phase out between $150,000-$165,000 (single) and $236,000-$246,000 (joint), with no contribution allowed at or above those upper limits.
The adjusted gross income (AGI) limit to qualify for the Retirement Savings Contributions Savers Credit in 2025 is $39,500 for single filers and married individuals filing separately, $59,250 for heads of household, and $79,000 for married couples filing jointly. Also, an eligible individual should be 18 or older, not a full-time student, not claimed as a dependent on another person's tax return, and make contributions to a retirement plan or IRA. The maximum contribution amount that may qualify for the credit is $2,000 ($4,000 if married filing jointly).
Individuals can contribute up to $4,300 to their HSA accounts for 2025, and families can contribute up to $8,550. Catch-up contribution limits for taxpayers 55 and older remain unchanged at $1,000.
Premium Tax Credit is a refundable credit based on your income and the cost of your healthcare plan if you bought health insurance through the Health Insurance Marketplace.
The Annual Exclusion for Gifts is $19,000 per recipient for 2025. The annual amount that one may give to a spouse who is not a US citizen without incurring gift tax or having to file a gift tax return is up to $190,000. Any amount above this limit may be subject to gift tax, and requires reporting to the IRS.
Student Loan Interest Deduction. Taxpayers can claim a deduction for up to $2,500 in student loan interest paid, based on taxpayers' income. The student loan interest deduction begins to phase out if your Modified Adjusted Gross Income (MAGI) is between $85,000 and $100,000 for single filers and $170,000 and $200,000 for married couples filing jointly.
American Opportunity Tax Credit amount is up to $2,500 per student based on taxpayers' MAGI. Single, head of household, or qualified surviving spouse with MAGI up to $80,000 and married filing jointly with MAGI up to $160,000 qualify for the full credit.
Lifetime Learning Credit is $2,000, based on $10,000 in qualifying expenses.
The higher Standard Deduction amounts from the TCJA are permanent and have increased due to inflation:
| Filing Status |
Standard Deduction for 2025 Tax Year |
Change from 2024 |
| Single |
$15,750 |
+$1,150 |
| Married filing jointly |
$31,500 |
+$2,300 |
| Head of household |
$23,625 |
+$1,725 |
| Married filing separately |
$15,750 |
+$1,150 |
DATA SOURCE: IRS.
Additional Senior Deduction: A significant change for 2025 is a new, temporary (through 2028) $6,000 bonus deduction for taxpayers age 65 and older (or $12,000 for a married couple if both spouses qualify). This is available even to those who itemize deductions, subject to Modified Adjusted Gross Income (MAGI) phaseout limits ($75,000 for single filers, $150,000 for joint filers).
The pre-existing additional standard deduction for age 65 or blindness still applies and is also adjusted for inflation: $2,000 for single or head of household filers (per qualifying individual) and $1,600 per qualifying individual for married filers (jointly or separately).
Long-term capital gains rates are 0%, 15% or 20%, depending on taxable income and filing status. In 2025, the 0% rate applies for individual taxpayers with taxable income up to $48,350 on single returns, $64,750 for head-of-household, and $96,700 for joint returns. The 20% rate for 2025 starts at $533,400 for singles, $566,700 for heads of household and $600,050 for couples filing jointly. The 15% rate is for filers with taxable incomes between the 0% and 20% break points.
The 3.8% surtax on net investment and additional Medicare tax (0.9% tax) are not tied to inflation and remain at $250,000 for married filing joint taxpayers, $125,000 for married filing separate taxpayers and $200,000 for other taxpayers.
Permanent Tax Brackets and Rates: The seven federal income tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) are now permanent and have been adjusted for inflation.
| Tax Rate on Income |
Single |
Head of Household |
Married Filing Jointly |
Married Filing Separately |
| 10% |
$0 to $11,925 |
$0 to $17,000 |
$0 to $23,850 |
$0 to $11,925 |
| 12% |
$11,926 to $48,475 |
$17,001 to $64,850 |
$23,851 to $96,950 |
$11,926 to $48,475 |
| 22% |
$48,476 to $103,350 |
$64,851 to $103,350 |
$96,951 to $206,700 |
$48,476 to $103,350 |
| 24% |
$103,351 to $197,300 |
$103,351 to $197,300 |
$206,701 to $394,600 |
$103,351 to $197,300 |
| 32% |
$197,301 to $250,525 |
$197,301 to $250,500 |
$394,601 to $501,050 |
$197,301 to $250,525 |
| 35% |
$250,526 to $626,350 |
$250,501 to $626,350 |
$501,051 to $751,600 |
$250,526 to $375,800 |
| 37% |
Over $626,350 |
Over $626,350 |
Over $751,600 |
Over $375,800 |
DATA SOURCE: IRS.