What are the 5 most important changes for the 2025 tax season?

1. Permanent Tax Brackets with Inflation Adjustments

The Tax Cuts and Jobs Act (TCJA) rates, ranging from 10% to 37%, were originally set to expire after 2025. OBBBA makes these brackets permanent and ties them to annual inflation adjustments, ensuring more predictable long-term tax planning.

2. Higher Standard Deduction & New Senior Deduction

Starting in 2025, the enhanced standard deduction amounts become permanent:

• $15,750 for single filers,

• $31,500 for married couples filing jointly,

• $23,625 for heads of households.

In addition, individuals age 65+ can claim a new senior deduction of up to $6,000 each ($12,000 for couples) between 2025–2028. This benefit phases out at higher income levels but provides a valuable planning tool for retirees.

3. Expanded SALT Deduction (Through 2029)

For tax years 2025–2029, the cap on state and local tax (SALT) deductions increases dramatically:

• Up to $40,000 for married couples filing jointly,

• $20,000 for those filing separately.

These higher limits are adjusted annually for inflation but subject to phaseouts at elevated income levels. After 2029, the cap reverts back to $10,000.

4. Updated Credits for Families

Several family-focused credits receive permanent or enhanced treatment:

• Child Tax Credit rises to $2,200 per child under 17 starting in 2025, with inflation indexing.

• The $500 credit for other dependents remains permanent.

• The adoption credit becomes partially refundable (up to $5,000) for the first time, increasing accessibility for families.

5. New Deductions and Energy Credit Terminations

OBBBA introduces innovative deductions while phasing out certain green energy incentives:

• New deductions: Up to $25,000 in tips and $12,500 in overtime pay (per filer), plus $10,000 in car loan interest on qualifying U.S.-assembled vehicles, available 2025–2028. Each has income-based phaseouts.

Energy credits ending: Clean vehicle credits, residential clean energy credits, and home improvement credits are terminated on dates ranging from September 30, 2025 to December 31, 2025, with some provisions extending into 2026.