On July 4, 2025, President Trump signed a new tax bill – a sweeping $3.8 trillion reconciliation package that includes a broad array of tax provisions affecting individuals, businesses, and international taxpayers. We want to highlight the key provisions and are here to answer any questions you might have.

Individual Income Tax Provisions:

  • Permanent extension of lower tax rates and brackets: The bill makes permanent the individual income tax rates and brackets established by the Tax Cuts and Jobs Act (TCJA), including lower individual tax brackets. The top marginal rate remains at 37%, and inflation adjustments are retained for the brackets above the 22% bracket.
  • Standard deduction: The new law makes permanent the increases to the basic standard deduction created by the TCJA. For tax year 2025, the standard deduction is increased to $15,750 for a single filer, $23,625 for a head of household and $31,500 for married individuals filing jointly and adjusted for inflation thereafter.
  • Enhanced deduction for seniors: For 2025–2028, a $6,000 deduction is available for seniors (age 65+) The deduction is subject to an income phaseout.
  • Qualified Tips Deduction: Individuals can claim an income tax deduction for qualified tips received in tax years 2025 through 2028. The qualified tip deduction amount cannot be more than $25,000 per tax year, subject to a phaseout.
  • Qualified Overtime Pay Deduction: Individuals can claim an income tax deduction for qualified overtime compensation received in tax years 2025 through 2028. The qualified overtime deduction amount cannot be more than $12,500 per tax year, subject to a phaseout.
  • Vehicle Loan Interest Deduction: Individuals can claim an income tax deduction for vehicle loan interest paid in tax years 2025 through 2028. The deduction amount cannot be more than $10,000 per tax year, subject to a phaseout and subject to certain criteria.
  • Itemized deductions:

    • Taxes: The limitation on the itemized deduction of state and local taxes (SALT) by an individual is temporarily increased for tax years beginning in 2025 through 2029 but will be subject to a phaseout. The maximum SALT deduction limit is:
      • $40,000 ($20,000 if married filing separately) for 2025,
      • $40,400 ($20,200) for 2026,
      • $40,804 ($20,602) for 2027,
      • $41,212 ($20,606) for 2028,
      • $41,624 ($20,812) for 2029, and
      • $10,000 ($5,000) for 2030 and thereafter.
    • Mortgage Interest: The limitation of the deduction for qualified residence interest (i.e., home mortgage interest) to interest on acquisition debt, and excluding home equity debt, is permanent for tax years beginning after December 31, 2017. The reduction in the maximum amount that may be treated as acquisition debt (to $750,000 ($375,000 if married filing separately)) is permanent for tax years beginning after December 31, 2017. The home mortgage deduction limitation on mortgage insurance premiums to those premiums paid or accrued before January 1, 2022, is removed. Thus, qualified mortgage insurance premiums are treated as qualified residence interest beginning after 2017.
    • Charitable deduction for non-itemizers: The new Bill permanently increases the deduction for taxpayers who elect not to itemize. Specifically, for taxable years after December 31, 2025, non-itemizing taxpayers can claim a deduction of up to $1,000 for single filers ($2,000 for married filing jointly) for certain charitable contributions.
  •  Child Tax Credit: The maximum child tax credit is increased to $2,200 for each qualifying child under age 17 for a tax year beginning in 2025. Thereafter, the dollar amount will be adjusted annually for inflation.
  • The $500 Other Dependent Credit for a dependent of the taxpayer other than a qualifying child under age 17 is made permanent. The ODC credit, however, is not adjusted for inflation. The increased phaseout threshold amounts of $400,000 for married individuals filing jointly and $200,000 for other taxpayers are also made permanent.
  • Other deductions and credits: The bill makes permanent or enhances several other deductions and credits, including the adoption credit, employer-provided childcare credit, paid family and medical leave credit, and education-related benefits.
  • Estate and gift tax exemption: The increased exemption is made permanent and raised to $15 million per individual ($30 million for married couples) in 2026, indexed for inflation.
  • Other deductions and credits: The bill makes permanent or enhances several other deductions and credits, including the adoption credit, employer-provided childcare credit, paid family and medical leave credit, and education-related benefits.
  • 529 college savings plans: The new tax bill significantly expands the use of 529 college savings plans, allowing tax-free withdrawals for a wider range of educational expenses, including K-12 tuition, and offering new flexibility with rollovers to ABLE accounts and Roth IRAs. Specifically, the bill increases the annual K-12 expense limit to $20,000, starting in 2026, and allows rollovers to ABLE accounts under specific conditions. Additionally, the bill makes permanent several ABLE provisions, including tax-free 529-to-ABLE rollovers.

Business Tax Provisions:

  • Qualified business income deduction made permanent: The 20% deduction for qualified business income (QBI) is made permanent. It also expands the deduction limit phase-in range by increasing the $50,000 (non-joint returns) and $100,000 (joint returns) amounts to $75,000 and $150,000, respectively.
  • Pass Through Entity deduction: The legislation preserves the ability of taxpayers to avoid the SALT deduction limit through various pass-through entity tax (PTET) rules of their state allowing partnerships and S corporations to elect to pay an entity-level state income tax. Previous versions of the legislation would have restricted the ability of taxpayers to use PTET rules to avoid the SALT cap.
  • Bonus depreciation extended and increased to 100 percent: The current 40-percent bonus depreciation rate is increased to 100 percent for qualified property acquired after January 19, 2025.
  • R&D expenditures: Taxpayers may deduct domestic research or experimental expenditures in the year paid or incurred, notwithstanding general capitalization rules Foreign research or experimental expenditures attributable to research that is conducted outside the United States must continue to be capitalized and amortized over 15 years.
  • Third-party network transaction reporting threshold: A third-party settlement organization is required to report third-party network transactions with a participating payee for a calendar year only if (1) the gross amount of the payments in settlement of third-party network transactions with the payee is more than $20,000, and(2) the total number of that payee’s transactions is more than 200.
  • Form 1099 reporting threshold: The dollar threshold amount for required information reporting on certain payments made to a payee by a payor in the course of the payer’s trade or business in a calendar year is increased from $600 to $2,000, for payments made after December 31, 2025.
  • Opportunity Zones: A permanent Qualified Opportunity Zone policy is created with rolling, ten-year designations beginning on January 1, 2027. The definition of “low-income community” is narrowed. The new law generally maintains the existing Opportunity Zone designation process, adding a special rule for rural areas. Reporting requirements and penalties are added. Qualified Opportunity Zones are designated areas in the United States, (including U.S. possessions) that offer tax benefits to investors through investments in Qualified Opportunity Funds.
  • Energy Tax Credits: The bill would terminate or phase out several clean energy credits from the Inflation Reduction Act (IRA) of 2022.
    • Energy efficient home credit terminated. The expiration of the new energy efficient home credit is accelerated, and the credit may not be claimed for a qualified home acquired after June 30, 2026 (instead of December 31, 2032).
    • Qualified commercial clean vehicle credit is terminated. The expiration of the qualified commercial clean vehicle credit is accelerated, and the credit may not be claimed for a vehicle acquired after September 30, 2025 (instead of December 31, 2032).
    • Credit phaseout and termination. The Code Sec. 45Y clean electricity production credit terminates for wind and solar energy facilities placed in service after December 31, 2027. The termination applies to facilities the construction of which begins after July 4, 2026. There is no phase down of the credit, the credit cannot be claimed for such facilities placed in service in 2028 or later.

If you have any questions, feel free to contact our office at 919-845-5315.

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