2025–2026 Tax Law Changes: What You Need to Know

2025 tax law changes

The Tax Cuts and Jobs Act (TCJA) passed in 2017 made significant, but temporary, changes to the tax code. Many of those provisions were scheduled to expire at the end of 2025. The One Big Beautiful Bill (OBBB), passed in 2025, prevents a full rollback to 2017 tax law and introduces new updates for both individuals and businesses. While some changes apply retroactively to 2025, most take effect starting January 1, 2026. 

Key Tax Law Changes for Individuals – Starting with 2025 

Several provisions of the OBBB are retroactive and will impact your 2025 tax return (filed in 2026). Others begin in 2026. Many changes are tied to income thresholds, are temporary, and may phase out over the next few years. Highlights include: 

• Tips and overtime income are no longer taxed 

• Increased Child Tax Credit 

• Additional standard deduction for seniors 

• Partially refundable adoption tax credit 

• Higher SALT (state and local tax) deduction cap 

• Interest deduction for qualifying vehicle loans 

• Trump Savings Accounts for Children  

• EV Tax Credit ends on September 30, 2025 

• Standard deduction increases across all filing statuses 

These changes could result in meaningful tax savings, particularly for working-class families, high earners in high-tax states, and seniors. 

Business Tax Changes 

For businesses, OBBB brings back and expands several deductions and expensing options: 

• 100% bonus depreciation restored 

• R&D costs fully expensable again 

• Interest deductions revert to EBITDA (more generous than EBIT) 

• Full expensing for qualifying manufacturing structures (temporary) 

• Section 179 expensing thresholds increased 

• Form 1099-K threshold increased (exact amount TBD by Treasury, likely to move from $600 to $5,000+) 

These provisions provide significant planning opportunities for business owners, especially in capital-intensive or R&D-driven sectors. 

Other 2025 Tax Updates (Not Changed by OBBB) 

Several provisions originally included in the TCJA continue to adjust automatically for inflation: 

Bracket and Deduction Adjustments: 

• Tax brackets widen: e.g., 10% bracket for single filers increases from $11,600 (2024) to $11,925 (2025) 

• 37% bracket starts at $626,350 for single filers in 2025 (vs. $609,350 in 2024) 

• Standard Deduction increases with inflation 

IRA Contribution Deduction Phaseouts (No Change to Contribution Limits): 

• Single/HOH: deduction phases out from $79,000–$89,000 (if covered by a plan) 

• MFJ: $126,000–$146,000 if both spouses are active participants 

• Spousal IRA: if only one spouse is covered, phaseout is $236,000–$246,000 

• MFS: phaseout remains $0–$10,000 

Earned Income Tax Credit (EITC) Updates: 

• Married filing jointly with 3+ kids: max credit $8,046, phases out at $68,675 AGI 

• Single with no dependents: max credit $649, phaseout begins at $19,104 AGI 

Alternative Minimum Tax (AMT) Updates 

The AMT exemption and phaseout thresholds continue to be indexed for inflation: 

• Exemption: $88,100 (single), $137,000 (MFJ) 

• Phaseouts begin at $626,350 (single), $1,252,700 (MFJ) 

This helps reduce AMT exposure for many upper-middle-income households that previously fell into the AMT due to static exemptions. 

Looking Ahead: 2026 and Beyond 

Most of the structural tax law changes from OBBB take effect on January 1, 2026, making many TCJA provisions effectively permanent or extended. Key long-term changes include: 

• Personal and dependent exemptions eliminated 

• Expanded standard deduction continues 

• TCJA-era tax brackets preserved 

• Child Tax Credit increases maintained 

• $750,000 mortgage interest deduction cap remains 

• Elimination of most personal casualty, moving, and miscellaneous deductions 

• 20% QBI deduction for pass-through business income continues 

• Estate tax exemption increases further 

• Expanded AMT exemption thresholds continue 

Unless otherwise stated, business-related changes from 2025 carry forward into 2026 and beyond. 

What You Should Do Now 

To take advantage of these updates: 

• Max out pre-tax retirement plans and HSAs before year-end 

• Review income projections and phaseout thresholds 

• Consider whether accelerated deductions or deferred income make sense this year 

• For business owners: consider capital purchases before bonus depreciation phases out again 

  
  

Note: This information is for educational purposes and should not be considered financial advice. Consult with a financial advisor for personalized guidance.

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