Tax season is around the corner, and there are quite a few new beneficial tax changes for individual filers. New tax laws in the One Big Beautiful Bill Act (OBBA) and changes to the Secure 2.0 Act could impact your 2025 tax return, which will be filed in the spring of 2026, as well as tax returns filed in 2027 and beyond.
Ashley Weeks, Wealth Strategist at TD Wealth, summarized the key points below, so you can understand which benefits may apply to your tax situation.
What you need to know about your 2025 taxes
Filers who are 65 and older can take an additional deduction
Starting in 2025, some who are 65 years of age or older can take an extra $6,000 deduction in addition to either their standard or itemized deduction. The $6,000 deduction starts to phase out for single filers with income over $75,000 and married filers with income over $150,000.
Child tax credit is now permanent
For working families, this can be a vital tax credit since the credit provides a dollar-for-dollar offset to taxes owed. This tax credit is partially refundable, meaning that even if you do not owe enough tax to take the full allowable credit, you can receive part of the credit as a tax refund. Other key facts include:
- The credit is now permanent.
- The credit increased slightly to $2,200 per child starting in the 2025 tax year.
- The credit will now be adjusted for inflation in future years.
Tax rates remain steady
While it’s common for tax brackets to adjust for inflation from year to year, the 2025 marginal tax rates are the same as they were in 2024. These marginal rates are considered permanent, unless there is another tax law change. While the tax rates for the brackets themselves will remain the same, the income range making up each bracket will still be adjusted slightly for inflation.
The SALT deduction increased significantly
The State and Local Tax (SALT) deduction cap, which includes state and local taxes as well as property taxes, increased to $40,000 in 2025, up from $10,000 in 2024. Taxpayers from high-tax states like New Jersey and New York are most likely to benefit, assuming they itemize. The increased cap is subject to a phaseout for higher earners, starting at a Modified Adjusted Gross Income (MAGI) of $500,000.
The $40,000 maximum SALT deduction will return to $10,000 in 2030 if Congress doesn’t make any additional changes.
New tax breaks for tip income and overtime pay
Starting in 2025, workers may be able to deduct up to $25,000 of their tip income. This deduction can be taken whether you use the standard deduction or itemize. The $25,000 maximum deduction begins to phase out for single filers who made more than $150,000 and for joint filers who made more than $300,000.
A similar tax break is available for overtime pay. Workers may be able to deduct up to $12,500 ($25,000 for joint filers) in "qualified overtime compensation", regardless of whether you claim the standard deduction or itemize. This amount starts to be phased out for single filers who make $150,000 and $300,000 for joint filers.
Both of these new laws are temporary and apply to the tax years 2025 through 2028.
New car loan interest deduction
For tax years 2025 to 2028, if you financed a new car, and the final assembly of that car was in the United States according to the IRS regulations, you can deduct up to $10,000 of the car loan interest paid in that year on your return. This deduction is available to all filers but the deduction amount starts to phase out for single filers with income over $100,000 and $200,000 for married couples filing jointly.
Changes starting in 2026
Charitable contribution changes
Starting in 2026, cash donations to nonprofit 501(c)3 charities will be deductible up to $2,000 for joint filers and $1,000 for single filers who take the standard deduction. Before 2026, only those who itemized qualified to deduct these donations. At the beginning of the new year, keep a record and receipts of cash gifts, even if you haven’t been able to deduct them in the past.
For those who typically itemize on their tax return and deduct charitable contributions, they will only be able to deduct charitable contributions that exceed 0.5% of their adjusted gross income starting in 2026.
Taxpayers in the highest tax bracket will see the benefit of their itemized deductions capped at the 35% tax rate starting in 2026. This change will only impact income earners who are single and make over $640,600 and those who file jointly and make over $768,700.
Catch-up on retirement contributions
Individuals who made $150,000 or more, are 50 years of age or older, and are making catch-up contributions to a retirement savings account such as a 401(k) or 403(b), must now put any catch-up contribution into a Roth account. That means the contribution will not be tax-deductible. This rule only applies to catch-up contributions to workplace plans, not individual IRAs.
Additionally, if you are currently employed, 60-63 years old, and contribute to a 401(k) or 403(b) plan, you are eligible to take advantage of an increased catch-up contribution of up to $11,250, though high earners may be forced to make this expanded catch-up contribution to a Roth account.
Getting help with your tax returns
This article is for informational purposes only and should not be taken as tax advice. Please consult a qualified tax professional for insight on how these changes might impact your own taxes. Additional free resources are also available at USA.gov.
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