On July 4, 2025, the President signed a new tax law known as the One Big Beautiful Bill Act (OBBBA). Regardless of your politics, this is now the tax landscape we’re all working with for 2025 and beyond. There’s been a lot of chatter online, but here’s the individual (1040) update of what actually matters for you this year.
Tax Rates, Brackets & Deductions
No rate increases: Tax rates—including capital gains—are the same as they were in 2024. Rather than being changed by this bill, these have been made "permanent" so they won't expire at the end of 2025.
Brackets adjusted slightly upward: You can earn a bit more before jumping into a higher bracket (Same annual inflation adjustment as usual)
Standard deduction increased: Now $15,750 for single filers, $31,500 for married couples (Same annual inflation adjustment as usual)
Itemized deductions: You can still choose to itemize if it benefits you. The five key categories remain:
1. Medical expenses: No changes; they still must be substantial to qualify.
2. Taxes paid: Deduction cap increased to $40,000 (up from $10,000), covering property and state/local income taxes.
3. Mortgage interest: No changes.
4. Charitable donations: No changes for 2025.
5. Miscellaneous: Still negligible; main change here is a 90% limit on gambling losses relative to income (vs allowing you to use your losses to offset 100% of gambling winnings)
New senior deduction: If you’re 65+ by Dec 31, 2025, you may deduct an additional $6,000 per person. This phases out starting at $75,000 (single) or $150,000 (married). Social Security is still taxable if this deduction doesn’t cover your total benefit.
Again, and for the majority of our clients, Social Security income is still taxable.
New Deductions
Car loan interest: You can deduct interest on new U.S.-assembled cars purchased in 2025-2028. Phases out at $100,000 (single) / $200,000 (joint). No need to itemize.
Tip income deduction: If your W-2 shows tip income, you may deduct the lesser of your tips or $25,000. Phases out at $150,000 (single) / $300,000 (joint). No need to itemize.
Overtime deduction: Same structure—deduct the lesser of your overtime pay or $12,500 per W-2. Same income phase-outs as tips. No need to itemize. W2s will likely be delayed in January, as this will require a new form to be created and approved.
Credits to Note
Child tax credit: Increased slightly to $2,200 per child.
Energy credits ending soon: Electric car credit ends Sept 30, 2025 (most established models already were past the qualification window. These are the remaining qualifying models) Credits for energy efficiency (e.g., insulation, solar, storm windows) end Dec 31, 2025.
This is a quick overview of 2025’s changes for individuals. There are a few more changes coming in 2026, but for now, these are the key updates that you might have questions about for this year.
Most of these adjustments will already be taken into consideration with your 2025 tax prep. But if you’re considering a major financial move - like retiring, selling a rental property, or buying into a business - we’re here to help you plan. Engagement letters for 2025 services, including an option for year-end tax planning, will be sent out in November.
Thanks!
The GWCPA Team