The Act: Key Tax Updates for 2025
Personal Tax Revisions
What it Does – The “no tax on tips” provision of One Big Beautiful Bill doesn’t completely remove all tax on tips, but it does eliminate federal income tax on the first $25,000 in tips per taxpayer—so long as the taxpayer’s total income is less than $150,000 (single) or $300,000 (married filing jointly).
Who it Affects – People who are traditionally tipped employees. (TBD on S-corp owners and independent contractors—we’ll need regulations from the IRS before we know for sure.) While we don’t yet have a complete list of who will qualify, one can assume it will include workers in the food and beverage industry, as well as personal care services such as massage therapists, hair stylists, barbers, etc.
When it Starts – Retroactive to Jan. 1, 2025. If you meet the income requirements, tips earned back in January are just as deductible as tips earned in December.
When it Stops – Dec. 31, 2028. Starting again in 2029, tip income becomes fully taxable again unless Congress extends the law.
What it Does – While many may think “no tax on overtime” means all hours worked beyond 40 in a week are tax-free, that’s not quite accurate. Only the extra dollars per hour—above your base pay—will be exempt from federal income tax, up to $12,500 (single) or $25,000 (married), provided your total income is less than $150,000 (single) or $300,000 (married). Example: Say you earn $20/hour and work 45 hours, with 5 of those being overtime. You’re still taxed on $900 (45 hours × $20/hour), but only the $50 premium pay ($10 extra/hour × 5 hours) qualifies for the deduction.
Who it Affects – Most employees paid 1.5 times their regular wage for overtime. However, independent contractors and business owners who own at least 5% of their business are excluded. So are individuals making more than $160,000 per year or those considered “highly compensated employees” by the IRS.
When it Starts – Retroactive to Jan. 1, 2025. If you meet the income limits, overtime earned earlier in the year is deductible.
When it Stops – Dec. 31, 2028. Starting in 2029, overtime pay becomes fully taxable again unless Congress extends the law.
What it Does – Anyone 65 or older with an adjusted gross income (AGI) over $17,750 (single), $33,500 (married to a spouse under 65 years old), or $35,500 (married to a spouse 65+), but under $75,000 (single) or $150,000 (married). You don’t need to be collecting Social Security to qualify.
Who it Affects – Anyone 65 or older with an adjusted gross income (AGI) over $16,600 (single) or $33,200 (married), but under $75,000/$150,000. You don’t need to be collecting Social Security to qualify.
When it Starts – Retroactive to Jan. 1, 2025.
When it Stops – This deduction applies from 2025 through 2028 unless extended by Congress.
What it Does – Since 2018, individuals have been limited to a $10,000 deduction for state and local taxes (SALT). This includes property taxes on primary and secondary homes, plus either state/local income tax or sales tax. One Big Beautiful Bill increases that cap to $40,000 and indexes it for inflation through 2028. For taxpayers earning more than $500,000, the $40,000 cap is gradually reduced based on income until it returns to the original $10,000 cap.
Who it Affects – Mostly residents of high-tax states and those with annual property tax bills over $10,000—or multiple homes with combined taxes exceeding that threshold. The group affected is relatively small, but potential savings could be substantial.
When it Starts – Retroactive to Jan. 1, 2025.
When it Stops – The expanded SALT cap applies through 2029. Starting in 2030, it reverts to $10,000 for all individuals.
What it Does – Effectively ends most of the solar, green energy, and electric vehicle (EV) tax credits introduced under the Inflation Reduction Act passed during the Biden administration.
Who it Affects – Anyone planning to purchase an electric vehicle or make green energy improvements to their primary residence.
When it Starts – All credits under Sections 25C and 25D—including for air conditioners, windows, doors, insulation, etc.—expire Dec. 31, 2025. Projects must be completed and in service by that date to qualify. EV credits expire Sept. 30, 2025. Vehicles must be in your possession and in service by that date to be eligible.
When it Stops – “Stops” is relative. Historically, the U.S. has offered some form of energy-efficiency credit, but those will come to an end in 2025 for individuals and are unlikely to return during the Trump administration. It would take an act of Congress to bring energy credits back into the tax code.
What it Does – Increases the child tax credit from $2,000 to $2,200 per child under age 17. Children over 16 and adult dependents remain eligible for a $500 credit, as before. The new $2,200 credit will be indexed for inflation each year.
Who it Affects – Parents or caregivers claiming children under age 17 at the end of the tax year. These taxpayers will receive an additional $200 per qualifying child.
When it Starts – Retroactive to Jan. 1, 2025.
When it Stops – Never! This is now a permanent part of the tax code.
What it Does – Allows individuals to deduct up to $1,000 (single) or $2,000 (married filing jointly) in charitable donations each year above the line. That means even if you don’t itemize, you can still deduct the first $1,000/$2,000 of your cash, check or credit card donations. (Non-cash donations like clothes or furniture do not count.) A similar provision briefly existed in 2021 and 2022, with caps of $300/$600.
Who it Affects – Anyone who gives to charity but doesn’t itemize deductions. If you already itemize, your donations are deductible regardless, so this change won’t affect you.
