The Impact of New Tax Legislation in 2025
July 9, 2025
On July 4, 2025, President Donald Trump signed a new tax reform bill into law. This law keeps many parts of the 2017 Tax Cuts and Jobs Act (TCJA). It also adds new policies that will affect many taxpayers. The law aims to stop the key tax breaks from the TCJA from ending in 2025.
It also offers more tax help to certain groups. These groups include retirees, families with young children, and people living in high-tax states.
Some parts of the law will last forever, but others will end after 2028. This will lead to new political debates in the future. Nevertheless, the changes made under this new law will reshape how Americans plan, save, and manage their tax obligations for years to come.
Why This Legislation Matters
Had Congress failed to act, many Americans would have seen their taxes increase on January 1, 2026, as key elements of the TCJA were set to expire. By extending and enhancing these provisions, lawmakers aimed to provide continued tax relief and add targeted benefits to promote economic activity and assist vulnerable populations.
The bill did face hurdles in Congress due to concerns about its cost. To offset some of the projected revenue loss, lawmakers approved reductions in Medicaid funding, rolled back energy tax credits from the 2022 Inflation Reduction Act, and made the elimination of personal exemptions permanent.
Key Permanent Tax Changes
1. Tax Brackets Remain Intact
The seven-tier structure established under the 2017 TCJA—ranging from 10% to a top rate of 37%—will remain unchanged. However, not all brackets will be adjusted for inflation going forward, which may result in “bracket creep” over time.
2. Adjusted SALT Deduction Limits
The state and local tax (SALT) deduction cap increases from $10,000 to $40,000, but this higher limit will expire in 2030, reverting back to the original cap. The expanded deduction will phase out for individuals earning over $500,000.
3. Enhanced Standard Deduction
The standard deduction, which doubled under the TCJA, will now be made permanent and increased further to $15,750 for single filers and $31,500 for married couples filing jointly. These figures will adjust annually for inflation starting in 2026.
4. Estate and Gift Tax Exclusions Increase
High-net-worth individuals benefit from a larger estate tax exemption—rising to $15 million for single filers and $30 million for married couples.
5. Boosted Child Tax Credit
The Child Tax Credit is increased to $2,200 per child and will become a permanent fixture of the tax code.
6. Mortgage Interest Deduction Maintained
The deduction limit remains capped at mortgage debt of $750,000 for joint filers ($375,000 for single filers), consistent with the reduction made in 2017.
Temporary Tax Benefits (2025–2028)
While several provisions are set in stone, others are temporary and will be available only through 2028 unless extended:
1. Exclusion for Tips and Overtime
Workers can deduct up to $25,000 in tips and $12,500 in overtime pay. This benefit phases out for individuals earning more than $150,000 ($300,000 for joint filers).
2. Additional Deduction for Seniors
Seniors aged 65 and older may claim an extra $6,000 deduction, on top of the existing age-related deduction. This new benefit begins phasing out at $75,000 for singles and $150,000 for couples.
3. Car Loan Interest Deduction
Borrowers may deduct up to $10,000 in interest on vehicles assembled in the U.S., provided their income is below $100,000 (or $200,000 for joint filers).
Innovative New Savings Tools
Trump Accounts for Children
The new law introduces a child-focused savings vehicle: the Trump Account. These accounts allow up to $5,000 in annual contributions for individuals under age 18. Funds grow tax-deferred and convert to a traditional IRA upon the child’s 18th birthday. Babies born between 2025 and 2028 will receive $1,000 in seed money from the federal government.
Expanded HSA and 529 Plan Uses
Health Savings Accounts (HSAs) are now available to more people and can be used for direct primary care and telehealth services. Meanwhile, 529 education savings plans now cover a wider array of educational services, including testing fees, tutoring, and therapeutic support for students with disabilities.
What Didn’t Make the Cut?
Although President Trump previously proposed eliminating taxes on Social Security benefits, that measure was not included in the final legislation. Currently, up to 85% of Social Security income remains taxable depending on income levels. However, the new $6,000 deduction for seniors could help reduce the effective tax burden for some retirees.
Navigating the Changes Ahead
Tax reform is complex, and while many Americans may see a net reduction in their tax bills, the long-term effects will vary based on income, location, and family size. Some individuals—particularly those earning under $30,000—could face a modest tax increase, while middle- and upper-income households are more likely to benefit from expanded deductions and credits.
Given the intricacies of the new law and the evolving political landscape, it’s wise to consult with a tax or financial advisor. Personalized advice can help ensure you’re maximizing your benefits under the new system while preparing for any potential changes ahead.
As with any major shift in tax policy, staying informed is key. Whether you’re a working professional, retiree, parent, or business owner, understanding how the 2025 tax law impacts you will be crucial for smart financial planning in the years to come.
Sources:
https://www.fidelity.com/learning-center/personal-finance/one-big-beautiful-bill
Disclosure:
This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.
This material is provided as a courtesy and for educational purposes only.
These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.