With the One Big Beautiful Bill signed into law, the following changes have been made to our tax code.
General changes
The One Big Beautiful Bill makes several Tax Cuts and Jobs Act changes permanent, including the elimination of the seven tax brackets and the personal exemptions. Previously, many of the changes from the Tax Cuts and Jobs Act were set to expire in 2025. The One Big Beautiful Bill makes many of the items set to expire permanent.
Changes to deductions
The following changes to deductions take effect in tax year 2025.
Senior Bonus Deduction - For tax years 2025-2028, taxpayers age 65 or older can claim a $6,000 bonus deduction regardless of whether they use the standard deduction or itemize. The deduction will begin to phase out if modified AGI exceeds $75,000 for single filers and $150,000 for MFJ filers. MFS filers are not eligible to claim this deduction.
Deduction for Tax on Tips - Beginning with tax year 2025, up to $25,000 worth of tips can be deducted. This deduction cannot be claimed if income is greater than $150,000 for single filers or $300,000 for MFJ filers.
Overtime Pay Deduction - Starting in tax year 2025, up to $12,500 worth of overtime pay can be deducted per individual. If both the taxpayer and spouse receive overtime pay, up to $25,000 can be deducted.
Car Loan Interest Deduction - Up to $10,000 in interest paid on a personal-use vehicle can be deducted starting in tax year 2025. The interest deduction applies only to car loans for new cars that were assembled in the US.
Changes to itemized deductions
State and Local Taxes (SALT) Deduction - Starting in tax year 2025, the limit for this deduction has increased to $40,000 from $10,000. The deduction will now begin to phase out by $50 for every $1,000 after your AGI hits the threshold of $500,000.
Miscellaneous itemized deductions - The One Big Beautiful Bill permanently removes the Miscellaneous itemized deductions.
Changes to credits
Adoption Credit - Starting with tax year 2025, up to $5,000 worth of your Adoption Credit is now refundable. Previously, the credit was completely nonrefundable, meaning it could not increase your tax refund. If you have a carryover amount for your Adoption Credit, it will still be nonrefundable.
Child Tax Credit - The 2025 Child Tax Credit has increased to $2,200 per dependent.
Additional Child Tax Credit - The maximum you can claim for the Additional Child Tax Credit has also increased to $1,700 per dependent.
Electric Vehicle Credits - The One Big Beautiful Bill repeals all electric vehicle credits starting September 30, 2025.
Residential Energy Credits - The One Big Beautiful Bill has set all Residential Energy Credits to expire at the end of tax year 2025. You cannot claim a Residential Energy Credit after 2025.
Child and Dependent Care Tax Credit - The maximum credit has increased from 35% to 50% of eligible child or dependent care expenses.
Other changes
Bonus Depreciation - Businesses can now deduct the full cost of eligible assets in the year it’s placed into service, instead of spreading the deduction over time. Bonus depreciation is now permanently set at 100%, instead of 40%.
Additional information
See our blog article for the 2026 tax year changes
One Big Beautiful Bill Act: Tax deductions for working Americans and seniors