When it Starts – Jan. 1, 2026. This is one of the few taxpayer-friendly provisions in One Big Beautiful Bill that begins after 2025.
When it Stops – Never! This is now a permanent part of the tax code.
What it Does – Allows individuals to deduct up to $10,000 in car loan interest, as long as the vehicle’s final assembly in the United States and has a gross vehicle weight rating under 14,000 pounds. The deduction begins to phase out at $100,000 in adjusted gross income for single filers or $200,000 for joint filers.
Who it Affects – Anyone with a qualifying car loan who meets the income requirements and whose vehicle’s final assembly in the U.S.
When it Starts – Retroactive to Jan. 1, 2025. Any eligible auto loan interest paid earlier in the year is now deductible.
When it Stops – This provision is temporary and runs through the end of 2028. It would require Congressional action to continue beyond that.
What it Does – Reduces the deduction for gambling losses. Gamblers may now deduct only up to 90% of their gambling winnings, down from the previous 100%.
Who it Affects – Anyone who gambles—including slot machines, lotteries, or sports betting. Gambling winnings must be reported as income, but now only 90% of your losses are deductible. Example: If you win $100,000 and lose $500,000, you can only deduct $90,000 in losses. That leaves $10,000 in taxable income—even though you’re down $400,000 overall.
When it Starts – Jan. 1, 2026. Gamblers can still deduct 100% of losses against winnings in 2025.
When it Stops – Never, as currently written. This provision is permanent. However, pressure from the gambling industry may prompt Congress to revise or repeal it, possibly before it even takes effect.
Business Tax Revisions
What it Does – Reinstates 100% bonus depreciation for non–real property assets, reversing the scheduled phaseout. Bonus depreciation was 100% from 2018–2022, dropped to 80% in 2023, and was on track to fall to 40% in 2025. One Big Beautiful Bill restores the 100% deduction.
Who it Affects – Business owners purchasing qualifying assets. Bonus depreciation is a complex strategy and should be handled with guidance, but most business owners will benefit from up-front deductions.
When it Starts – Jan. 21, 2025. Assets purchased between Jan. 1 and Jan. 20, 2025, are still subject to the 40% rule.
When it Stops – Dec. 31, 2028. Beginning in 2029, bonus depreciation phases out again—unless Congress acts to extend it.
What it Does – Extends and makes permanent the Qualified Business Income (QBI) deduction, which allows most business owners to deduct 20% of their qualified business income. The eligibility rules remain largely the same as those introduced in 2018.
Who it Affects – Many business owners, though eligibility depends on income levels and whether the business is considered a specified service trade or business. Most small to mid-size business owners will benefit.
When it Starts – QBI has been in effect since 2018, but without this bill, it would have expired Dec. 31, 2025.
When it Stops – Never—unless repealed by future legislation. QBI is now a permanent part of the tax code.
Student Loan Revisions
What it Does – Eliminates SAVE, PAYE, and ICR as income-driven repayment (IDR) options for student loans.
Who it Affects – Current borrowers enrolled in these plans.
When it Starts – While the bill codifies this change, SAVE borrowers have effectively been in administrative forbearance for nearly a year.
When it Stops – Permanently. These plans are not expected to return.
What it Does – Discontinues Income-Based Repayment (IBR) for new borrowers starting July 1, 2026. Existing borrowers can still enroll in IBR through 2028.
Who it Affects – New borrowers applying for loans after July 1, 2026. Existing borrowers who enroll in IBR before the cutoff will retain access.
When it Starts – July 1, 2026.
When it Stops – Never. IBR remains in the tax code but will be unavailable to future borrowers starting in 2026.
What it Does – Keeps Public Service Loan Forgiveness (PSLF) rules intact. Despite early fears, borrowers can still reach PSLF through eligible plans. Both IBR and RAP will qualify.
Who it Affects – No one negatively—PSLF eligibility remains. However, reaching forgiveness may be harder under RAP than under SAVE.
When it Starts – Immediately.
When it Stops – PSLF rules may change with future administrations. Student loan policy has a long history of shifting direction.
What it Does – Though not technically part of the bill, the repeal of SAVE will force borrowers off the plan. Administrative forbearance will terminate on Aug. 1, 2025, and interest will begin to accrue from that date forward. There is no current date where payments will have to begin again, but we expect that to occur before the end of 2025.
Who it Affects – Anyone not making payments due to being on the SAVE plan.
When it Starts – Administrative forbearance is terminated Aug. 1, 2025. SAVE borrowers who have been in forbearance and not making payments since June 2025 should be ready to start making student loan payments again at any point.
When it Stops – SAVE is gone for good.
What it Does – RAP will become the primary IDR plan moving forward. It resembles SAVE but includes a 30-year repayment term for forgiveness eligibility, effectively removing forgiveness options for most borrowers not in PSLF.
Who it Affects – Primarily new borrowers starting in 2026. Existing borrowers whose current IDR plans are being eliminated may also transition to RAP. In some cases, private student loans may become more attractive.
When it Starts – The expected start date for RAP is Jul. 1, 2026, though this date could be fluid.
When it Stops – Possibly with the next Democratic-controlled Congress. Democrats strongly oppose RAP and are likely to replace it with a more borrower-friendly option in the future.
